Postal Services Bill

Wednesday 12th January 2011 Commons Chamber

[Relevant document: The First Report from the Scottish Affairs Committee, Postal Services in Scotland, HC 669-I and –II.]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 2

Guarantee of inter-business agreement

‘Prior to any sale or transfer of a post office company an agreement must be secured to guarantee the inter-business agreement between Post Office Limited and Royal Mail for a period of at least 10 years.’.—(Bob Russell.)

Brought up, and read the First time.

12:42

[Bob Russell (Colchester) (LD)]

I beg to move, That the clause be read a Second time.

When social historians come to study the Post Office/Royal Mail between 1980 and 2010, they will wonder how a great British institution, which was exported around the world and was copied by other nations, was allowed to go downhill so quickly. Successive Governments during those 30 years have to share equal blame. The number of post office closures was considerably greater under the Labour Government than in the years of the previous Conservative Government. In my constituency—I am sure that this was repeated around the country—the number of sub-post offices was almost halved under Labour Government policies that were both deliberate and had unintended consequences. For example, no joined-up government was involved when that Government’s Department for Work and Pensions put the delivery of Government mail out to the private sector. What makes the situation even worse is that the final journey of every privatised letter and package delivered in this country makes the Post Office/Royal Mail a loss; every private package and private letter is subsidised by the public purse.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Does my hon. Friend know that when I went to meet postmen, as I always do at Christmas, I found that what bothered them more than anything about the Bill was not so much the privatisation element—although they did not particularly welcome that—but that they were walking up drives, delivering letters at a loss? That suggests that the kind of inter-business agreement that led to that regulatory requirement showed a serious deficiency in Post Office management.

[Bob Russell]

I endorse that. I, too, like many right hon. and hon. Members, visited my local sorting office. It is safe to say, without any contradiction, that morale is not high.

[Mr Mike Weir (Angus) (SNP)]

I have listened carefully to what the hon. Gentleman has said. The inter-business agreement is an agreement between post offices and Royal Mail about the use of post office services. I think the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) was referring to the headroom agreement, which relates to the “last mile”. That is a different thing and is not related to the agreement between the two arms of Post Office Ltd.

[Bob Russell]

The hon. Gentleman has taken a keen interest in this Bill and will know the ins and outs of it far better than I do. I am making the general point that the incompetence of the last Government and of Royal Mail and the Post Office under the jurisdiction of the last Government mean that every time a private package is delivered by the friendly postie, it is at a loss to the public purse. That was my general point. Indeed, I could refer to Postman Pat and his black and white cat. Some hon. Members might have seen the adaptation of Postman Pat by Specsavers, and the agreement that the last Labour Government allowed is like that Specsavers advert—Postman Pat is not on the road, he is driving over the fields and knocking down signposts.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I can understand that the hon. Gentleman is unhappy with what happened under the previous Government, but would he care to elaborate on his anxiety and the role of the regulator in constantly squeezing prices, which led to some of the losses?

[Bob Russell]

The hon. Gentleman may well be right. I might come on to the point about pressing down prices in the future.

I am not a fan of privatisation, either of Royal Mail and the Post Office or of any other aspect of a public utility. My record is proof of that. I did not agree with the proposals that came out under the Labour Government to privatise or part-privatise Royal Mail and the Post Office. Although my heart is against the Bill, my head tells me that it will happen. We must be pragmatic and we must accept the inevitable. I am still hoping that a mutualised company will emerge, as many of our sub-post offices are already run by mutuals through the co-operative movement. That is one way. Another way would be if shares were issued to the work force.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

On the issue of downstream access that my hon. Friend has been addressing, one thing that the Bill does is to give the regulation to a regulator with more robust experience of regulating markets. The most important thing that the regulator will have to do is to ensure that the access arrangements are fair and balanced so that Royal Mail can survive to deliver that crucial universal service.

[Bob Russell]

As ever, my hon. Friend makes an important and valid point. Those who inherit this Bill, when it becomes an Act, will need to take that on board.

I think I am one of the few people in the House who was once employed by the Post Office. I joined the company in 1973, when it was Post Office Telecommunications. It then became British Telecommunications—that was the first significant split—and it was then privatised. The rest is history, as they say. Many people still refer to that great British institution as the General Post Office, even though it must be 40 or 50 years since the GPO ceased to exist—I am not sure exactly when it was—in the same way as they still refer to the boy scouts, even though they have not been boy scouts for decades.

Returning to the point that the hon. Member for Dumfries and Galloway (Mr Brown) made, I am grateful for this trip down memory lane because when the previous Postal Services Bill came before the House, the shadow Chancellor was the responsible Minister and he had some harsh words to say about the previous Administration. He said:

“If I was being kind, I would call their stewardship maladroit. If I was being unkind, I would say that Postman Pat’s black and white cat would have provided better stewardship of the Post Office over the term of the previous Government.”—[Official Report, 15 February 2000; Vol. 344, c. 868.]

It is fair to say that we are now back to the modern Postman Pat and the Specsavers advert.

There are 11,905 post offices in the UK, the vast majority of which are sub-post offices run as franchises by sub-postmasters.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Gentleman agree that a 10-year agreement would be a better system for securing the future of the Post Office, especially given that the future of perhaps as many as 1,500 post offices across the United Kingdom might be in question?

[Bob Russell]

I am grateful for that intervention because the thrust and purpose of my new clause is exactly to enable the new, privatised Royal Mail to ensure that business continues to go to the Post Office and our sub-post offices. There is a general perception of the Post Office and Royal Mail as being one organisation, and I acknowledge that I regard it in that way. I know that they operate as two separate business entities, but just as when British Telecom moved away from the Post Office, it takes time for people to come to terms with the fact that they are two different animals.

[Mr Weir]

Is that not the crux of the problem? The Post Office does a lot more than simply service the mail delivery system, and by privatising Royal Mail the Government are breaking that link. A Royal Mail focused primarily or solely on mail delivery will not need the other services offered by post offices.

[Bob Russell]

The hon. Gentleman makes my point for me, so I hope that if we go to a vote he and his colleagues will join me in the Aye Lobby.

We have the network and the operating company, Post Office Ltd, and post offices provide a vital service to communities around the UK, especially, but not only, in rural areas. As I have said, about 10 neighbourhood, suburban community post offices have already shut in my urban constituency.

[Mr Mike Hancock (Portsmouth South) (LD)]

Unlike my hon. Friend, I am not an enthusiastic supporter of the legislation. What will his position be if his new clause is not passed, because he is saying that the Bill will be effective in protecting the things he is interested in only if his new clause is carried?

[Bob Russell]

I am bound to say that that was not a very helpful intervention from my hon. Friend, particularly as I share a flat with him. At the very least, he could have raised those concerns over the breakfast table.

I think I have made it clear that I am not a fan of the privatisation. I accept the reality of what is going to happen and I am suggesting to the Minister what I think would be in the best interest of our communities. I think that I am making an overwhelming case and it would be great if he accepted my new clause. The previous Government brought in measures on sustainable communities and we are now talking about localism, which is right. To say that the previous Government decimated the system would be wrong: they did more than that because decimation is only 10% and I would have settled for 10%.

[Mr Brian Binley (Northampton South) (Con)]

Would not this measure make the whole transfer or sale deal much more viable and do much more to guarantee the viable retention of a post office network? If it is not accepted, that will all be in danger.

[Bob Russell]

I am grateful to my hon. Friend for that extremely helpful intervention. Regardless of what we think of the Bill, we all want to retain as many of our sub-post offices as we can.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does the hon. Gentleman agree that, for post offices to be sustained, they need regular work? Is he concerned by what postmasters have pointed out—that there has not yet been a guarantee of additional work from the Government? Indeed, post offices might not even win some of the contracts that they have already bid for.

[Bob Russell]

The hon. Lady is correct and it is a pity that she was not here during the terms of previous Labour Governments to argue that case because they withdrew business from our sub-post offices. That is all on the record and there is no point in anyone seeking to deny it. The deliberate policies of the Labour Government are one reason why so many post offices have shut.

[Tony Lloyd (Manchester Central) (Lab)]

The hon. Gentleman is being very generous in giving way. He began to touch on the importance of the post office network in urban as well as rural areas, but was not able to develop the point. I represent a very urban, inner-city area and the post office network is vital to keeping the business community together. Quite simply, other businesses depend on post offices, which are coming under intense pressure from the supermarkets, for example, so we need to build in protection for the urban as well as the rural areas.

[Bob Russell]

I am also grateful for that intervention; every intervention so far, with the possible exception of that by my hon. Friend the Member for Portsmouth South (Mr Hancock), has been helpful to my argument. I referred to the rural post offices and I mentioned urban post offices following a series of interventions. The intervention of the hon. Member for Manchester Central (Tony Lloyd) bears that point out. The difference between rural and urban sub-post offices is that at least in urban areas there is a sporting chance that there might be one two miles or so away, whereas in rural areas one might have to add a zero to that distance.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I do not challenge the hon. Gentleman’s recording of history in that certain Government Departments that tendered their postal arrangements went outside Royal Mail. That is a matter of fact, as he says, but in defence of Labour’s record, my right hon. Friend the Member for Edinburgh South West (Mr Darling) secured £1.7 billion to try to keep the network as large as possible. Has the hon. Gentleman made any estimate of how many post offices and sub-post offices his right hon. and hon. Friends will close if his new clause is unsuccessful?

[Bob Russell]

No, I have not, but I am sure that the Minister, whom I have not yet won over to my argument, will point out that the coalition Government are investing a substantial sum of money in the sub-post office network. That will happen irrespective of what happens to my new clause.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

May I help the hon. Gentleman? Over the weekend, Consumer Focus said that unless there is any progress on this agreement, up to 4,000 post offices could be closed. Does he agree with that assessment?

[Bob Russell]

I am not in a position to challenge research that other organisations have undertaken. If that is the case, based on the number of closures under the previous Government, I would probably lose at least a third of the remaining sub-post offices in my constituency, which I would not welcome. Indeed, I would be distraught if that happened as a result of the Bill, but I hope that the money that the coalition Government are placing into the network will mean that the losses will not be of that magnitude.

12:59

[Mr Russell Brown]

The hon. Gentleman mentioned the amount of Government work that was taken away from post offices by the Labour Government. For the record, would he care to list what Government work was actually taken away? Not just the House, but the wider public would then be able to understand exactly what that means.

[Bob Russell]

The hon. Gentleman tempts me to rush to the Library to see whether that information would fill one or two sides of A4. We are not talking about one or two things; otherwise sub-postmasters would not have been telling me over the years that they lost business because of the actions of the previous Government—for example, on TV licences.

[Mr Brown]

I am sure the hon. Gentleman recognises that TV Licensing is not controlled by Government. The authority made a decision to save £100 million, so I have to say to the hon. Gentleman in good faith that it is wrong to make that statement, because TV Licensing is not Government-controlled.

[Bob Russell]

I am not sure whether I am grateful for that intervention, but if the hon. Gentleman is saying that the previous Government were impotent, I accept his observation.

[Richard Fuller (Bedford) (Con)]

The hon. Gentleman has been so gracious in giving way that I need to go back about four interventions to what he was saying about what the current Government are doing, rather than going into the history. When he acknowledges that the coalition Government have put substantial amounts of money into defending the post office network, does he accept that there really is a commitment behind the Bill to maintain the viability of the post office network, and there must be good reasons why his proposal is not permissible? Would he care to comment on the implications at European Union level?

[Bob Russell]

I suggest that the hon. Gentleman discuss that last point with the hon. Member for Stone (Mr Cash), who can enlighten him far better than I can. I thank him for the intervention, but the short answer is that I do not know what impact my new clause would have on EU legislation. I am sure that if there would be an impact we will hear about it from one of the Front-Bench speakers at some point.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

If the hon. Gentleman looks at the record, he will see that the amount spent by the previous Government in paying out for closures of post offices—in other words, to people who left their post offices and took the King’s shilling—came to much more than the sum proposed by the current Government over a four-year period. How much impact does the hon. Gentleman think there will be on post offices from losing the arrangement to do business for Royal Mail, in terms of closures, compared with the paltry sum that is being offered? It may in fact be spent on redundancies and closing post offices, as it has been in the past.

[Bob Russell]

I need to move on, as my hon. Friend the Member for Bedford (Richard Fuller) suggested. However, in view of that intervention, I must respond by pointing out that the money the previous Government put in was to pay for closures, whereas the money this Government plan to put in will be to keep sub-post offices open. There is a significant difference between the two.

[Mr Mike Hancock]

Will my hon. Friend give way?

[Bob Russell]

No.

As the interventions have indicated, the post office network is still fragile. Some 9,000 sub-post offices have closed over the past 20 years. I am advised that 900 are for sale at the moment and that more than 150 are designated as “long-term temporarily closed”. That is not a phrase I understand, because I am not sure in which order the words should go.

The sub-postmasters who run those businesses have retired, are about to retire or want to sell their business because it makes no money. That is an important point, because in calculating the number of post offices that are open, Post Office Ltd includes those that are euphemistically described as “temporarily closed”. It is clear that many post offices find it hard to survive and sustain business. I am pleased that the Business Secretary recognises the difficulties that face the network. His announcement of a £1.3 billion subsidy will bring much comfort and will help the network to continue to operate for the next four years.

All of us want post offices to operate without subsidy. It is certainly unique that a high street retailer should be financed by the taxpayer; no other retail outlet would be allowed such support and nor would any Government want to provide it. The subsidy to the post office network reflects the unique nature of the business and the services post offices offer. When the social historians look back, they will acknowledge that just as the telegram has gone, so modern technology means that the business has to adapt. What should have happened in 1997 was a recognition of the potential use of modern technology through that wonderful network of outlets across the country—in towns, cities and villages. The Government should have asked what else that unique network could provide. They did not, and the result was that business continued to go down, which is why we are in the mess we are in now.

The relationship between Royal Mail and Post Office Ltd is governed by the inter-business agreement, or IBA, which sets out in detail the commercial relationship between the two companies. Typically it will include the goods and services that Royal Mail offers exclusively—or not—through the post office network. The IBA is essential to those post offices, as well as their commercial retail activity. I had the privilege of opening a fish and chip shop in a post office so that the owner could, it was hoped, keep the post office going. I believe it was the only fish and chip shop post office in the country. Sadly the post office has gone, but the Myland chippy is still there.

Royal Mail provides the post office business with a significant proportion of its income through transactions in respect of the postage of letters, packets and parcels. As we all know, historically, the combined businesses were known as the General Post Office—the GPO for those of us of a certain age—and then the Post Office. Integrated businesses operated together to handle mail and provide post office services. Over time, the businesses have become increasingly separate and the Bill breaks the company link between Royal Mail and Post Office Ltd entirely—exactly as British Telecom broke away from the Post Office.

There was a time when working for the post office was a family thing; it was generational. There was pride and security of employment, but now, as we have already heard, morale is on the floor. My new clause seeks to ensure that before the sale of Royal Mail, the two businesses have a copper-bottomed inter-business agreement in place and that it stays in place unmolested for 10 years.

Ministers may ask why it is necessary for such an agreement to be in the Bill. No doubt, they will point to the current IBA and, of course, the subsidy the Government, or rather taxpayers, are generously providing. They will point to evidence given in Committee by Royal Mail that it has no intention of breaking its commercial relationship with Post Office Ltd. There should thus be no problem with the new clause, because it will put in writing what the Committee was assured would be the case.

[Jim McGovern (Dundee West) (Lab)]

May I ask the hon. Gentleman about the 10-year period? Why not one year, or an indefinite period? How did he arrive at 10 years?

[Bob Russell]

That is a good question. The number could be nine or 11. Those with whom I have discussed this point—including the Communication Workers Union and others—are of the view that the period cannot be open-ended. There is general acknowledgement that the provision cannot last for ever. The number of years could be five, eight or 10—it is just a figure. I do not think it was scientifically arrived at—if that is what the hon. Gentleman is asking; it was really a question of trying to cement an existing operational mechanism on a formal legal footing for at least 10 years, in the hope that it would continue way beyond that. It would be a guarantee for 10 years, but the hope is that it would continue.

[Mr Mike Hancock]

I will try to be helpful to my hon. Friend. I do not support the Bill, but I support the new clause in trying to bring about a significant improvement. In his discussions with the Government, have they given him any explanation of why they would want to resist such a straightforward and sensible measure as the one he proposes?

[Bob Russell]

If my hon. Friend thinks that I have been spending hours and hours trawling around meeting Ministers—

[Mr Hancock]

You have been getting up early.

[Bob Russell]

I was up early—true—but the new clause stands in my name, and I am sure that the Minister is aware of my thinking. I have not persuaded him so far, although I have been speaking for half an hour. I hoped that he might intervene to say that he accepts the argument and my new clause. Until such time as he does, I will keep going and hope I can win him over.

[Mr Weir]

I thank the hon. Gentleman for giving way; he has been very generous with interventions. He mentioned what the Minister said in Committee, but I can assure him that many of us who served on the Committee were not convinced by the Minister’s argument. It seems to me and to many others that the fundamental difference is that Royal Mail and Post Office Ltd are part of the same group and will obviously stick together, but when Royal Mail is privatised we will have a large Royal Mail company and a relatively small Post Office Ltd negotiating an agreement. Does the hon. Gentleman think that Post Office Ltd will come out well from such an agreement?

[Bob Russell]

I cannot comment on the body language in Committee because I was not there. I tabled the new clause, which, if passed, will deal with the hon. Gentleman’s fears. It is as simple as that.

The new clause would protect the post office network from the IBA’s possible erosion by a privatised Royal Mail. Ministers might feel differently, but we must ask ourselves why Royal Mail is being privatised. Indeed, successive Governments have argued the same points over the past 30 years.

[Damian Collins (Folkestone and Hythe) (Con)]

Is the hon. Gentleman concerned that, given the nature of change, a 10-year restriction on the inter-business agreement might end up being bad for the Post Office? Under the Bill, new providers may come in, so it might welcome the flexibility to renegotiate the agreement.

[Bob Russell]

That is certainly a valid argument, although I do not agree with it. I understand what the hon. Gentleman is saying: 10 years could be too restrictive and a shorter period—or, indeed, no period at all—might be beneficial.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Is my hon. Friend aware that there are many examples of private sector companies splitting to become separate entities and that, in almost every case, a shareholders’ agreement between them has set the terms until they have been able to operate independently? Is that not precisely what the new clause would do, and is it not simply commercial good practice, which should be commended to the Minister?

[Bob Russell]

I am extremely grateful to my hon. Friend. If he is called to speak in the debate, I hope he will elaborate on that important and valuable point, of which I was not aware. I am sure he is correct—he would not have said it otherwise—so if it is acceptable for private sector companies to split but still have a legally binding agreement, why cannot we have that in this case? I thank him for making that point.

Royal Mail needs to be free from Government interference. It must become more dynamic—I think that that reinforces my point—and more competitive, as the market for postal services has liberalised. Mr Richard Hooper, who has reported to this Government and the previous Government, has said that Royal Mail’s profit is considerably lower than that of other national postal authorities and a lot lower than that of the private carriers. Of course, one reason for that is the subsidised delivery of private mail. Whether or not that is an accurate assessment, the argument in favour of privatising Royal Mail has at its core the desire for the business to grow and become more profitable. As with all private businesses that operate in strongly competitive markets, Royal Mail will undoubtedly want to use the new commercial freedoms it has been given. Indeed, a dynamic Canadian business woman was appointed as chief executive precisely to ensure that Royal Mail can get the best of starts as a wholly commercial entity.

13:15

Chief executives of large private companies have a primary goal: to maximise shareholder value by running their businesses as profitably as they can. Of course, that involves driving down cost, ensuring that distribution channels are as efficient as possible and selling products wherever and however possible. What would a dynamic chief executive make of an inter-business agreement that restricts the ability of the principal business to sell its goods or services? What would Sir Terry Leahy say to a supplier who told him, “You cannot negotiate with me on the price of the goods or services I provide for you”? Tesco—I shop at the Co-op—did not become what it is by being anything other than determined to drive down costs.

We may not always feel comfortable with the relationship that supermarkets have with their suppliers, but they will always say that the No. 1 customer motivation is price and that costs must be controlled. If a chief executive of a large company somehow neglected their obligations to cut costs or gave unfair favour to a supplier, they would have a board, including non-executive directors, and shareholders breathing down their necks. In a few years’ time, we face the prospect of a privatised Royal Mail, free from the clutches of my right hon. Friend the Secretary of State for Business, Innovation and Skills, free to innovate and free to do all the things that only privatisation will allow it to do.

[Jim McGovern]

The hon. Gentleman said that the Communication Workers Union supports the 10-year period. I am part of the Select Committee on Scottish Affairs, and when we visited the sorting office in Glasgow the manager told us that he favours privatisation—the very first Royal Mail employee to say so. Is the hon. Gentleman aware that the CWU has made it clear that it is against privatisation? Does he support the CWU’s position?

[Bob Russell]

I am sorry if the hon. Gentleman is not aware of my views on the Bill. I thought that I had made it quite clear that I do not favour privatisation, but I accept the reality that it will happen, and I am trying to make things as good as I can. Of course I know the CWU’s views. I have met CWU people both nationally and locally, and I have told them, “I do not like it, but it’s going happen—accept the reality.” I do not like lots of things, but we have to accept the reality.

The new clause is designed to try to assist the post office network—our neighbourhood post offices. It is also designed to try to ensure that Post Office workers—the people who deliver our mail—have a sustainable business. That is what it is all about. I have encouraged my local CWU people in Colchester to understand that the concept of mutualisation and employees having shares are positive things—they seem to work for John Lewis, as one model, and for the co-operative movement, as another model—and to embrace, not deny what will happen.

[Mr David Anderson (Blaydon) (Lab)]

I thank the hon. Gentleman for giving way; he is being very generous. Does he agree that neither the Co-op nor John Lewis had arrangements foisted on them by a Government against the will of the work force and the British people?

[Bob Russell]

I need to reflect on what the Labour Government, particularly Lord Mandelson, had in mind, and how that may or may not differ from the proposals.

I am critical of the Labour Government, but I am also critical of the Government who preceded them. This is the third time that I am going to say this: for the past 30 years, this great British institution has been run down by successive Governments. It was the envy of the world—it no longer is—and ultimately the blame must rest with Government and, it must be said, the somewhat mediocre management for many of those years.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The problem for Labour Members is that when the Government discuss mutuals or co-operatives, we do not know whether they are proposing a workers’ co-operative or a mutual co-operative. We received some indications in Committee, but we do not know for certain what model they are proposing. As has been said, 97% of post offices are independently owned, and we assume that those owners will go into a mutual model.

[Bob Russell]

I thank the hon. Gentleman for his intervention, and in so doing I return to the confusion about post offices and Royal Mail. If we get confused in this debate, we can understand why the general public are confused too. He is absolutely right that 97% of sub-post offices are not owned by the Government. We are not talking about them—we are talking about Royal Mail and how privatisation and whatever measures and aspects of the Bill are introduced will assist post offices and Royal Mail and its workers.

[Ian Murray (Edinburgh South) (Lab)]

The hon. Gentleman has been generous in accepting interventions. You talked in response to my hon. Friend the Member for Blaydon (Mr Anderson) about successive Governments running down Royal Mail, which, to use your words, is a national treasure and national institution. Would you therefore agree that it will be your Government who could put the final nail in the coffin?

[Mr Speaker]

Order. I have not talked about anything and I am not giving any commitments on anything, but Mr Russell might.

[Bob Russell]

Thank you, Mr Speaker. Which Government did what when will be in the history books, so the hon. Gentleman will have his moment of glory and can say, “It was the dastardly Conservatives and Liberal Democrats wot done it.” That is how he would wish to present it, but I am not sure how history would record the demise of Royal Mail and the Post Office if Lord Mandelson’s proposals had been introduced, whatever they may have been.

I want to gaze into the future and imagine the agenda of the first board meeting of the newly privatised Royal Mail plc. After a report from the remuneration committee, perhaps the main item of business will be listed as the sponsorship of Sunderland football club. Afterwards, the agenda will no doubt turn to the issue of cost savings to be achieved. Like any other dynamic FTSE 100 company, which Royal Mail, I understand, will become, the board will want to see how it can reduce the cost of its contracts with suppliers. It happens every day in the world of commerce, notwithstanding the helpful contribution from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso). In that private world, the agreements that I propose in my new clause exist.

A principal supplier to Royal Mail is Post Office Ltd. The board will confer and I have no doubt it will quickly decide two things: first, the cost of the contractual relationship with Post Office Ltd is too expensive and, secondly, limiting the distribution of products and services to the post office network does not work in the best interests of Royal Mail. That is where the analogy with the supermarkets comes in, because the criticism is that they are all-powerful. They determine the contracts with suppliers, they set the price, and if suppliers do not like it, they know what they can do.

[Damian Collins]

In the scenario that the hon. Gentleman paints, might it not be possible for the Post Office to say to Royal Mail, “Well, if you are going to do this to us, we will look at taking postal services from providers from whom we do not currently accept them, and run them in competition with your service. Would you like us to do that?” It would be an honest negotiation.

[Bob Russell]

Again, that is a good argument, and the hon. Gentleman may be proved right as time moves on. I hope that that will not be the case, but he makes his point.

Why would it be any different with Royal Mail? It may operate an agreement with Post Office Ltd, but there would be nothing on this earth to stop Royal Mail renegotiating it. In fact, Royal Mail would be obliged to change the terms of the inter-business agreement. It would, under any commercial logic, seek a wider set of outlets for a broader range of its services, including supermarkets, petrol stations and retail outlets. That will take vital revenue away from those post offices that currently have exclusive rights. Royal Mail will seek to chip away at the transactional costs that it pays to Post Office Ltd. It will want to revisit the IBA, renegotiate terms, and demand changes. As they say, it is nothing personal, only business, but every little counts.

What can we do to protect the UK’s network of post offices from the predatory actions of a privatised Royal Mail? If we leave the whole issue to be resolved in the commercial arena, there will be only one winner and one big loser. Even more of our neighbourhood and community post offices, both urban and rural, would go.

[Jim McGovern]

May I take the hon. Gentleman back to proposals to reduce costs, and what he said about there being one loser? Does he agree that probably the biggest cost to Royal Mail is paying its work force, and that the way to reduce costs is probably to drive down terms and conditions, so the biggest loser of all will be the work force?

[Bob Russell]

I am sure that the hon. Gentleman is right, which is why the new clause is important, not only for the retention of the sub-post office network but for the interests of employees whose morale, as I have said, is exceptionally low.

The new clause seeks to bring certainty, and ensure that the post office network will not face an immediate onslaught from Royal Mail. It places the IBA in legislation and ensures that it cannot be broken for 10 years. I accept that in order to help the process of privatisation along, Royal Mail managers have pledged undying love for their supplier. However, it could be argued that directors of a dynamic, privatised Royal Mail would be negligent in their duties if they did not try to cut the cost of doing business through Post Office Ltd.

The new clause can absolve them of that responsibility. It would enable all sides to point to the legislation and walk away from having to renegotiate the inter-business agreement. It would manage the expectations of institutional shareholders, who would not be able to exert pressure on Royal Mail to cut those costs. I am sure that my right hon. Friend the Secretary of State for Business, Innovation and Skills will recognise that together we are protecting the post office network. The omission of the inter-business agreement from the Bill can now be rectified.

[Michael Connarty]

Unfortunately, I have to leave the debate early, because I have to attend the European Scrutiny Committee at 2 o’clock.

First, the new clause attempts to ameliorate the impact on Royal Mail and particularly the post office network of what is probably one of the nastiest things that the Government will ever do to the people of the UK. The terrible act of putting up tuition fees up to £9,000 will damage a number of people, and will probably bring about the demise of the Liberal Democrat party, but the Bill attacks the fundamental structures of society, because it will bring about the closure of a vast number of post offices. Strong arguments were made—and I made them—every time that the previous Government went through another retooling of the post office network at huge cost. The hon. Member for Colchester (Bob Russell) tried to say that Government money set aside for the post office network over the next four years will be somehow be used to keep post offices open. If we look at the amount of money spent by the previous Government paying postmasters and paying for redundancies in the Royal Mail and the post office network when post offices closed in many of the communities that I and all of us represent, it is clear that the money will go in that direction. One reason why it will go in that direction is that the inter-business agreement will not be sustained in a privatised environment.

13:30

Let us look at former privatisations and see what happened to those who supplied services to BT. Let us look at what is happening now, when everyone is screaming about the cost of domestic fuel being charged by the six large energy providers—a cartel by any other name, although the providers say that it is just imperfect competition. It is the market. People are told, “Sorry, it is the market that is causing you to be unable to heat your homes.” It is the market that will cause post offices and sub-post offices to close.

It is clear that although Royal Mail management says that it is proud of the present Royal Mail/Post Office arrangement, the market will drive the management to look for cheaper ways of doing things. The example that I always use is what happened in the case of TV licensing. When the television licensing authority wanted to continue to use the post office and sub-post office network to sell its products, the Post Office said, “That’s fine. First, you’ll pay us a million pounds. In addition to that, you will obviously pay for every transaction.” That is what killed the deal—the £1 million that Royal Mail, through Post Office Ltd, wanted to get into its coffers, not the cost of transactions at sub-post offices, and the contract went to PayPoint.

That will happen again and again, because Royal Mail will look at what it gets for its money and will ask whether anyone else will offer the same service. PayPoint is publicly saying that it wants to take over the monopoly of the Post Office for delivering the services that the Post Office delivers now for Royal Mail and for Government Departments, and it will win because it will undercut. It will loss-lead to do so, as it has said so in its business plan. That will threaten what is at present one third of the revenue—£343 million per annum—going to the post office network from Royal Mail. Of that, £240 million is paid to the sub-postmasters. If they are not getting paid their money, they will not run the service.

[Mr Russell Brown]

I support my hon. Friend. There is no doubt that any of us who speak to our local sub-postmasters and postmistresses will be told clearly that private utility companies have over recent years negotiated prices that have driven down incomes for sub-postmasters. If we do not get the new clause written into the Bill, we will see such ongoing negotiation driving prices down. The Government say that they are providing £1.3 billion, with no closure programme in place. We will see sub-post offices withering on the vine as the years roll forward.

[Michael Connarty]

My hon. Friend echoes sentiments that are expressed in every post office and sub-post office when any of us take the trouble to ask.

[Bob Russell]

Will the hon. Gentleman be gracious enough to acknowledge that over the past 13 years his Government’s policies, inactivity and general performance created the situation that we are in today? If he wishes to move on with his argument for the future, he should have the good grace, please, to acknowledge past failings.

[Michael Connarty]

I have no problem doing that. I do not know whether the hon. Gentleman has been in the House when I have spoken about the Post Office in the past. I am the organiser and secretary of the communications workers liaison group in this place. I have opposed every attempt by any Government to bring in schemes to downsize the post office network—every single one of them.

My Government was criticised by me and by the Communication Workers Union. That Government put in a director, Crozier, who walked off with millions of pounds in bonuses for sacking people—for downsizing the number of people at the sharp end and failing entirely to do the one thing that he was tasked to do, which was to bring in the technology to modernise the process of distribution and introduce letter-bundling by street, as is done in any sensible country. He failed and was paid millions of pounds. That sounds like what happened with the banks so it seems as though we did a lot of that under the previous Government.

I am happy to say that the Labour Government got it wrong, because they did get it wrong. I say to the hon. Member for Colchester (Bob Russell) that his party will be judged on how it acts in government, not on how he is acting from the liberal wing of the Liberal Democrats. The orange book Liberals have joined the Tories and will become Tories if they want to stand at the next election. They are sitting opposite me at this moment. They are the people who are destroying the post office network, just as the delusional people in my party cost us millions of votes by doing what is about to be carried to its final conclusion—that is, attacking the structure of our communities.

When a Crown office goes and a sub-post office is put into a sweet shop at the end of the high street, we see the change. We see people queuing outside in the rain because the shop is too small to handle the business. When a sub-post office is put into the back of a small supermarket, as one has in Bathgate, or into a sweet shop, as one has in Linlithgow in my constituency, people in wheelchairs cannot get into the post office when staff create a barrier as they stock the shelves with quick-sale goods. All that happened under our Government, and the measures proposed in the Bill will be worse than any of that.

[Mr Weir]

The hon. Gentleman is making a good point. He speaks of a post office being put into a sweet shop. Does that not underline the need for the agreement? There is much talk about post offices delivering government business. After the closure programme and the relocation to paper shops and sweet shops, how many post offices in his constituency will realistically be able to do such business immediately?

[Michael Connarty]

As I said, the new clause is intended to ameliorate the impact, not to negate it. I would prefer a permanent agreement that the Royal Mail and the Post Office would not be sundered by the Bill. It is an illusion that the market will allow things to become more efficient. I do not believe that.

[David Mowat (Warrington South) (Con)]

Will the hon. Gentleman explain how the Bill, which gives each of the 7,000 currently unviable post offices approximately £200,000 over the next four years to keep going, is an attack on their communities?

[Michael Connarty]

It might be useful to read the Bill. That is not in the Bill. It is an under-the-counter promise by the Government that they have set aside a sum of money. That is no different from the sum set aside in the past by the Government every time they carried out a reorganisation to sustain the unsustainable. It is clear that those post offices are not viable in the market. If those post offices and sub-post offices lose another £343 million, which is the cost per year if the business arrangement is broken, that is where the money will go. It will replace the money that should have come from the agreement. The money will be required to pay the people. At present 900 post offices are up for sale, apart from those that are temporarily closed, as the hon. Member for Colchester said.

It is important that we realise that, in this process, the Conservative-led Government, supported by the Liberals against their pledges in their own manifesto, are trying to move the Post Office and Royal Mail into a market and away from a controlled situation. There is talk now of the inter-business agreement. There will be talk later of the universal service obligation, which will also be destroyed by the Bill. In the USA, the arch-capitalist country, the postal service is permanently in the public sector. It will not be taken out of the public sector because it is seen as a public institution. We will follow a route that will cause us to destroy part of our institutions.

I do not believe that Members are kidding themselves. I am sure they have talked to their communities when a sub-post office has been closed and heard the anger when that happens. I am sure that they have talked to people when they lose their Crown office and get a second-rate service from a post office put into the back of a supermarket. People do not like it because it destroys the structures of their communities.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

The hon. Gentleman mentions the United States Postal Service. Is he aware that it made an $8 billion loss last year?

[Michael Connarty]

What I am aware of is that the public purse supports an institution in the USA. If the Liberal Democrats in the Government are saying that they believe it best not to subsidise but to let the market rip, why do they talk about subsidising those 700 post offices that do not make any money? Is the Minister arguing for the withdrawal of the subsidy in the USA but not here? It does not make sense, and he knows it.

[Mr Anderson]

Has not the Minister just let the cat out of the bag—that the Liberal Democrats, at least those in the Government, just like the rest of the Government, know the cost of everything but the value of nothing?

[Michael Connarty]

Tomorrow, the Liberal Democrats will find out the value of making various pledges to the public and then breaking them. Even the proposal to privatise 50% of the Post Office, which was very similar to the proposal that a certain Minister in the Lords made on behalf of the previous Government, has been betrayed by the Liberal Democrats. I shall support the new clause, because it is a cross-party proposal that would ameliorate some damage for a short term. The most important thing, however, is to vote against the Bill and to let people know that what is being done is a dirty deal by the Liberals to let the Conservatives privatise and smash the post office network.

[Mr Binley]

I congratulate the hon. Member for Linlithgow and East Falkirk (Michael Connarty)—he must have trouble pronouncing that; I have trouble with Northampton South—on a robust speech, and I pay tribute to his defence of the Post Office over a very long period. His colours have been clearly nailed to the mast, and that we must accept.

I say to the Minister that I support the general thrust of the Bill, with which I have no problems. I have been a critic of Post Office management for a sizeable time and believe that the organisation’s senior staff should be ashamed of the results of their management. It is true that they produced a bottom line that looks slightly healthier, but they left an immensely demoralised work force whom they bullied most unacceptably for years. I might tell those managers that if they had worked for the company of which I am chairman, I would have sought their dismissal.

Let us be absolutely clear that the Post Office and the Royal Mail have not been well served by senior management over recent years, and that makes the difficulty that the Government face even greater. I understand that point, and it is one reason why I have argued consistently for a massive injection of good-quality, creative management in the upper levels of the Post Office’s management structure. We have not seen that; we have seen City hatchet men, just at the time when it was necessary to bring in creative, technological management. But this House shares a sizeable amount of the blame for that outcome. I would have wanted things to be done differently, as indeed would the hon. Member for Linlithgow and East Falkirk. We have argued for that jointly. We might disagree on a number of things, but on that we have been as one.

I genuinely share the Government’s ambition to create in the Post Office a new management structure that can come to terms with a quickly and massively changing technological marketplace. That particular attempt is absolutely vital, and it means a sizeable commercial injection from the private sector. I have no doubt about that, or that the Post Office was one of those organisations that had almost immured itself from the necessary quality of management. I have equally no doubt, however, and I shall say it again, that bringing in City hatchet men was not the way to deal with the problem.

13:45

[Mr Davey]

It is not appropriate for me to comment on the previous management, but I invite my hon. Friend to contact the new chief executive of Royal Mail, Moya Greene, and the new managing director of Post Office Ltd, Paula Vennells. If he seeks to meet them and to listen to them, he will find that the management in Royal Mail and in Post Office Ltd are of the highest calibre.

[Mr Binley]

I, of course, welcome the Minister’s intervention in that respect. I have no wish to vilify the current management; I just make a statement about why we are in our current position with the Post Office. We have to be realistic if this debate is to have any meaning at all. I have outlined an important reason for being in the position we are in, and I have no fear in doing so.

[Michael Connarty]

Will my hon. Friend—on this issue—take from me a factual statement? In front of witnesses, we met the previous Minister with responsibility for the matter, Lord Mandelson, and put it to him that the manager, Crozier, who by the way comes from Falkirk, had been an absolute disaster and failed. One of my party’s Whips asked why he was still in post, and Lord Mandelson’s civil service leader said, “He was the best we could get at the time.”

[Mr Binley]

I am grateful for the interjection. What an awful statement for somebody concerned with a business to make, but then I have never been very keen on the gentleman’s boss: I would not have appointed Lord Mandelson, either.

[Richard Fuller]

To echo the Minister’s comments about the observations on the current management by Members on the Public Bill Committee, I note that there has been a substantial improvement on the legacy management. The current management really shine a torch forward for Royal Mail Group. Does my hon. Friend the Member for Northampton South (Mr Binley) echo my sentiment that, in the sight of ineffective, hostile management over many years, there was an excellent outcome when the Communication Workers Union and other unions put together a modernisation programme and commitment for our postal services, privatised or otherwise, for the long term? That was a substantial triumph by the unions against hostile management.

[Mr Binley]

I accept that interjection and support that point, too, because I was one of those who consistently said that we should be proud of our Royal Mail work force. I am sure that my hon. Friend visits his local sorting offices, as the hon. Member for Linlithgow and East Falkirk and I do. We visit our sorting offices and post offices regularly and we know the quality of people we are dealing with. I would be proud to have them in any organisation with which I was associated, so paying tribute to the work force at this stage has real value. I accept that and thank my hon. Friend for his intervention.

To return to the main thrust of my contribution, I am concerned that, unless we are careful, the separation of Royal Mail and post offices will have a sizeable detrimental effect on the viability of the post office network. The truth is that the network is a diminishing resource even as we speak. My hon. Friend the Member for Colchester (Bob Russell), who moved the new clause, said that some post offices had temporarily closed. Well, if you believe that, you’ll believe anything. In truth, they are closed for business, just as many pubs are, which is another problem in rural areas—but not a part of the Bill.

[Mr Weir]

I have some experience of the Post Office in my constituency, and a long-term temporary closure effectively means that, although the Post Office accepts that there should be a post office in that location, the branch has closed because someone has retired or died and the organisation cannot find anyone willing to take it on. One reason for that is uncertainty about the future.

[Mr Binley]

I am most grateful to the hon. Gentleman, whom I worked with for some time on the Business, Innovation and Skills Committee, for that intervention. He spent many hours with me questioning the management whom I have criticised so heavily. He is absolutely right: temporary closure does not take into account the fact that post offices are private businesses that need to have people to buy them, run them and invest in them. My hon. Friend—I mean the hon. Gentleman, but he is still my friend—makes a valid point. The post offices are for sale, but there are not any buyers for them. The reason is not difficult to work out. I have grave concerns about the viability of the Post Office.

[Jim McGovern]

I am sure that the hon. Gentleman would agree that we—or any new owners—must push business towards the post office network. During the last post office closures in 2007-08, I visited the sub-post offices in my constituency. The sub-postmaster of one of them freely told me that he renewed his TV licence and his road tax online. In addition, seven out of 10 pensioners and nine out of 10 new pensioners get their pension paid into the bank. We need new business for the post offices. That sub-postmaster was willing to bite the Government’s hand off for the compensation he was getting because he just wanted out.

[Mr Binley]

I accept the hon. Gentleman’s comment. The Post Office could have been much more imaginative in supporting sub-post-offices to increase their business. Over the past 10 or 12 years, the lack of that support has been one of the reasons why they are less viable as a business than they should be—even the good ones now are less viable. We must accept that steps have been taken recently and I welcome that. However, the general thrust of his intervention is absolutely right.

Let us consider the post office network. I have already made the point that 150 post offices are closed and will remain closed because there are not the buyers to buy them. Some 900 are up for sale, which supports that point totally. Let us not mess about with stupid phrases such as “temporarily closed.” They are pretty much finished and that is the end of it. We need to be honest.

[Damian Collins]

Does my hon. Friend agree that the problem he describes affects not just post offices, but businesses in neighbourhoods and rural communities in general, and that some of the provisions in the Government’s Localism Bill and in the White Paper, “Local Growth: Realising Every Place’s Potential,” might help to stimulate interest in communities and local government to support those businesses?

[Mr Binley]

I thank my hon. Friend for that intervention. He knows that I agree with that view—in fact, we have talked about it. We fought the 2005 election together. That was a very happy experience for me; I wish it had been slightly happier for him, but it is good to see him in the House now. As we fought that election together this was one of the issues we talked about at some length. I accept his point.

The very fact that more than 1,000 of our post offices are either closed or up for sale shows that there is concern about the viability of the network. It is not in doubt that we have some serious problems. I shall come to the impact that those closures might have on many of my colleagues in rural seats in two or three years’ time. We went through a process of fighting to save post offices and I will describe how I experienced that process and how difficult it was to deal with as a Member of Parliament, even though I was an Opposition Member. It will be much more difficult for many of my colleagues to deal with the matter as members of the Government. The Minister may well take that point into account. However, the separation of Royal Mail will create massively greater pressures on the commercial viability of many of our post offices, unless we give them more time to adjust. That is the point of all this.

[Margaret Curran (Glasgow East) (Lab)]

Will the hon. Gentleman draw parallels between his experience of representing rural areas and my experience of representing very deprived communities that are often isolated, where the post office is a vital lifeline? Perhaps we should support the new clause—although it is proposed by a Member from an opposing party—because the very best thing we can do is to preserve that historic link between Royal Mail and the post office network. We can at least offer people that crumb of comfort from the legislation.

[Mr Binley]

I share that sentiment—in fact, it is the thrust of my contribution. There is no doubt that urban and suburban post offices are as important to their communities as rural post offices. In the main, urban post offices have a bigger market to exploit if they are given the help to do so, but that is all the advantage they have. They are still in difficulty and they still face considerable danger. I totally accept the hon. Lady’s point.

[Damian Collins]

My hon. Friend talked about good and bad management in the past. Does he agree that we should not let Post Office management off the hook and that they should continue to innovate in terms of how they deliver their services, particularly in relation to the roll-out of the post office local service? That service could integrate well into existing businesses, both in villages and urban areas.

[Mr Binley]

I thank my hon. Friend again for his intervention which is, of course, quite supportive of my words; I am grateful.

I accept the point made by the hon. Member for Glasgow East (Margaret Curran). The truth is that our local post offices are more than just local small businesses. They are that at their very heart, but they serve a wider purpose in many respects. They are vital to our local community networks, as she said, and they are crucial in urban, suburban or rural areas where they are the only point of contact for perhaps a mile or more.

There is a social networking element to my local post office—I pay tribute to it and I shall name it, as I hope it benefits from my doing so—in my village of Hackleton. I know the quality of service that post offices give. Elderly, vulnerable people go in them and seek help on a range of subjects that are way outside the remit of the post office. That help is given willingly as part of the service that post offices provide. The community networking element of our post offices has a value that we have not priced into this whole exercise, and that needs to be taken into account.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I very much want to support the focus on the community role of local post offices. We have focused on the economic role, which is massive, but the community role is so important. Figures provided by Age Concern show that more than 98% of older people say that their local post office is a lifeline. For some people, the issue is almost a matter of life and death, which is why this debate is so important.

[Mr Binley]

I thank the hon. Lady for supporting my point.

In addition to the community networking element, post offices have a social work element as well. I have hinted at that, particularly—as was just said—in relation to the elderly and young mums in our communities. Many of those young mothers, who are building families and creating the generations of tomorrow, have only one car. Many of the elderly do not have a car. If such people are not close to a post office, they are, frankly, even more socially deprived.

[Fiona O'Donnell (East Lothian) (Lab)]

Does the hon. Gentleman agree that, during the bad weather that we had at the end of last year, the role of local post offices that have been combined with small shops was even more important in constituencies such as mine because people could not travel to large supermarkets?

[Mr Binley]

I am grateful to the hon. Lady for her comments. I think that these interventions are making an impression on the Minister. I am sure that he is well aware from his own experience of the social role that post offices play and that he will have taken that into account. I hope that when I sit down after having made a suggestion to him, he might be able to agree with me, throw me a little red meat, be kind and make all of us feel a bit better as a result of the debate.

I have talked about support for the elderly and young mums—the people without transport. The Government say that there is not a social element to their thinking, but there needs to be, as they will surely find out, as individual Members of Parliament. If people find out some six months or a year before the next general election that that has not been taken into account, those colleagues will be kicked pretty hard, I can assure them, because that happened to many of us in the previous round of closures.

14:00

Many of our post offices are heavily dependent on Royal Mail. A third of our local post offices’ revenue comes from the sale of Royal Mail products and services. When the split happens—I am not arguing against that per se at the moment—it will be possible to withdraw, change and alter pricing for those products and services, and that could impact detrimentally on post offices. The related income to our local post offices is £343 million—not to be sneezed at. More than 30% of the wages of the people who work in our local post offices is paid for via these services—that is, some £250 million. Withdraw that, and we withdraw a whole work force of many tens of thousands of people. There are also the 900 post offices that are mail work sub-post offices, which means that they provide the premises and facilities and supervise the mail delivery—a vital element of the role of our sub-post offices in terms of the larger business of communication and mail. That applies to more than 14% of our rural post offices. Unless there is a pre-arranged business relationship, any organisation coming in will see that as a real opportunity to save costs immediately.

[Ian Murray]

It is not inconceivable that a company such as Deutsche Post could buy Royal Mail. When such a transaction happens in Germany, the post office network is protected by law. As a result of the cost implications, Deutsche Post could run down our post office network to subsidise its post office network in Germany.

[Mr Binley]

I thank the hon. Gentleman for that supportive intervention. That gives us even more reason to ensure that there is a business agreement to tide the post offices over. We need to ensure—not to hope, guess or think—that they have the time, and therein lies the great value of the new clause. We must give them time; otherwise, we cut their legs off almost immediately. If we cut their legs off, many of my colleagues’ legs will go with them. We need to consider this particular aspect very seriously, not because I want to save the future well-being of my colleagues, although I am delighted to do so, but because if their legs get cut off it means that my worst fears have come to fruition and my local communities will suffer immensely. That is where the real concern lies in all this and why it needs consideration and thought.

I fought the closure of two post offices in the previous round. I am delighted that I was successful in one case, although I must say that I was suspicious that the Government had already decided to allow some to be saved merely to give the impression that the consultation had value. Can we really believe that? Well, I did, all the way through—shame on me! I was able to save, in one way or another, one of those post offices, but one of them closed, in a community where the elderly were a sizeable, if not predominant, section of the population. That meant that to get to the nearest post office they either had to hire a taxi or walk a mile and a third uphill. Frankly, the older one gets, it is just as dangerous coming downhill as it is going uphill. A number of those elderly people were distraught, as were some of the young mums with two or three kids, because their husbands needed the car to go to work and they had no other form of transport. They found it immensely difficult—and dangerous too, as the elderly did, particularly in slippery weather such as that which we have just seen.

Those are the sorts of little things that do not impact massively on decision making in this place but impact massively on the lives of individuals in our communities. I therefore implore the Minister to give some thought to the value of post offices as social and local community institutions, and to recognise that many of them will need time to make the adjustment. To cut off the supply of income that Royal Mail provides will be a damaging and, in some cases, a closure-making blow. Does he agree that they are a community network of social value? I am sure he does. I hope he also accepts that I want to see the success of this coalition and to see it returned as the next Government. Unless he takes action, however, he might be cutting off the legs of many of his colleagues—and indeed, for all I know, even his own legs.

I ask the Minister to think about this seriously. Perhaps, as my hon. Friend the Member for Colchester suggested, he would prefer a different time line and might be willing to consider three, four or five years. If so, I beg him to do so. The Minister may need that option to provide more help in his negotiations with potential buyers to ensure that the pill is sweetened a little in recognition of the cost implications. That sort of thinking would be massively valuable to our communities up and down the land. I would argue equally that in the real world of politics it could be massively helpful to many of my colleagues, and the Minister’s, who will be fighting for their political lives at the next general election. That is not the reason for doing it—the reason is to help the community—but I will use any arguments I can to encourage him to think about extending the agreement between Royal Mail and the Post Office, as the new clause suggests. I implore him to do so, for our communities and for our colleagues, but most of all for the well-being of our country.

[Ian Murray]

I support the new clause. I must say at the outset that I do not share a flat with the hon. Member for Colchester (Bob Russell), but it sounds like a fun flat to be in, none the less.

I hope that the Minister is listening to what hon. Members are saying. Prior to any sale or transfer of a post office company, an agreement should be secured between the new owners of Royal Mail and the Post Office for a period of 10 years—that is the suggestion, but it could be any number of years—in order to gain that transfer. Under the Bill, a privatised Royal Mail could break the historic link with the post office network and use another outlet such as Tesco, as the hon. Member for Northampton South (Mr Binley) mentioned. That might force customers to go much further to post offices to register parcels or to use the other services that people enjoy.

The Government have shown ambivalence towards post offices in this process. Everyone has talked of the importance of maintaining the link and the inter-business agreement between Royal Mail and the Post Office in some fashion, to ensure that the post office network is maintained. Although new clause 2 is not perfect, it would oblige a privatised Royal Mail to maintain the inter-business agreement with Post Office Ltd. The Government refused to listen to similar calls from the Opposition in Committee. Indeed, the Opposition spokesmen made those points clearly throughout the 20 sittings. Unless the Government make a strategic decision to put business through the post office network, the future of the network as we know it will be in significant danger.

As we have heard throughout the debate, the post office network has a declining share of the market because of the model in which it operates. The Government have an obligation to donate as many services as it is in their gift to donate to the post office network.

[Fiona O'Donnell]

Given how many post offices are running at a loss and how many are on the market, does my hon. Friend agree that it is important to the future of post offices that they have a period of at least 10 years to plan and recover?

[Ian Murray]

I am grateful to my hon. Friend for that point. The hon. Member for Northampton South was clear about the size of the revenues that go through the post office network, and therefore the survival of many post offices in rural and deprived areas would be in jeopardy. The figure has been mentioned of 900 post offices being temporarily or long-term out of business. It is clear from such figures that the business model for the post office network is unviable at the moment, let alone after taking an additional £343 million out of it.

Tory and Lib Dem MPs were happy to use the Post Office for their own political ends when it suited them in opposition. The post office network was a political hot potato for many years in my constituency of Edinburgh South. It seems shameful that the Liberal Democrat party, which has made a living out of saving post offices—or pretending to save post offices—now sits in judgment on Royal Mail and threatens many thousands of post offices, if not the entire network.

That the Government are not prepared to put a straightforward clause into the Bill to guarantee the future of post offices calls into question the logic of allocating more than £1.3 billion of taxpayers’ money to subsidise and refurbish them. There are still no bankable contracts for additional Government work for post offices, in spite of the warm words, and the requests of the National Federation of SubPostmasters. It is not clear that the Post Office will even win the renewal contract from the Department for Work and Pensions following the benefit changes.

The Government’s failure to take forward Labour’s plans for a people’s bank at the Post Office is yet another Lib Dem manifesto pledge broken. They are turning their backs on the very people out of whom they made political capital for many years.

[Mr Denis MacShane (Rotherham) (Lab)]

That is a fundamental point. In France, Germany, which has been cited, and Switzerland, such banks are viable banks. They are more than just a service for poorer elements of the community, as the hon. Member for Northampton South (Mr Binley) said; they are successful enterprises. I am astonished that the Liberal Democrats, of all parties, do not insist that the bank should be part of the new model.

[Ian Murray]

I decided a long time ago that I would stop being astonished by the Liberal Democrats, and just take it for granted that the things that they say in this Chamber will be astonishing.

[Bob Russell]

The right hon. Member for Rotherham (Mr MacShane) was a former Minister and had 13 years in which he could have promoted the people’s bank proposals. It is up to Parliament to suggest clauses. The hon. Member for Edinburgh South (Ian Murray) could have tabled a new clause on a people’s bank for this legislation. Surely the right time to establish the people’s bank in legislation was when his Government bailed out the banks with billions of pounds of public money, when it could have been imposed on the network of post offices that was left after the huge closure programme?

[Ian Murray]

I am delighted by the hon. Gentleman’s intervention, but I repeat the point that I made in my intervention on him: he has criticised previous Governments going back 20 or 30 years for running down Royal Mail and the post office network, but it will be his Government who put the final nail in the coffin.

14:15

[Malcolm Bruce (Gordon) (LD)]

One problem for the people’s bank, and for using post offices as a branch network for joint-stock banks, was that the Royal Bank of Scotland and the Bank of Scotland refused consistently over the past few years to comply. However, they have now done so and the post office can be used to access cash from pretty much every mainstream bank account. That is a real help to the post office network.

[Ian Murray]

We must leave no stone unturned in looking to provide services through the post office network, so that it can survive this process. The black hole in finance that will appear if the inter-business agreement is removed will make most post offices in this country unviable. We should look at every conceivable option to get as much revenue as possible into the post office network, because, as everyone in this Chamber knows, people love and enjoy the services that it provides.

[Tom Blenkinsop]

On the point made by the right hon. Member for Gordon (Malcolm Bruce), given that banks are closing branches left, right and centre, it suits the banks in the current commercial circumstances to use the post office as an access point.

[Ian Murray]

Absolutely. My hon. Friend makes his point clearly.

[David Mowat]

Will the hon. Gentleman give way?

[Ian Murray]

I will just make a little progress, because many hon. Members want to speak.

The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees the use of the Post Office as its retail arm. When the agreement is renegotiated, a privatised Royal Mail will try to reduce costs by using other outlets such as supermarkets and high street chains instead of the post office network.

In my intervention on the hon. Member for Northampton South, I used the example of Germany, which has privatised, or certainly reformed, its national mail services through Deutsche Post. It has written protection of its post office network and services into legislation. We are giving no such protection. Deutsche Post could happily buy Royal Mail and decimate the unprotected UK post office network to subsidise its network at home, which is guaranteed by legislation.

[Mr Davey]

I am grateful to the hon. Gentleman for mentioning Deutsche Post and its legal protections. He and hon. Members who served on the Postal Services Public Bill Committee will be aware that the protection given to post offices in rural areas of Germany is that there must be a post office every 80 sq km. Is that what he proposes for this country?

[Ian Murray]

We are proposing protection for the post office network in any fashion, which the Minister point blank refuses to give, even though his Back Benchers are asking him to consider it through the new clause.

In Committee, the Minister said:

“No previous Government have thought to put it on any different footing.”

However, no other Government have needed to intervene on the inter-business agreement because no other Government have separated the post office network from Royal Mail, which is what will happen under this full-scale privatisation. He has tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. As has been said, the stated aims of the management of Royal Mail and the Post Office are to keep the relationship, but to be frank, management changes rather quickly and regularly. We need more reassurance in the Bill, rather than words from the management of Royal Mail and the Post Office. The Minister went on to argue in his evidence to the Committee:

“If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-123, Q244-245.]

He therefore admitted that there will be no inter-business agreement going forward and that the post office network is essentially being hung out to dry by this legislation, along with the Royal Mail and tens of thousands of workers.

[Lorely Burt (Solihull) (LD)]

My understanding, on which I stand to be corrected, is that the problem is not that the two companies want to have an inter-business agreement—they are free to do that—but that EU rules prohibit Governments from intervening to ensure that an inter-business agreement is prescribed for a specific period. I believe that that is the problem with the new clause.

[Ian Murray]

But as we have already discussed, Germany seems to have found a loophole in that legislation, so I do not see why we should not be able to find a way forward for an inter-business agreement in this country. It would be up to the Minister and the Government to find a way around that problem and ensure that the post office network was maintained for the future.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Is this possibly the first time on the record that a Liberal Democrat has blamed the European Union for anything?

[Ian Murray]

As I said in response to my right hon. Friend the Member for Rotherham (Mr MacShane), nothing astonishes me about the Liberal Democrats these days. Indeed, blaming the European Union is one of their latest wheezes as they break their pledges and proposals and change their philosophy.

The National Federation of SubPostmasters believes that a minimum 10-year inter-business agreement is essential, and it knows about the matter having worked with its members, postmasters and postmistresses across the country. That organisation, which is at the coal face, says that such an inter-business agreement would protect its members, and I think it is telling the truth in this particular matter and giving us the evidence that we need that agreement.

Today we are seeing a disgraceful privatisation of one of the country’s, and the world’s, treasures. The Royal Mail is not safe in the hands of this shameful Government, and the Bill in its current form will decimate the post office network in this country.

[Lorely Burt]

I have a great deal of sympathy with my hon. Friend the Member for Colchester (Bob Russell) and with everyone else in the House who wishes to protect the relationship between the Royal Mail and the Post Office. We all want that relationship to continue, but I have severe reservations about whether we can enforce that through Government legislation.

If we examine the situation between the two companies, we will see that they rely on one another. There will continue to be a long-term contract in place between them because there will remain an overwhelming commercial imperative for the two businesses to work together as they do now. The chief executive of Royal Mail, Moya Greene, has said that it is “unthinkable” that there will not always be a very strong relationship between the Post Office and Royal Mail. However, legislation is not the appropriate way for the commercially sensitive terms of a relationship between two independent businesses to be settled.

[Mark Durkan (Foyle) (SDLP)]

The hon. Lady says that legislation is not the appropriate way to make provisions about commercial relationships, but surely it is the appropriate way to make provisions to guarantee public services and public service standards.

[Lorely Burt]

I hope that the hon. Gentleman would agree that there is a guarantee of public services built into the Bill.

The Government are not party to the current arrangements between the two businesses, and they will not be in future. There is no statutory precedent for requiring particular commercial terms between two independent businesses. What the Government can do, however, is help to create the conditions in which both businesses can flourish in partnership with one another. We have heard this afternoon about the £1.3 billion funding package that is being provided to post offices, which will help the Post Office to deliver the best possible service to its new business partner.

The hon. Member for Glasgow South West (Mr Davidson) mentioned the EU, and I will surprise him again by saying that we in this House are to blame for the EU legislation that has come forward. We have gold-plated the EU directive and created an uncompetitive situation by giving private companies compulsory access to Royal Mail and guaranteeing a margin for competitors. My hon. Friend the Member for Colchester mentioned the loss that is made on each competitor’s letter; 2.5p is lost with the delivery of a competitor’s letter.

[Malcolm Bruce]

Most of us have visited post offices in recent weeks. Does my hon. Friend agree that the Royal Mail is delivering a huge amount of mail on behalf of other carriers, and that if it did not provide that service, those carriers could not provide their customer guarantees? It is imperative that they pay a fair price for that service, and the Bill may create the space in which that can happen.

[Lorely Burt]

My right hon. Friend is absolutely right. It is shameful that Royal Mail’s demise has been caused partly by the fact that we have gold-plated the rules that have come down from the EU.

[Tom Blenkinsop]

I think we are getting slightly confused about the matter. There is cherry-picking within Royal Mail, with which I personally do not agree, and the report that members of the Bill Committee considered before our sittings recommended that the practice should be got rid of. However, that should not be a defence for what the Government are doing, which will undermine internal business arrangements. They have created a smokescreen of European legislation for what they are doing, but in fact the Government make 10-year agreements with rail companies, for example.

[Lorely Burt]

I am struggling to answer the hon. Gentleman’s point, because it is a bit technical. I am looking over towards my hon. Friend the Minister, and I am sure that he will make a better fist of giving an answer.

[Mr Russell Brown]

I hear what the hon. Lady is saying about the UK gold-plating EU legislation, but when the liberalisation first started, and in fact beforehand, a number of Labour Members—we were then in government—spoke to Ministers and met the regulator. The liberalisation that the regulator was committed to carrying out in a five-year period was driven through far too quickly, and it actually happened in 18 months. There was great concern, but the problem was that if we had been seen to be interfering with the job of the regulator, we would have been severely criticised.

[Lorely Burt]

I take the hon. Gentleman’s point, and I have a great deal of sympathy with it. It is a great shame that that happened, but now we have to pave the way for a change in how the rules operate, and the Bill will empower Ofcom to examine how the regulations in question apply.

As far as I understand it—I am sure the Minister will comment on this—current EU rules do not allow specific periods to be imposed on inter-business agreements. Donald Brydon pledged in his evidence to the Public Bill Committee that before any privatisation of Royal Mail, a continued long-term commercial contract would be in place between the two businesses for the longest duration that was legally possible. I do not know whether 10 years is the right period, but that decision has to be made between the two organisations. I know that there is a great will in Royal Mail to ensure that there is an inter-business agreement between the two parties that guarantees a safe, secure and productive future together.

[Mr Weir]

Let me remark in passing that I have spent many years standing in this spot defending post offices. It is somewhat disconcerting to find after the general election that, with a few honourable exceptions, everybody else has changed sides, while I am still standing in the same place, making the same point. However, it is good to see the hon. Member for Colchester (Bob Russell) come at least partly back into the light. We shall be supporting his new clause 2 this evening if he pushes it to a vote, which I hope he will.

14:30

The reason for that is that the new clause addresses one of the major issues with the Bill. There are serious concerns in all our constituencies about splitting the Royal Mail delivery system from Post Office Ltd, and about what future awaits our local post offices in the brave new world. Indeed, the National Federation of SubPostmasters made the point that nowhere else in the world have the post office and mail delivery service been split.

There are many issues that give me great concern, but the overall problem seems to be that far too much about the post office network’s future depends on the Government crossing their fingers and leaving things to the good will that exists between the management of Royal Mail and Post Office Ltd. That is far too tenuous a way of guaranteeing the future of our local post offices. We need to be much more proactive. As we have heard from other Members, so much of the business that comes through our local post offices depends on Royal Mail and is governed by the inter-business agreement.

Our position is that which was also articulated by the hon. Member for Linlithgow and East Falkirk (Michael Connarty). We are totally opposed to the privatisation of Royal Mail, and we intend to continue to oppose it. However, if that tragedy comes to pass, we will want as much as possible done to protect our post offices. Throughout our debates in Committee the Minister assured us that he was exploring the greater delivery of Government and local government services through our post offices, which would help them to diversify. That was also touched on by Paula Vennells of Post Office Ltd during our evidence sessions. I would welcome that development, and I genuinely wish the Minister good luck in doing that work.

[Mr Alan Reid (Argyll and Bute) (LD)]

I agree that much more Government and local government work has to go to the Post Office, but can the hon. Gentleman tell us what his Government in Scotland are doing to give more Scottish Government work to the Post Office?

[Mr Weir]

The Government in Scotland will have discussions with the Post Office, in the same way as the Government here, but that will depend on what happens. I was making the point that, although I welcome the development that I have described—I could equally well ask the hon. Gentleman what his colleagues in local government are doing about it—I have concerns about what will be produced, albeit not because I distrust the Government’s intentions. The Minister held a meeting before the Bill came forward and he explained what he was trying to do. I support that, but there are practical difficulties.

I made the point that, in my area of Angus, the local authority has established local access offices in most boroughs to offer a front-office service for all local authority services. In Arbroath, Brechin, Kirriemuir, Forfar and Montrose, those offices are all situated around 100 yards at most from a post office. In the case of Kirriemuir, Forfar and Montrose, those are the only post offices in the borough. However, there are two difficulties with that. It is difficult to see how the local authority will have a greater ability to deliver services through the post offices in those borough areas, especially where there is only one post office. Also, because of what happened in the last round of closures—when many of our stand-alone larger post offices were closed, being moved into sweet shops, paper shops and other premises, as the hon. Member for Linlithgow and East Falkirk said—those post offices do not have the space to deliver greater services and nor, in many cases, do they have the expertise.

In my constituency, there are already problems with some of those post offices because of lengthening queues and an inability to deliver the services already provided by the Post Office. It is difficult to see how those post offices will cope with an influx of other services from the UK Government, the Scottish Government, local authorities or anybody else. That is a practical difficulty, and I have not heard anyone in the Government come up with a solution to it. What is proposed may be a possibility in rural areas, but in their programme for post offices, the Government are talking about 4,000 main post offices that will provide a full range of services—incidentally, that is the number of post offices that are currently viable, which is slightly worrying. However, on top of that is what the Government call the post office local model. The idea of the local model is to put post offices into smaller businesses to deliver—the Government say—longer office hours and greater help for local people.

That is fine in theory, but the post office local model does not provide the full range of post office services. I suggest that the bulk of our post offices will be unable to provide the full range of services in smaller communities if the Government, local government, Scottish Government and whoever else get their act together and produce such services in the first instance. That practical difficulty needs to be tackled before things can proceed. That is another reason why a long-term inter-business agreement is a good idea. We have to look at not only the business, but the structure of the post office network, so that it can deliver the new business that is being promised to it.

However, the most important point is what the relationship will be between a privatised Royal Mail and a Government-owned Post Office Ltd, where the Government are determined to push down the costs to the taxpayer of continuing to support Post Office Ltd. As the hon. Member for Colchester rightly said, Royal Mail will inevitably try to push down its costs in delivering a mail service. When asked about that in the evidence session, Paula Vennells of Post Office Ltd said:

“In terms of what is in the Bill, what is important for Post Office is that we maintain our strong relationship with the Royal Mail Group.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]

That is fine and well, but we all know that at present Post Office Ltd gets fully one third of its business through the inter-business agreement. The Minister will, I am sure, point to the statement made during the evidence session by Royal Mail. Moya Greene, the chief executive, said:

“For me it is unthinkable that we would not have a very long-term relationship with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

Again, that is all very well, but I would suggest that the relationship between a fully privatised Royal Mail and a Government-owned or mutual Post Office Ltd would be very different from that between two companies that are both members of Royal Mail Group, as they are at present. In passing, one might also wonder how long the present management will remain in place, given what has happened with management previously.

[Fiona O'Donnell]

The hon. Gentleman has referred several times to the report of the Public Bill Committee, but I wonder whether he has also seen the excellent report from the Select Committee on Scottish Affairs, in which the Minister is recorded as saying:

“That makes it very clear that there are very limited circumstances in which there could be more than one universal service provider.”

However, if the Government are really committed to the relationship, why leave any gaps in the Bill at all?

[Mr Weir]

The hon. Lady makes a good point. I have read that report, which I found to be an excellent report, hitting on the main points as they affect Scotland.

I was talking about the management at Royal Mail. Ms Greene may have a considerable attachment to Post Office Ltd, but will a new owner of the business necessarily feel the same way? What happens when the commercial profit motive really kicks in? How much will sentimentality govern the actions of Royal Mail? That is especially important given that, as has been said on many occasions in previous debates, including in Committee, the ultimate owner of Royal Mail may turn out to be Deutsche Post or TNT, which I would suggest perhaps do not have the same sentimental attachment that we all have to our Royal Mail. As I understand it, the rationale behind the privatisation is to make the new company look for efficiency savings and cut costs. I agree with the hon. Member for Colchester that it is utterly inconceivable that the new company will not look at how it can do so in its relationship with Post Office Ltd, which will not be exempt from scrutiny under the new arrangement.

In her evidence, Ms Greene said:

“I do not see other retailers as a particularly serious threat, because Post Office has an enormous amount of expertise in this area”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17, Q42.]

The hon. Member for Edinburgh South (Ian Murray) mentioned the situation in Germany, but as the National Federation of SubPostmasters has said, there is no precedent anywhere in the world for splitting the delivery service from the post office. I asked the Minister on Second Reading whether he could come up with one, but none has been forthcoming since.

I spoke at length in Committee about the situation that has developed in New Zealand. I will not go into that again at great length today—interested Members can read the report of the Committee’s proceedings, where it is explained at some length. Suffice it to say that a competitor has set up what amounts to an alternative post office network targeted purely at what it needs to sustain its postal delivery business. That is another point. When Royal Mail is split from the Post Office, it will be in a very different position. Royal Mail will be looking at what it needs to be able to deliver a postal business—not a Government business, a pro-Government business or all the other things that the Post Office might do.

In her evidence to the Committee, the chief executive of Royal Mail said that it would be “inconceivable” that anyone but Post Office Ltd would be used by the Royal Mail. The Minister, if I recall correctly, was very dismissive of the idea that an operator might want to go to, say, a major supermarket and use it for delivery of post office services. Then again, it was not so long ago that it was inconceivable that a supermarket would offer a mobile phone network, for example, be an internet service provider or perhaps offer legal services, which might happen shortly. Who would have bought a television or a hoover from a supermarket 15 years ago? Times change and that applies to the Post Office as well.

In New Zealand, as I say, that has already begun to happen. That does not mean that a provider in the UK would necessarily do the same, but it is certainly a possibility. It might look into it and that provides a danger sign for post offices in the UK. New Zealand Post, of course, fought back—one of its principal weapons being Kiwibank—but this Government have rejected the option of creating a post bank in the UK with which to anchor Post Office Ltd.

No two postal markets are the same and the UK Royal Mail and Post Office Ltd might be able to hold together and provide a seamless and mutually profitable business, but there are lessons from what has happened elsewhere and we simply cannot idly let the future of the post offices in our constituencies rest on the good amicable feelings that currently operate between the two companies, which might not survive the privatisation.

[Damian Collins]

Does the hon. Gentleman not accept that, as discussed in Committee, the Post Office remains the owner of the Post Office brand and the business with the largest retail footprint in the country, which gives it considerable power in negotiating with Royal Mail?

[Mr Weir]

I do not agree with that, as I think Post Office Ltd will be very much the junior partner in the negotiation. I would ask whether Royal Mail rather than the Post Office is the brand for letter delivery, and Royal Mail will focus on how it delivers its mail business through the Royal Mail brand. In an earlier intervention, the hon. Gentleman made the point that an alternative provider could go to Post Office Ltd, but I ask him to consider whether that is realistic, given that only Royal Mail as the statutory provider of the universal service obligation will be required to have a nationwide delivery service. Other companies do not go in for that, and most of the present business for alternative providers relates to bulk mail delivery, not individual delivery. That requires a different business model from the one currently operated by Royal Mail.

[Tom Blenkinsop]

Another point is that there seems to be a massive assumption that these independently-owned post offices will suddenly opt into this mutualised model. A significant number of independent post offices will not want to do that; they enjoy the profits and the livelihoods they earn from their businesses.

[Mr Weir]

The hon. Gentleman makes a reasonable point. The problem is that it is not at all clear what mutuality means. If I understood the Minister correctly in Committee, what is being mutualised is not the post office network, but Post Office Ltd—the management of the Post Office—so the individual post offices would not be in a mutual network, but continue as individual businesses. I struggle to see how that is going to improve the situation.

[Lindsay Roy (Glenrothes) (Lab)]

Is the hon. Gentleman aware that Post Office Ltd is the junior partner in relation to some retail outlets, where it has an upstairs or downstairs location? It has to go through the footprint of the retail store, so it is not able to provide adequate facilities or the same kind of facilities that it did before as the Crown Post Office.

[Mr Weir]

I made that point with respect to my own constituency earlier and the hon. Gentleman is quite right.

14:45

Once Royal Mail is sold to a private operator, that operator will be focused solely on the needs of its enterprise to deliver postal services, not on the various other activities carried out by the Post Office. As I mentioned earlier, we already know that only 4,000 of the current post offices are profitable and that only around 7,500 are required to meet the current terms of the universal service obligation. Is it such a leap of imagination to think that a new owner of Royal Mail might consider whether its needs could be met with a deal with, say, supermarkets, which are increasingly opening for longer hours? I think not—especially now that Tesco Express or Metro are opening everywhere, and although they do not have the 24-hour opening of their hypermarkets, they are still open from 7 am to 10 pm. Even if that did not happen, there would still be two companies of vastly differing sizes and economic muscle negotiating an agreement. It is difficult to see Post Office Ltd not coming out very badly from that.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

On the hon. Gentleman’s point about doing a deal with a supermarket, does he agree that there is absolutely nothing to prevent Royal Mail from doing a deal with other supermarket chains?

[Mr Weir]

The hon. Gentleman makes a perfectly good point. It does not have to be with Tesco. It could be with Sainsbury or Asda for all we know, and it could cover the whole country.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

On the point about supermarkets, one key issue coming out of the Scottish Affairs Committee’s report was that the post office network is, in fact, a far better network than any supermarket chain in the UK as a whole. There are huge swathes of Scotland that have no supermarket and no supermarket chain, so this would not be a workable solution for large parts of the landmass.

[Mr Weir]

My hon. Friend makes a very good point. Of the 12,000 current post offices, only 7,500 are needed to meet the universal service obligation. The Minister laughed at the hon. Member for Edinburgh South, I believe, for mentioning the German model and 80 sq km, but one wonders what exactly might happen in large swathes of rural Scotland if this were to come about.

I have spoken longer than I intended, but I end by saying that, while we maintain our position of opposition to the privatisation of the Royal Mail, a 10-year inter-business agreement would give Post Office Ltd the necessary guarantee and stability for a lengthy period after the privatisation. I hope that it would allow the stabilisation of Post Office Ltd, allow a reasonable period to get new Government business, if possible, into post offices, provide some hope for the temporarily closed post offices or others up for sale, and some comfort to those thinking of entering the post office market. That would at least provide them with some confidence that there is a future. Otherwise, they would not go into that market. I urge all Members to support the new clause, which I hope the hon. Member for Colchester will press to the vote in order to show the House’s strength of feeling on the issue.

[Mr Anderson]

I welcome the debate. Like the hon. Member for Colchester (Bob Russell), I do not want to see the privatisation of the Post Office at all, but if it happens the new clause will ameliorate its effects. Does anyone really believe that the Post Office, going out into the world of competition, would be able to survive against some of the competitors it would be up against? The case for going outside has not been made, but if it does go outside, the Post Office should be protected. I am not quite sure where the Liberal Democrats are coming from—there is nothing unusual in that—but they seem to think that European Union law stops us passing this new clause. We have had no evidence to demonstrate that, and I do not believe that any evidence was shown in Committee either.

I hope that the Minister will explain exactly what rule in European legislation prevents an inter-business agreement. Everybody else who appeared before the Committee seemed to think it was a good idea. George Thomson of the National Federation of SubPostmasters said:

“On separating Post Office Ltd from Royal Mail, it is unprecedented and we have to get it right, which is why we need a 10-year inter-business agreement… We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI…you would get a 21-year contract. I am not asking for a 21-year contract, but…for a 10-year IBA contract.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 29, Q70.]

He was not alone. Paula Vennells, managing director of Post Office Ltd, who ought to know as she was part of the new management, said that

“we have a very strong commercial relationship with Royal Mail and that is something that both businesses would want to continue, so as we transform the post office network we will make it into something that Royal Mail will want to use.”

Moya Greene, the chief executive of Royal Mail, concurred, stating that it was

“unthinkable that we would not have a very long-term relationship with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17-18, Q42.]

Even Richard Hooper, who brought forward the original report, said in the updated report that he believed that the

“importance of the inter-business agreement should not be underestimated”.––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 114, Q228.]

It is a shame that those three people did not say that they wanted the IBA to continue in the way the amendment suggests. If we do not have that in black and white, we shall experience a rerun of what we witnessed in the Chamber between 12 and 12.30 pm today, when the Prime Minister repeatedly replied to questions by saying, “We hope that this can happen”, “We wish this to happen”, or “We are looking into ways of making this happen.”

If privatisation takes place in the way that is being proposed, when the contract goes outside people will eat it up. I spent 30 years in the trade union movement trying to unravel agreements and contracts or renegotiate agreements with organisations. I would say, “That must be there in black and white. If it is not in it, you cannot win it.” If we do not provide protection for Royal Mail and the Post Office that works in the way in which the IBA has worked so far, the service will clearly not be saved.

I appreciate that members of the Government are naïve amateurs who are doing their best to make things work, but that is not good enough. We need to ensure that services are supported. We are told that European Union rules are preventing that, and I hope that the Minister, who has now returned to the Chamber, will be able to explain exactly how they are doing so. When Corus was threatened with closure on Teesside, my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and I were constantly told that EU rules prevented Government intervention. We were told that the Germans and the Dutch used those rules, and that the British must play by the rules. We were losing out. Unless we have real, clear evidence that this cannot be done under law, the Government’s case will not hold water.

[David Mowat]

The hon. Gentleman has talked of the way in which the IBA works, which seems to have resulted in three quarters of the network becoming unsustainable or unviable. How does he think that extending the IBA in its current form will improve the position?

[Mr Anderson]

The hon. Gentleman is clearly under the misapprehension that public service is about nothing more than making money. We must accept that the public sometimes have to pay for the delivery of a public service in a way that does not satisfy accountants. We have a health service that costs £100 billion. No one says that it is in deficit. We have a defence system that effectively requires us to pay out all the money: we are not given any proper help. The postal service is also a quality public service that we should be proud of. The Labour Government invested a large amount of public money in it, but the truth is that we did not succeed. We were maintaining post offices that we had to accept were effectively a drain on public resources. The question that we must ask, and the question that people in the country will ask, is whether this is money well spent, and I would argue that it is.

[David Mowat]

I entirely agree that the sustainability of the post office network is a valuable public service, which is why I am delighted that the Bill will provide £1.3 billion to sustain it over the next four years—an average of £40,000 per post office per year. What I want to understand is how the continuation of an IBA that has apparently caused three quarters of the current network to lose money will help.

[Mr Anderson]

I think that that question should be put to Ministers. Nothing else will change: the need is still there, and the service must still be provided. In the last Parliament we invested £3.9 billion in the network, but that was clearly not sufficient. As was pointed out by the hon. Member for Angus (Mr Weir), we must accept that we are living in a different world now. People are obtaining their television and driving licences on line and using e-mail, but that does not mean that we as a nation should not be prepared to say that the post office network is so important that it should be subsidised by the public purse.

[Mr Russell Brown]

The hon. Member for Warrington South (David Mowat) has mentioned that £1.3 billion twice, but the fact is that money alone is not the answer to the problem affecting our post office network. It also needs the business that comes through the door and is transacted over the counter.

I assure the hon. Member for Warrington South that if there were an easy answer to all this, a Labour Government would have found it. There is no easy answer, which is why the IBA is such an important element. It will deliver more than 30% of the business that is transacted. As I said earlier—and I apologise for repeating myself—if that goes, post offices will wither on the vine.

[Mr Anderson]

We may compare the IBA to a sticking plaster covering a wound, but if it continues following privatisation, it will provide that little bit of additional protection that would not be there otherwise. Otherwise, post offices will be left wide open to businesses that simply want to make money. Why else would they want to take on post offices? Who wants this not to happen? The people who want it not to happen are those who want to buy postal services, who want to compete, and who want to make more and more money.

If we had been sitting here 25 years ago, we would have been debating the privatisation of the utilities. We would have heard all the arguments that we have heard today about how dynamic privatisation is, and about the efficiencies that it produces. E.ON is raising prices by 9% at a time when people are facing pay freezes. That is the truth about privatisation, and that is what will happen in the case of this privatisation.

[Richard Fuller]

I should like some clarification. We are using the phrase “inter-business agreement”, but the hon. Gentleman seems to be describing it as a 10-year continuing subsidy mechanism. Is he saying that he wants an inter-business agreement to be the transport mechanism for a continuing taxpayer subsidy, regardless of whether Royal Mail is privatised?

[Mr Anderson]

I want the IBA to give sub-postmasters the security that they have asked for. They say that it will give them faith in their ability to continue in their business. After all, it is their money. As I said earlier, they will lose £2 billion if the Bill does not work. They would much rather remain in a system enabling post offices to remain in operation and to receive support from the public purse. If we had adopted that attitude, we would not be having this debate.

[Richard Fuller]

I thank the hon. Gentleman for giving way to me again. There is an issue here that specifically concerns subsidy, and we should call it subsidy rather than an inter-business agreement.

The hon. Gentleman has cited the comments of Royal Mail executives as well as those of members of the National Federation of SubPostmasters. They did not ask for a 10-year IBA. Was that because the changes proposed in the Bill will enable managers to manage the operations of the business? Is not one of the problems that we have experienced in the past the fact that Government have shackled management and prevented it from managing effectively? That is the reason for the programme of closures and the inability to modernise effectively.

[Mr Anderson]

That is true, but the managers have not made the best of the deal that they have been given. They have received plenty of public money, but they have not succeeded. There are a number of reasons for that, but in recent months we have seen a break from it. We have seen new management; we have also seen the trade unions presenting a modernisation plan that can and will work. Those developments are being stopped in their tracks by the attitude of the Government, who want privatisation at all costs.

[Richard Graham (Gloucester) (Con)]

Does the hon. Gentleman agree that the other side of the equation, which focuses on the agreement between Royal Mail and the post offices, is the amount of business that post offices can do by other means? That revolves first around their ability to distribute financial services—access to banking and credit union arrangements—and secondly around their role as “front of office” providers of a series of services for customers coming from other Departments. I hope that the Minister will tell us more about that.

[Mr Anderson]

I could not agree more. As was pointed out by the hon. Member for Colchester, the post office network is unique. Over the past few years, however, we have let the country down by allowing it to be weakened. I must admit that I have argued against that in the House: I have argued against my own Government. The network is being offered a huge opportunity, but the security of being in the public sector will make it even more possible for it to succeed. If it is allowed to leave that sector and to face unbridled competition, it will fall apart.

[Lindsay Roy]

Does my hon. Friend agree that subsidy is often viewed in a negative context, and that profit is gauged not in social terms but solely in a financial context? In fact, it is about dividends for communities. That kind of social investment is vital to our nation.

[Mr Anderson]

I could not agree more with my hon. Friend. It is strange to hear Liberal Democrats who, justifiably, used to make that case say that it no longer holds water. The Minister mentioned the cost of the United States social service, but the United States Government obviously decided that the cost of providing a service that they believed to be second to none was money well spent. Perhaps we should take a lesson from them. There are not many lessons that I want to take from the Americans, but that may be one worth considering.

The truth is that we have been here before. There has been compulsory competitive tendering. There has been the privatisation of cleaning services, when we were told, “You’re not allowed to build into contracts clauses that prevent some people from bidding for them.” However, there were discussions between employers and trade unions after both sides found that the cowboy contractors were undercutting the service and not delivering what they were supposed to, and we ended up with an agreement between contractors and the trade union side that there would be a baseline that nobody would be allowed to go below.

We could have a similar agreement. We want protection for people, so they know where they are going and they have the strength of knowing that they have the security of this agreement behind them to make sure that things are right. Otherwise, the only people who will benefit will be those who want to take over the post offices: the international companies who want to come here and make money out of public services. It is a disgrace that the Liberal Democrats have given cover to the Tories to push this through.

15:00

[John Thurso]

First, I apologise to the House for having been absent for two of the contributions to this debate. I had an urgent meeting with a constituent who had come rather a long way, from the far north, to be here.

I want to speak in support of my hon. Friend the Member for Colchester (Bob Russell)—notwithstanding the fact that I am not his flatmate, which might not be the best way to support him judging by what we heard earlier. I will confine my remarks to why I believe it is absolutely crucial that there should be an agreement. However, I should briefly preface those comments by reminding the House that in the previous Parliament I was my party’s Business, Innovation and Skills spokesman. For a considerable time, discussions on the then Government’s privatisation of the Royal Mail were in hand and I had discussions with representatives of the post offices and the unions and the Royal Mail.

One view I came to is slightly different from an opinion that has been expressed by many Members today. I felt that the post offices had been the poor relation inside the Royal Mail Group, and that the fact that they did not have their own board or their own chairman meant that very often got the second-best outcome. I therefore put in my party’s proposals that whatever happened—whether the Royal Mail was privatised, left as a mutual or left as public—the post office group had to be a separate entity with its own chair and board, so that it could argue its case effectively and have a real future.

I always saw a strong future for post offices. Many of the reasons for that have been alluded to today: the opportunity for new financial products; the possibility of a post bank, which I remain convinced is a particularly good way of taking post offices forward; and the ability to develop post offices in a range of areas, and especially for them to be in many instances the first line of contact between the citizen and the state. A numerate, literate, intelligent and articulate person—which is what our postmasters and postmistresses are—can help people at the very start of the process of making a claim and so forth, and can help people avoid many of the problems that are encountered when they can talk only to a call centre.

I always saw a strong possibility of post offices developing, but I felt that that required them to be a separate organisation. However, I also thought that, in order to ensure that there is a reasonable degree of stability in the business, it was essential that there was a business agreement for a suitable time to enable the transformation to take place.

[Dr Whiteford]

I am very sympathetic to the argument for increasing the range of services and products available in post offices, and I think that if that had been done in the past it would have assisted matters greatly, but does the hon. Gentleman share my concern that some of the local post office branches, and in particular the outreach services provided in vans or in mobile facilities, are wholly unsuited to this sort of provision?

[John Thurso]

I share the hon. Lady’s concern, but I do not believe that is insurmountable. In my constituency, I have probably some of the remotest post offices in the United Kingdom. In the villages of Mey and Dunnet we had the first pilot of a van out of Wick, so I have been through all of that. There are problems. There is a post office at Buldoo, which is a mile from Dounreay. Those in charge of the post office are the fourth generation of the family to run it. Happily, they have a croft to sustain them, because they have only 14 customers; there are 14 regular customers and the odd tourist. Clearly, that kind of operation would have a long way to go to be sustainable in the way we are discussing.

A great many products can be delivered online, but often a human interface is required. Given the breadth and depth of the post office network and the number of people involved in it, it can provide that human element that nowadays is so sadly lacking in so much of the interface between Government and the citizen. That is where the opportunity lies.

Let me now explain why I think the new clause of my hon. Friend the Member for Colchester is so necessary. There are many examples in the private sector of businesses that have decided to split, or of joint ventures where those involved have decided to go their own way, or of hotel companies where those in charge have decided to sell the property to a property company but remain the managers. In every one of those examples, there is an agreement. It might be a shareholders’ agreement, or it might be a contract between the two parties, but there is some form of agreement. One aspect of such an agreement that is nearly always in place, and usually for a period of five, seven or sometimes 10 years, is a non-compete clause. If there is not a non-compete clause, it is a fair given that at some point—maybe after one or two years—one side or the other will say, “You know that contract we signed? I reckon we can do a bit better. Let’s have a go at this.”

The Royal Mail needs such a measure just as much as the post offices do. If any body can come anywhere close to challenging the Royal Mail’s universal service obligation last-mileability, it is the post office network. That may be unlikely, but it is a possibility, and why bother with allowing a possibility? It is inconceivable that, in an initial public offering or a trade sale, any investor would make an investment in the Royal Mail if there was not a clear contract. Therefore, I would almost guarantee that there will be a contract, so I do not understand the reticence of the Under-Secretary about giving a few measly guarantees as to length and content. I cannot see how that would be other than simply sound commercial good sense by the Business Department, in order to enable both organisations to operate effectively and have a clear path for the future, and for there to be a clear understanding. It is on that one commercial ground that I think the arguments put forward are compelling, which is why, unless there is an even more compelling argument from the Front Bench, I shall support my hon. Friend the Member for Colchester.

[Chris Evans (Islwyn) (Lab/Co-op)]

I support the new clause. I noticed that the hon. Member for Colchester (Bob Russell) was temporarily sitting on this side of the House a few moments ago. I thought he had crossed the Floor. If he wants to make it a permanent arrangement, I am sure we will find space for him on these Benches.

[Mr Davidson]

We are full up.

[Chris Evans]

Oh, we are full up, are we?

It was John Major who said that in 50 years from now Britain will still be a country of long shadows on cricket grounds, warm beer, dog lovers, invincible garden suburbs and pools-fillers. Well, he was wrong about that; I do not know anybody who plays the pools any more. He was derided at the time for that vision of the future. It was said that it was nostalgic. However, in that nostalgic vision, what he was really describing are the villages throughout Britain where the sub-postmaster and sub-postmistress underpin the community, as they know their customers and will ask, “We haven’t seen Mrs Jones for a couple of days. What’s wrong with her? Perhaps I should go round or give her a call.” We have all seen stories in the press of the times when postmasters or postmistresses have said they have not seen someone collect their pension, and they have gone round to their home and found that they were in trouble and sorted it out. Unless this new clause is passed, the British way of life—the British way of village life—will be at stake.

As we all know, the fact of the matter is that if the Royal Mail is privatised, it will not be working in favour of the community or the customer; it will be working in favour of the shareholder by selling off assets and knocking down costs. The one thing that it will say is, “We will go to the lowest bidder.” I know that Sir Terry Leahy is retiring from Tesco, but if he decides to come up with a white-label Post Office, I am sure that a privatised Royal Mail will go along with that. What will happen then to our village post offices? They will lose more than a third of their business, and that would be terrible.

We already face a problem in getting people to be postmasters. Just this week, I have heard from residents in Crosskeys, in my constituency, where the postmaster has decided to resign. They do not have a post office at the moment and are deeply concerned by the situation. What is the problem? I do not know, so I am talking anecdotally, but it may be that he is making more money from the grocery side of his business or from the national lottery distribution. A lot of people have said to me, “I make more money out of the national lottery than out of the post office.” So here is a quick idea for the Minister: if these people are making so much money from gambling, perhaps he should change the regulations to allow post offices to have one-armed bandits or fruit machines in them. Perhaps that would be one way to raise revenue.

[Richard Graham]

Will the hon. Gentleman clarify where he thinks the risk to our sub-postmasters is coming from? I have a print-out of a Communication Workers Union briefing that arrived this morning. It is claiming to have a list of 900 post offices that are for sale and 160 that are subject to long-term temporary closure. One of those listed in both categories is the post office in Quedgeley, in my constituency. However, it is not for sale and it is not subject to long-term temporary closure, because a new sub-postmaster will be opening it in the next six weeks—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. We are discussing a new clause on inter-company agreements, so the hon. Gentleman’s intervention needs to be relevant to that point, although I am sure that his sub-postmaster will be pleased to hear that they have been cited in the Chamber.

[Chris Evans]

I know Quedgeley post office, because I was the Labour party candidate in Cheltenham in 2005. I know Gloucester quite well and I know that Quedgeley is a lovely part of the world. If the hon. Gentleman is looking for support to keep its post office open, he should give me a call.

[Jim Shannon]

Be the postmaster.

[Chris Evans]

I will not be the postmaster, as I have enough on my plate as it is.

As I was saying, we seem to have enough of a problem getting people to become postmasters. If postmasters start losing a large amount of their business, how we will recruit people into these positions? Nobody becomes a postmaster in the hope of becoming a millionaire. Perhaps I am naive, but I believe that people become postmasters because they want to serve their community. They want to be part of their community and provide a service, but who in their right mind would want to be a postmaster when they are having their business taken away? That situation is a tragedy.

[Jonathan Edwards]

The hon. Gentleman will be aware that 71.3% of Welsh post offices are in rural areas, which compares with the UK average of 55%. Does he not therefore share my concern that if there is no long-term inter-business agreement, that will have a disproportionate effect on Wales?

[Chris Evans]

Yes, I agree with the hon. Gentleman completely. As a Welsh MP, I know that this Government have certainly hit our country hard. I well remember the posturing of some Members during the Second Reading debate. Many Government Members were boasting, patting themselves on the back and telling us what they had done to keep their post offices open when they were up against the wicked Labour Government. What will they do next time if this Bill goes through? Before they go into the Lobby, they should think hard. If they are faced with a post office closure in five or 10 years’ time, what will they say to their constituents? Are they going to say, “I didn’t think it through,” or “I followed my Government Whips”? That is what they are faced with at the moment. The hon. Member for Northampton South (Mr Binley) talked about people’s legs being cut from under them, and that is what the Bill will do to these Members politically—I am saying that as an Opposition Member.

[Damian Collins]

The existence of business agreements between the Post Office and the Royal Mail has been no guarantee of keeping post offices open. Surely that is the lesson of the past 10 years.

[Chris Evans]

Yes, but my major argument in response to that is that if we are taking business away, we are condemning post offices to closure in any case. We have to give them every chance possible. As has been said, many people see the Royal Mail and the Post Office as the same thing. An elderly person who cannot go to their post office to post a letter yet sees the Royal Mail thriving will wonder what is going on. The Government may say that they are providing support to the Post Office, but if they defeat this new clause, they will be giving about as much support to the Post Office as a scaffold gives to a hanged man.

15:15

[Margaret Curran]

I begin by declaring an interest: I am pleased to be a member of the Communication Workers Union. I was disappointed that I was not more closely involved with the Scottish Affairs Committee and its excellent report on this Bill and with the Public Bill Committee, which I know went into great detail when examining the Bill. I wished to speak this afternoon because I feel obliged to represent the interests of my community and to put on the record the real concerns that exist about the Bill. Like other Members, I wish to reiterate people’s support for, and emphasise the significance of, post offices, but I have to tell the Government that people see this Bill as a real threat to them.

As I said to the hon. Member for Northampton South (Mr Binley), my particular interest relates to the attention that needs to be given to post offices in particularly deprived communities. Such post offices often face different challenges from those in rural communities and from those faced by normal city post offices, because they, too, deal with isolation, represent a lifeline and are vital. Other shops, services and support are often absent in these deprived communities, so post offices take on a particular importance, and we should bear that in mind. I do not doubt that most of us in this House would seek to improve those areas and represent their interests as best we can, despite our different political approaches to doing so. However, rather than improving services, this Bill will move in completely the opposite direction.

I recognise the points made by the hon. Member for Colchester (Bob Russell) and I understand that he has a long history of criticising the records of many Governments on post offices. I understand that he legitimately and respectfully disagreed with the Labour Government, but it is somewhat illogical if the moment people in government, they make the situation even worse and take actions that will make the problems that they are identifying much more grave in communities. None the less, the hon. Gentleman has tabled this new clause, which gives us some means of protecting the interests of the communities that I wish to discuss this afternoon.

I hope that hon. Members will support the new clause and that the Minister will address the many detailed points that have arisen. In particular, I hope that he will deal with the interesting points made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), who addressed the economic and business arguments and showed that this proposal could easily be supported because it does not run counter to business interests or, presumably, to European Union legislation. I say that given the hon. Gentleman’s knowledge of the subject. If we are seeking to bring stability to post offices’ services and to secure the future viability of the Post Office, the new clause should be supported, because the core of the argument is the fact that we need to oblige Royal Mail to maintain an inter-business agreement with the post office network. We need to do that if we are to safeguard and protect the viability of post offices. If we do not do that and the Government go full steam ahead with their proposals, it is perfectly feasible that the historical link between Royal Mail and the post office network could be broken, with far-reaching implications.

As many Members have said, the implications of that may be felt further down the line, but they will be far- reaching. As the hon. Member for Northampton South put it, they could cut the legs from under people and from Members in here when people realise the consequences of this. So the decision we make this afternoon will have consequences down the line.

[Cathy Jamieson]

Does my hon. Friend agree with me and with the other members of the Scottish Affairs Committee on our recommendation that the Government should take a more proactive approach towards the inter-business agreement, rather than simply setting something up and leaving it to its own devices?

[Margaret Curran]

I strongly agree, because that goes to the heart of the protections that are required and explains why people are deeply worried about this legislation. They see it as a forerunner of many post office closures because we are not taking the necessary steps to protect the service and we are not being proactive. Communities, particularly the ones in greatest need, look to their representatives to protect them and to take action that will look after their best interests. If we do not do this during today’s debate, we are being, at best, neglectful. If we pass the Bill in its entirety, we will be taking negative action in respect of the interests of the post office network and, therefore, of those communities.

[David Mowat]

I have difficulty understanding how the continuation of the IBA can be more powerful than the policy whereby 11,500 post offices are guaranteed to be kept open for four more years. Can the hon. Lady answer that question?

[Margaret Curran]

I have listened to the hon. Gentleman make similar points to a number of Members. I fundamentally disagree with the argument made by Government Members that it is an either/or situation. I am not saying that the IBA is the only thing that will protect post offices, but it is at the core of what needs to be done. If we take it away, we will almost guarantee closures. In itself it is perhaps not enough, but we cannot take it away. To argue the opposite is illogical.

We need to take action now to ensure that we do not end up, as has been said by many Members, in a situation in which a large retailer steps in and takes over the service. In my constituency, Barlanark—a very deprived area—has a post office on the up-for-sale list. That community could end up with no post office in a few years’ time. An elderly person living at the back of a housing scheme would be unable to get to any of the large retailers in the community, a single parent with three children would be unable to get to a post office, and all those who did not have a car would find things very difficult.

We have seen the centralisation of services in the big retailers and, as the hon. Member for Angus (Mr Weir) has said, more and more purchases are being made from them. That has led to the centralisation of many facilities in deprived communities and those who are at the margins of those communities cannot access those facilities. We should not be making the situation worse. We should not be acting against those interests by not protecting the IBA through the opportunity we have before us this afternoon.

[Mr Nigel Dodds (Belfast North) (DUP)]

I totally endorse what the hon. Lady is saying, particularly about post offices in deprived inner-city areas. I represent some of the most deprived wards in Belfast and I recognise what she is saying. We face a similar situation in my constituency at the moment and we need the agreement to provide stability. We cannot get people to take on post offices as it is. If this threat hangs over them, we will have no chance of getting postmasters to take over ailing businesses.

[Margaret Curran]

That is a very good point and I associate myself strongly with it. Things are very difficult as they stand and if the IBA is not strengthened in the proposed way, we will make the situation much worse and make it a much less attractive option for people.

[David Mowat]

I agree with the need to keep the 11,500 post offices open, which is exactly what the Bill is doing, but I have genuine difficulty understanding why the IBA, which has resulted, among other things, in two thirds of the post offices that are open making a loss, is more important than the clear policy commitment to keep 11,500 post offices open.

[Margaret Curran]

I disagree fundamentally with the hon. Gentleman. First, it is not the IBA that has led to post office closures in the past. Many factors led to those closures, but many people would argue that we need to maintain the IBA to continue to protect the service. If we do not take this action today, we could deprive Post Office Ltd of 38% of its income. In whose world does depriving an organisation of 38% of its income protect it and its viability? I ask the hon. Gentleman to think long and hard before he argues in favour of and supports the Bill this afternoon.

Those involved in the regeneration of deprived communities and who have considered the different levers available to Government to keep those communities going know that post offices are a critical part of the process. We should not—particularly not under any Government who would ever try to claim the word “progressive”—be undermining the regeneration of those communities and making the lives of individuals, particularly those in the greatest need, more difficult. I disagree with the Bill fundamentally and think that the privatisation of Royal Mail will critically undermine post office services, but if we do not take the opportunity offered by this new clause, not one of us could ever with any credibility stand outside a post office and campaign to save it.

[Mark Durkan]

Like many others who have spoken in this debate, I completely opposed the direction of travel of the last Government on Royal Mail and post offices. I therefore oppose this Bill. I very much support the new clause tabled by the hon. Member for Colchester (Bob Russell), because it at least seeks to mitigate some of the most likely impacts and effects of the privatisation measures on the post office network.

As legislators, and collectively in this House, we have a duty of intelligent care when it comes to the impact and effects of the legislation that we pass. It is not enough for any of us to say that our judgment of what, as many Members have said, is predictable as regards the future of the post office network—many have recalled the toll of business loss, the loss of Post Office Counters and the loss of post offices in many constituencies in every area—is somehow washed away by the Secretary of State’s telling us that it is unthinkable that there would not be a long-term ongoing relationship. It is not washed away if we are told that that is unthinkable by Richard Hooper or the chief executive of Royal Mail. We all know that it is entirely thinkable— and it is not just thinkable, but predictable.

The truth about why the Government do not want us to legislate against the unthinkable—surely, as legislators, that is the first thing we should be doing—is not because such a change is unthinkable, but because they think that legislation against it is undesirable for the potential investors that they seek for Royal Mail. The Government believe that the sort of measures contained in the new clause would be repellent to potential investors and would-be future buyers of Royal Mail. It has little to do with what the EU will say or anything else. The real business is that such changes are entirely thinkable, which is why it is completely dishonest for people to rely on the claims that a change in the long-term relationship between Royal Mail and the Post Office would be unthinkable.

I was struck by the points made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). He began by saying that, in his view, the post office side of the business had always suffered from being a bit of a Cinderella and that the driving force was very much on the Royal Mail side of the business. At the end of his interesting and welcome comments, he suggested that he thought that at some point the Government would consider the need for a clearer contract between Royal Mail and the post office counters side, but, again, it was telling that that contract would be revised because of the interests of Royal Mail and the future of that business, not so much because of the post office end of the business. In those circumstances, it is right and proper that this House—now we have been given the opportunity offered by this useful new clause—should make very clear the particular regard that we, collectively and individually, have for the service that post offices provide and could provide in future.

There is a danger, which some of us might have added to in this debate, of creating a sense that the demise of post offices as we know them is inevitable and terminal, but I do not believe it is. As many hon. Members have said, there are services into which post offices could better diversify, such as providing a range of different financial services with other businesses or having a much stronger service portal relationship with government and public services in many ways. The best way of allowing the post office network to reinvent and develop itself over a period of years in the aftermath of this privatisation would be to provide a margin of reliability for post offices in terms of the business from Royal Mail on which they have traditionally depended. A figure oft quoted in this debate is the amount of post office business that involves post offices fronting for Royal Mail services. If we deny them that margin of reliability and say, “It’s up to you to find all sorts of new services and new markets and to reinvent yourself,” we give them an impossible task. It would be an absolute dereliction of our public and legislative duty to do so. I therefore ask all hon. Members to support the new clause.

15:30

What might constitute a long-term agreement? Back in October, the Secretary of State told the House, and we have since heard it from everyone else, that it is unthinkable that there would not be a long-term contract. In Committee, many hon. Members, including Opposition Front Benchers, asked exactly what that meant. If there is to be a long-term contract, the Government should tell us the substance of the contract and how long is meant by long term, but we have not had that information. It is ridiculous for them to ask us to rely on assurances and indications. It would be like pretending that a tyre is flat only at the bottom—that this is just a small issue that we do not have to worry about and that we can go along and make do on that basis. That simply is not true.

What would be a reasonable long-term agreement between these two independent businesses, which are going to be new and separate entities? The Government are made up of two separate and independent entities and they have made a business agreement between them that goes to the maximum it could possibly be—five-year parliamentary terms. They have produced a five-year agreement on the back of which they say that all future Parliaments should be five years rather than the four years that people believe to be reasonable. They have gone to the maximum in that regard, but apparently five years is too long for a business agreement between the Post Office and Royal Mail. They say that would be wrong and undue—apparently it is too long term—but I think it entirely proper that there should be a long-term agreement.

[Jim Shannon]

Does the hon. Gentleman agree that as postmasters and postmistresses retire and opportunities become available for people to take on public post offices, a 10-year, rather than a three-year, agreement would make that more attractive? If he were considering taking over such a business, would a 10-year agreement give him some confidence in the future?

[Mark Durkan]

I fully accept the hon. Gentleman’s point. The proposed agreement would make a difference not just for the individual business people who make a commitment to individual post offices, but collectively for the network and for those who will have responsibility for the broader Post Office enterprise in future. It is meant to give a period of confidence and space, to reduce the unknowns and to give at least some stability and reliability regarding some of the knowns in that context. It would not solve all the other problems—and there are many other issues and challenges—but it would at least give people some measure of assurance.

[Lorely Burt]

I think we are all on the same page in wanting a long agreement. Donald Brydon has said that he would push for the longest agreement possible, so I am not too sure why hon. Members are so worried about the fact that we are trying to impose a 10-year agreement on two businesses for which 10 years may or may not be an optimum time.

[Mark Durkan]

We are not worried about why we should impose an agreement of 10 years; most of us are worried about why the Government would not impose an agreement of 10 years. If someone says they want the maximum agreement possible, it is entirely reasonable for us as a legislative body to say that 10 years is a reasonable period. Given that the legislation is going to construct new realities and impose new conditions on these businesses, we at least have a duty and responsibility to make sure that one of them can have a measure of confidence that it will not have if this new clause is not accepted.

[Gordon Banks]

Does the hon. Gentleman agree that the argument put by the hon. Member for Solihull (Lorely Burt) is not assisted by the fact that people such as Mr Brydon are unable or unwilling to put a figure on what the maximum number of years will be? That undermines her argument.

[Mark Durkan]

I accept fully the point that my hon. Friend on the Front Bench is making. In the absence of other indications, that is why we as legislators have a duty at least to indicate what we think is a reasonable time. It is unreasonable for us to do otherwise in the circumstances.

[Richard Graham]

Does the hon. Gentleman agree that if legal advice to the Minister is that it is not practical to legislate for an agreement between Royal Mail and Post Office Ltd for the IBA, and if we all accept that both companies wish to agree a long IBA, surely that will happen in due course, before there is any IPO—initial public offering—of Royal Mail?

[Mark Durkan]

The hon. Gentleman may be easily reassured on that point, but I certainly would not be and I doubt whether many other Members would be either. Perhaps we should have tested the question more during the debate—the hon. Member for Solihull (Lorely Burt) referred to it—so that we knew exactly why the Minister says that we cannot include the new clause. It seems that there would be a legal challenge on the basis of EU legislation.

[Mr Russell Brown]

I sincerely hope that the Minister responds to my hon. Friend, but I think the answer to the question he is posing is simply that the Government are trying to privatise an asset, but they think it will become a liability as soon as it has the sentence of a 10-year IBA around its neck.

[Mark Durkan]

My hon. Friend is exactly right and he reinforces a point that was made earlier. The real issue is that the Government believe that potential investors will be put off if the agreement is seen to impose restrictions on their options for a period of years.

[Mr Binley]

Whatever happens, the recognition of 900 mail centres means that whoever buys Royal Mail will have to work with those people. They cannot possibly cut off those centres straight away, so an agreement of some kind has to be made for Royal Mail to continue working. Is it not right to say that we want to include the provision so that we know that an agreement will certainly be made?

[Mark Durkan]

I fully take the hon. Gentleman’s welcome point. That is precisely what we as legislators are being asked to do—provide some back-up certainty and reinforcement on such an agreement.

There is a suggestion that the EU would upset an agreement, or frown on it. Let us remember that we are not talking about the House suddenly legislating to impose an agreement on two currently free, private and commercial enterprises; we are talking about a very different starting point. All Members of the House and of the devolved Assemblies have dealt with lots of situations where, through legislation and other means, we provide for various restraints, guarantees, restrictions and obliged agreements in contracts over a period of years. Such provisions could relate to restrictive gas and energy licences over long periods, guaranteed contracts between providers in different markets to create stability, or even to opening and developing markets. Such things are done all the time, and the measures are respected and accepted by the EU.

[Gordon Banks]

Does my hon. Friend agree with the people who believe that it may not be legal pressure that prevents the Minister from making the proposed arrangement possible, but Treasury pressure?

[Mark Durkan]

I join my hon. Friend in that suspicion; no doubt the Treasury is asking where the proposal will go and what would be the margin of attraction if there were changes. Because the Treasury believes that the proposal would make the business less attractive to the market, it has drawn conclusions and made an assessment.

On that point, I shall close to allow other Members to participate. I stress that we cannot hide behind the assumptions and presumptions that have been casually made, either in Committee or in the House, that the new clause is neither necessary nor feasible because other things are unthinkable.

[Mr Davidson]

I rise to speak as the Chair of the Scottish Affairs Committee, rather than as a constituency Member. I will therefore not explain why the construction of two aircraft carriers is absolutely vital to the maintenance of Royal Mail and the postal service.

We decided as a Select Committee that it was not appropriate for us to consider ownership or pension issues, because they were not mainly Scottish issues, but we wanted to consider particularly the future of the universal service obligation and the future of post offices, as they are of greater importance to rural and deprived areas in Scotland than perhaps they are to many other areas of the country.

We took as a given the importance of the role that post offices and Royal Mail play in the community. A number of other Members have already referred to that. Normal procedure does not necessarily mean that we cannot repeat exactly what other Members have said, but I will not do so in these circumstances. I want to move on to our recommendations on these issues.

We met the Minister and had a hearing with him, and it was generally our view that he was not nearly as bad as people led us to believe. He was sincere in his view. We all thought that he wanted to support the maintenance of the post office network and the universal service obligation. There was no doubt in our view that his heart in all this was in the right place. Unfortunately, we did, however, think that his head was a bit muddled.

The Minister and ourselves had identified the fact that the inter-business agreement was absolutely essential for the future of post offices, but we were not convinced that he appreciated the necessity to make it as firm as possible. We took the view that his good intentions, which we accepted, were not sufficient, because events might occur that submerged a host of good intentions. We have already seen the Government use the economic crisis as an excuse to ditch all sorts of commitments that both coalition parties made before the election. We therefore took the view, as Ronald Reagan did with the Russians on missiles, “Trust, but verify.” We accepted his good intentions, but we wanted to ensure that things were pinned down as firmly as possible.

We welcomed the Minister’s statement that he did not intend to put anything in the way of such an agreement. We took the view that there was a hierarchy of ways in which it could be approached. Undertaking to remove obstacles—well, not objecting to doing so in the first place—we took as a given. He indicated that he was keen to see obstacles removed. One of our recommendations is that the Minister take positive steps to facilitate a long and robust IBA and to remove any obstacle, whether practical, legal or otherwise, that may exist. Clarifying whether there are obstacles to a 10-year IBA being signed now would remove a lot of the anxiety about whether the European Union is blocking this or any other agreement.

As the second line of pursuit, we wanted a voluntarily entered into 10-year IBA agreed before any such sale. There seemed no reason from what we heard from the Minister, given that he was willing to overcome any obstacle, why a voluntarily entered into IBA could not be signed before sale took place. We said:

“We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland.”

We appreciated that Royal Mail signing an IBA might affect the price that it achieved, because it might be seen as a less attractive commercial operation than would otherwise be the case. We none the less agreed that we wanted to include that because the preservation of post offices through the construction of an IBA and its implementation before privatisation or a change of ownership was absolutely vital.

[Damian Collins]

Does the hon. Gentleman not think that the case might be argued the other way? In taking Royal Mail to sale, one has to demonstrate that one has a secure agreement with the post office network as a major retail outlet that provides a sound footing for services at the point of sale. It is in the network’s interest in getting the best possible deal for Royal Mail.

15:45

[Mr Davidson]

No, we took exactly the opposite view. We accept that Royal Mail would probably want to have the post office network. That network is important to Royal Mail, but it is not utterly and absolutely essential, whereas the converse is not the case. It is a question of ham and eggs. The pig makes a much greater commitment than the hen, so we took the view that, if there were a privatised Royal Mail or a change of ownership, which is free to negotiate with post offices, it would be likely to drive a much, much harder bargain. It would seek, for entirely understandable commercial reasons, to drive the post office network into the ground as much as possible, to extract the maximum possible advantage from those negotiations, because it would not be directly responsible for the future of the post office network. That is why we took the view that the Post Office’s position was likely to be strongest before any change of ownership, so it was best agreed now, rather than later.

[Richard Graham]

I was not quite sure who the pig and chicken were in the hon. Gentleman’s analogy. However, on the relationship between Royal Mail and Post Office Ltd, and the role of the Treasury and the financial issue, does he not agree—and I am sure that we will all be invited to buy shares in a privatised Royal Mail, and that it will be a flotation in which many people will participate—that we would all want to see that agreement in place, so that provides the best likelihood of its happening?

[Mr Davidson]

No, I do not agree with that at all, because I do not believe that a structure will be established for Royal Mail that necessarily allows all shareholders to come round and cast a collective vote on whether they want to maintain a collective post office network. It will be in the management’s interests to maximise the return for the shareholders, so screwing the post offices into the ground will probably be in their interest. I am sorry if my comparison about ham and eggs, and chicken and bacon was not understood. The concept is that the pig provides the bacon, and the chicken provides the eggs. The chicken can carry on afterwards, but it is not quite as easy for the pig. I am sorry if that is beyond senior members of the Conservative party, but we are prepared to explain these things to them later.

Returning to the question of how we can secure the strongest possible commitment to the IBA, as proposed in the new clause, which the Committee had not seen when it prepared its report, we thought that having that in legislation would be an extremely strong protection. If the Minister can give us an assurance that legislation is not necessary because the same things will be achieved without legislation before there is any question of a sale, then, because we are reasonable, we would be satisfied. However, the House will understand our anxiety, because after the by-election on Thursday, the Minister might not be here any longer. We want to make sure, while he is in a position of authority, that he allows his heart to rule and produces measures that we find acceptable.

I should like to touch on one or two other worrying issues relating to the Post Office. On the size of the network in Scotland, we accept that the Government’s access criteria are helpful in setting out the structure of the network that they want. We welcome, too, the fact that they intend to keep 11,500 post offices. However, it is not the case that the access criteria necessarily mean that the 11,500 will remain, because our understanding is that the access criteria could be met with 7,500 post offices. A commitment to 11,500 is not necessarily a commitment to the 11,500 that are there at the moment. It would be possible in those circumstances for a substantial denuding of the post office service to take place in the highlands, the islands, the borders or Argyll. Rural areas could maintain the present access criteria, and the 11,500 criterion could be met because other post offices might set up elsewhere in urban areas, but the service would undoubtedly be worse than it was before.

The Minister shakes his head. I would welcome a commitment from him that the intention is to maintain the network pretty much as it is. I genuinely understand his difficulty. Individual post offices are controlled by individual private contractors. We cannot legislate to refuse somebody permission to leave. There will always be some degree of coming and going. If it were one in, one out in a particular area, we would not object to that, but there could quite easily be a couple of hundred post offices going out of the rural areas or the poor areas, and a couple of hundred starting up in the richer areas where need is perhaps less. The Minister’s criterion would still be met, but the social objectives that we are pursuing would be lost. I am happy to give way if the Minister wants to solve my problem.

[Mr Davey]

Philately has got me to my feet. I am looking forward to reading the Scottish Affairs Committee’s full report. I thought that I had said to the Committee that the 11,500 commitment is in the contractual agreement between the Government and Post Office Ltd. That is a strong commitment and it is backed up by the access criteria that we inherited from the previous Government, which could be delivered by a network of 7,500 post offices. Obviously, there is a debate about that, but the two together give a strong reassurance to Members and to communities around the country and meet all the concerns that the hon. Gentleman is raising.

[Mr Davidson]

The Committee unanimously welcomed the points that the Minister was making about the access criteria and the fact that he was guaranteeing, as I understood it, 11,500 post offices, but surely he will accept that his guarantee does not guarantee the same 11,500. It does not guarantee them in the same locations. In some areas, particularly rural areas, where there are small post offices, the access criteria are, thankfully, better met. One of those could easily close, one could open somewhere else, such as London, and both sets of criteria would still be met.

If the Minister cannot give us a commitment today, perhaps he will take that away and consider whether something could be done at a later stage in the passage of the Bill. I think that he accepts that this is a genuine anxiety and that we are here to help him. We are identifying gaps in provision and trying to strengthen the Bill.

[Mr Reid]

I share the hon. Gentleman’s anxieties. However, as we discussed in Committee, the problem was framing legislation to cover all eventualities. He correctly pointed out that the previous Government’s access criteria, which continue under the present Government, could be satisfied with 7,500 post offices. The only way to solve the problem would be to pass legislation that no post office could ever close, but it was agreed that that was not a practical solution. No amendment has been tabled today that offers a practical solution. The problem is putting such a solution into legislation. We have to accept the assurances of the Government. That is the only way in which we can proceed, because of the impracticality of legislating.

[Mr Davidson]

The hon. Gentleman serves with me on the Scottish Affairs Committee. As he will remember, we were not recommending that there should be a change to the legislation on this point. Unanimously we agreed that putting it in legislation would be too difficult, and we understood the Minister’s difficulty in identifying a policy that would encompass these points. But we wanted to raise the matter again because it was raised with us on a number of occasions by people who could see how the Government’s commitment could, in effect, continue to be met while there was none the less a deterioration in service.

The Minister has made the point that the contractors are independent. If somebody leaves a post office, somebody else will have to decide whether they want to take that on. After the next election, there may well be a number of Liberal Democrats looking for new jobs, and they may consider whether to become sub-postmasters. So, I am actually thinking of the Minister as much as anything else. He might wish to become a sub-postmaster in those circumstances, and, to return to a previous point, I am sure that he would much prefer a 10-year, or what might then be a five-year, guarantee with Royal Mail to one of only a few weeks. Again, it would be for his own good.

[Sarah Newton (Truro and Falmouth) (Con)]

I very much agree that the location of post offices is vital. Does the hon. Gentleman agree that responsibility for that could be given to the new regulator? The previous Government took away that responsibility, but there used to be regulation on the consultation and decision-making process that affected the location of post offices, so the Minister might consider that idea when establishing the new regulator.

[Mr Davidson]

That seems like a very constructive way of looking at the issue. I am not sure about the practicalities, and nobody else raised the matter with us during our discussions, so we have not introduced it as a recommendation. We were interested in the outcome, however, and we had sufficient faith in the Minister and his support staff to identify ways in which it could be achieved.

That brings me to the other point about which we had anxieties. It relates to the point about the number of outlets, and it is the issue of wandering vans. The Government have committed to a certain number of outlets, and the Minister has indicated that he wants to have 11,500, but an outlet can be a van that stops for a certain period at a location and then moves on; it does not necessarily have to be a post office.

We have already heard how some sub-post offices and outreach facilities were not considered adequate, and the hon. Member for Banff and Buchan (Dr Whiteford) described how people had to queue outside some of them in the rain and snow. The facilities were not always satisfactory, and we worry that the Government will be able to meet their target of 11,500 by introducing a number of wandering vans that go to five places a day, five days a week, meaning that 25 outlets are covered.

So, 100 peripatetic vans—to use their Sunday name—would cover a substantial number of the 11,500 outlets that the Minister identifies, and that is clearly not what we intended. It would therefore be helpful if he indicated the criteria that will apply when deciding to introduce a wandering van. Is he willing to state that there will be a maximum number? We do not want the commitment to 11,500 outlets undermined and devalued by there being not even full-time vans, but part-time vans that appear for only a limited number of hours per week. That is the final area of the proposed changes on which we want the Minister’s clarification. Again, if he does not feel able to provide it today, I hope that he will find it possible to produce appropriate statements before the legislation is finalised.

[Tom Blenkinsop]

I support new—cross-party—clause 2 as part of a damage limitation exercise in opposition to this Bill to privatise Royal Mail, and in order to protect Royal Mail, which Moya Greene, its new chief executive, says provides one of the most excellent services in the world.

I, like many colleagues, have major concerns that the Bill’s proposal to separate Post Office Ltd and Royal Mail will lead to significant changes in arrangements between the two entities—two that are currently one. My Opposition colleagues and I are not the only ones to have said that; the postmasters, and the Royal Mail workers and managers whom I met in my constituency over Christmas, reiterated it.

There is no known international precedent for separating a national mail operator from its retail arm, and the changes will be detrimental to post offices in my constituency and to my constituents, their customers. The changes are likely to lead to Post Office Ltd no longer being treated as a preferred and reliable in-house provider by Royal Mail. Instead, I fear that the Post Office will be seen no differently from any other supplier, with the long, shared history between the two companies overlooked and the public’s wishes for a good, complementary service disregarded.

As we have heard, post offices—especially small rural post offices in villages across the country and in my constituency—are heavily dependent on Royal Mail business for income and attracting customer visits to their premises. In the same area, our local post offices provide a convenient and trusted location to carry out Royal Mail transactions both for the general public and for our local small businesses. Many of those post offices act as village shops and sell convenience goods, groceries, sweets and newspapers. However, many of those businesses’ activities are unviable on their own without post office activity underpinning them.

16:00

The existence of the business agreement is also important to sub-postmasters when they deal with their banks. The banks view the agreement as a guarantee of income that can be considered as collateral for lending to post offices and sub-postmasters. An unconditional clause must therefore be put in any legislation stating that such a mandatory contract between Post Office Ltd and the Royal Mail must be put in place if there has to be any separation. However, Liberal Democrat and Conservative pleas on that are in opposition to the comments of the Lib Dem Minister, who said in Committee:

“if you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that would be subject to serious legal challenge.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 123, Q244.]

To date, the Minister still has not provided any evidence for that position.

I strongly believe that there must be a commitment from Ministers that the full range of Government services that can be delivered via local post offices will be secured. The Government must proactively look at a range of attractive new services and post office business streams. Some post office services have already been outsourced to PayPoint, as was reported in the press recently. In addition, the coalition’s decision not to pursue a post bank is another example of the Government ignoring opportunities for the post office and the public. A mutualised post office with a bank would be an excellent community asset and would provide financial sustainability for post offices. The other arguments we have heard today about commercial necessity and banks withdrawing from localities and using post offices for their financial services tie in with the ongoing arrangements that post offices are developing.

[Mr Robin Walker (Worcester) (Con)]

Does the hon. Gentleman accept that the alternative of bringing credit unions into post offices is very attractive and that the opportunity for credit unions to work with post offices creates a positive alternative to the banking approach?

[Tom Blenkinsop]

It certainly is an alternative and I take it on board as an option. However, in and of itself, the post bank would not necessarily be in conflict with the credit union. Other Government policies have undermined and withdrawn funds from credit unions. That happened recently with the north-east moneylending team, which was within the Minister’s remit.

Many postmasters fear the worst—that the Bill will be passed—and have made a plea to Government to consider at least extending the contract to 10 years. That request has been knocked back by the Government on the basis that it would not be compatible with EU regulations. However, I am assured by postmasters who investigated the matter that that is merely an excuse. The Government’s position regarding BSkyB and the fact that the potential buyer of the Royal Mail could own 90% of the company leads us to ask what the difference is between a state-owned monopoly and a private monopoly.

Postmasters have also referred me to the rail franchise contract as an example of how such things can be and, indeed, have been done. I cannot think of any reason why the Government are willing to grant 10-year rail franchises, but will not do something similar for the Royal Mail. A 10-year agreement would be advantageous for a number of reasons. First, in the German and Dutch models, which have been referred to as examples of best practice by Ministers in Committee and today, legislation stipulates the number of national access points. It appears that the Minister has more of a problem with German geography than with the potential German ownership of the Royal Mail. Without such a clause, a minimum 10-year deal is necessary to reassure those running existing post offices, which are mainly independently owned.

[Neil Carmichael (Stroud) (Con)]

Having seen several post offices close in my constituency before the general election, I welcome the Minister’s commitment to end the closure programmes. The key point is that post offices should be given the flexibility to get in extra services and respond to new developments, and that is the fundamental point of this aspect of the Bill. Does the hon. Gentleman agree?

[Tom Blenkinsop]

No, I do not. The point of the IBA is to allow for an established foundation so that post offices can exploit further services, but we have not seen, to date, what those services will be. We have had promises about potential services, but as in the case of the press stories about PayPoint bidding for benefits contracts, for example, we hear one thing and then there is evidence of something else occurring.

Post offices are, in the main, independently owned, and the mutualised scheme assumes that the vast majority will opt into the mutual model, without providing any details of what that will mean in practice for a particular post office, which mutual model will be adopted, or whether Government will sit on the board of a mutual or a workers’ co-operative or customer-workers’ co-operative. Nor does it say what would happen to a sub-postmaster if they decided not to opt into the model. In any case, a mutual model offers no safety without a long-term guaranteed IBA for business. Royal Mail could, and probably will, seek cheaper access points after the IBA has expired.

How can the Government guarantee fair commercial negotiations between a privatised, large and powerful Royal Mail and a mutualised, smaller Post Office Ltd? Perhaps the two coalition partners, with one obviously being large and the other smaller, can give us some information on how such negotiations go ahead and how such agreements are reached. However, looking at this from the outside, it does not look particularly helpful for any form of Post Office Ltd taking forward any sort of commercial negotiations. If the position cannot be guaranteed, what message does that give to business and to the general public at large, and what chance is there of having an independent Post Office that opts out of a mutualisation scheme and goes into commercial dealings with a larger Royal Mail?

The Government’s proposed pilots have yet to start and to prove how new services in post offices will have worked. That is not to say that they will not, but there is no evidence as yet for us, as legislators, to see that evidence before we carry on.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Obviously the details are some way from being decided, and the model for how the Post Office will be organised as a mutual, if that happens, has yet to be chosen. Surely, however, this is something to be welcomed across the House. There may be concerns about the specifics, but does not the hon. Gentleman feel a sense of warmth towards the idea of a mutual Post Office?

[Tom Blenkinsop]

As a member of the Labour and Co-operative party, I always have a sense of warmth towards mutuals and co-operatives. However, I do not yet know what we are being sold, and until I see the details I ain’t signing anything.

Post office and mail services are seen not as mere businesses but as an essential part of our way of life. These are not just romantic notions on my part. I cite the report issued last year by the Business, Innovation and Skills Committee, which says that local post offices provide a focal point for communities. It says that they are

“an instrument of social cohesion”

that

“preserve the fabric of our society”

and are places

“where vulnerable and non-vulnerable people alike share services”.

Every week 20 million people visit a post office. For every £1 transacted in the UK, 14p is handled through the post office network. Post offices are also a lifeline for many of the most vulnerable people in society, including older people, the disabled, people on low incomes and also—this is important to me in my constituency—those living in rural villages and small towns.

Small businesses are also extensive users of the post office network, particularly its mail services. I understand from the Federation of Small Businesses in my region that 20% of its member companies use post offices, while 59% use their local post office at least once a week. The growth of online business transactions has boosted this usage significantly, with Royal Mail parcel delivery posted from local post office branches being the preferred medium.

The inherent strength of the current post office network lies in its depth and its reach. The existence of 11,500 sub-post offices means that the network of post offices remains bigger than all the bank and building society branches put together. This becomes even more important when we note the continued closure of local bank branches.

[Damian Collins]

As we have discussed, that is the inherent attractiveness of the Post Office and one of its great bargaining tools. No retail outlet in this country can offer the breadth and number of locations of the Post Office.

[Tom Blenkinsop]

We have seen recently that Tesco could compete with the Post Office, and have heard in this debate that other commercial ventures could do so.

[Damian Collins]

Even the major supermarkets—and probably all the major bank branches—combined do not reach the scale of the Post Office. I am yet to be convinced that there is a realistic retail alternative whereby the Royal Mail could take its business wholesale out of the Post Office and give it to someone else. That is the picture painted by some Opposition Members.

[Tom Blenkinsop]

No, we are portraying a picture of the future in which that could happen. Royal Mail Group has admitted that nearly two thirds of existing post offices are economically unviable. That does not mean that they are not propped up by the inter-business agreement. That is the difference in how the Opposition and some Government Members view the IBA. Is it simply a system that keeps post offices alive, or is it a redistributive mechanism within Royal Mail Group, alongside other mechanisms, that ensures that there is a service provider across the UK?

[Mr Davidson]

Perhaps it would be helpful if we clarified whether it would be possible, without an IBA, for Royal Mail to do a deal with Tesco, other supermarkets and a number of banks, and to fill in the missing parts of the jigsaw with post offices. Surely that is the alternative that we ought to be worried about. That is the danger of going down the road indicated by the hon. Member for Folkestone and Hythe (Damian Collins). He seems to think that the option is between the Post Office in its entirety and Tesco in its entirety. A predatory Royal Mail could easily decide to pick and mix. The danger is that we would be left with a small number of post offices, with the rest replaced willy-nilly by Tesco and the like.

[Tom Blenkinsop]

There is also the assumption that the Royal Mail will stay at its current size and not contract wholesale to a more commercially viable size in urban areas, and an assumption that it will remain as one national system and not fracture into regional systems with further purchases and sales. It depends who the buyer is, and we have no guarantee on that either.

The importance of the inter-business agreement is demonstrated by the figure from the National Federation of SubPostmasters that income from transactions carried out in post offices on behalf of the Royal Mail accounts for a third of Post Office Ltd’s income—£343 million in 2009-10—and makes up a third of sub-postmasters’ pay and income. It is clear that if the agreement, which has almost four years left to run, is not retained and carried over, more local sub-postmasters will conclude that the game is up and hand in their keys. The arrangements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 are likely to change, and the terms and conditions for sub-postmasters may change substantially. If I was a sub-postmaster in a rural area and wanted my pension or redundancy, I would see this as a dodgy area.

It may be easy for Ministers to ignore such arguments and say that there are always people who are willing to provide post office services, but from my constituency experience, that is far from the truth. When a local urban post office in Coulby Newham closed recently, the response to the advertisement of the new business opportunity was negligible. Luckily, we were able, in partnership with the regional offices of Post Office Ltd to find a business man, Mr Patel, who was willing to take the risk of opening a new outlet in Coulby Newham, but I stress that that was with the benefit of the inter-business agreement. Without it, I do not believe that he would have taken the plunge.

Any changes to Royal Mail and its relationship with Post Office Ltd that adversely impact on the network will unquestionably risk further widespread post office closures. If the Government do not heed that warning, the public and my constituents will know who to blame. Royal Mail is a great example of how the market does not solve everything. It simply does not make economic or business sense for a company to set up to provide a postal service in rural areas. That is why we need Royal Mail, why we have the IBA, and why it must remain.

[Nia Griffith (Llanelli) (Lab)]

To most people in this country, the Royal Mail and the Post Office are synonymous. To them, the matching colours of the Royal Mail vans and the oval sign indicating the presence of a post office are symbolic of an inextricable link between the two. They are the two arms of one and the same service. The post office is the collection or access point—the place where people take the parcel that they want to post or the letter that they want to register—and the Royal Mail van that does the country rounds, or the postman or woman wearing the badge with the red and yellow insignia on it, provides the delivery service.

16:15

To most people, it is unthinkable that the two should be separated, and indeed Moya Greene, the chief executive of Royal Mail, recognises that historical link and has uttered warm words about a privatised Royal Mail continuing to use the Post Office to provide the access counters for its services. However, fine words are not enough. In the tough world of business, in which a profit-hungry, privatised Royal Mail will be looking to drive the hardest bargain possible, neither tradition nor public service is likely to be the foremost consideration. They are likely to be subservient to the profit motive.

One may well think that the motive of profit would also lead to costs being driven down, which would be beneficial to the consumer. However, we all know that cost-effectiveness can mean that services become concentrated in the big centres with high turnovers. Services such as shops or post offices that serve scattered rural communities, or less well-off urban areas where spending levels are low, find it difficult to make ends meet, and that can lead to shop owners or sub-postmasters shutting up shop with little to attract new entrants. The consumer is therefore left with fewer outlets and less choice. Very often, those who are not car owners miss out most. They can no longer look forward to a little walk and a chat in the local shop. We have all seen it happen—the big supermarket arrives in an area and surrounding businesses are put out of business.

Labour’s belief is that a viable, sustainable post office network is a critical part of the social infrastructure of many communities. That belief led us to develop the access criteria for post offices and to set aside the £1.5 million annual subsidy to maintain the current network of some 11,900 post offices. I am pleased to note that the important social role of post offices was recognised in the Government’s recent document accompanying the announcement of the continuation of that subsidy.

We know that Royal Mail business accounts for more than a third of the post office network’s revenue—some £343 million. One third of sub-postmasters’ pay, some £240 million, is also generated from the sale of Royal Mail products and services. Clearly, the loss of one third of the Post Office’s revenue would have catastrophic effects.

That calls into question the logic of allocating £1.34 billion of taxpayers’ money to subsidising and refurbishing post offices, when we could find the business stream that guarantees them a third of their business being taken away. There has been no guarantee that it will stay. Where is the logic in putting taxpayers’ money into the Post Office while doing nothing to secure a third of its revenue? Using taxpayers’ money to refurbish post offices while doing nothing to secure Royal Mail business is like respraying a car before pushing it over the cliff.

The Minister has tried to tell us that he cannot do anything about securing an inter-business agreement between a privatised Royal Mail and the Post Office. He is standing back, wringing his hands and saying, “Oh, I’m so terribly sorry, there’s nothing I can do.” It sounds very much like Pontius Pilate. What advice has he taken? What options has he explored? Does he expect that a privatised Royal Mail would honour the current inter-business agreement? Depending on the time scale of his proposed sell-off of the Royal Mail, that could mean honouring just the last couple of years of the existing agreement.

[Lorely Burt]

My understanding is that the inter-business agreement will come into place before any agreement is signed between Royal Mail and whoever takes over.

[Nia Griffith]

As I understand it, there is an existing IBA. The question is: what is the timetable for the privatisation of the Royal Mail? How much of the existing IBA will be left? If we are arguing that an existing IBA can be carried over, surely an existing IBA of a different length could also be carried over. Although we currently have one that is worth probably a couple of years at most, by the time the privatisation procedure has gone through, there could be a new and different IBA. Indeed, there could be a 10-year IBA. We have already heard from the Minister that it is possible to have all sorts of businesses entering into agreements. We know that there are 10-year rail franchises, for example. There are all sorts of different takeover bids—when companies take over other companies, they have all sorts of contractors working for them—so there can clearly also be a takeover of an inter-business agreement. We are asking the Minister for a guarantee that it will be a 10-year agreement. What we are asking for is not rocket science; it is something that I am sure he will want to do. Indeed, if we can be persuasive enough, I am sure that he might even consider it, but we shall see.

If that can be done and a privatised Royal Mail can be expected to honour the existing agreement, what has the Minister done to explore the option of putting in place a longer-lasting inter-business agreement, such as a 10-year agreement? Perhaps he will be able to tell us later what he has done. What will he do to put that in place before privatising the Royal Mail? Has he looked at examples of business takeovers where the buyer has taken over the existing commitments of the company that it has acquired? Simply telling the Committee and now the House that it cannot be done, without even exploring the options, suggests a fundamental unwillingness to take every possible step to secure the future of the post office network.

The Minister seems to think that it would be good enough to rely on the good will of those concerned. Indeed, he tried to assure the Committee by saying:

“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-22, Q244.]

However, what has the Minister done to turn that good will into practical action? Has he had talks with the chief executive and chairman of Royal Mail about securing a longer inter-business agreement between Royal Mail and Post Office Ltd before privatisation? What mechanisms has he explored for doing that? It also has to be said that Moya Greene may not be there for ever. What happens if we have a new chief executive or chairman? I have every belief in the sincerity of their words, but we all know that words are not enough. What we need in business are agreements in writing, so that we know what we are talking about.

The Minister also said that consideration had not been given to the matter before. No, it has not, quite simply because when we were in government, we always intended to keep Royal Mail in majority public ownership, so it would not have been separated from the post office network in the way that it will be if the Government privatise it. Therefore, there was simply no need to consider the future of the IBA in that way.

The National Federation of SubPostmasters is clear that it needs a 10-year IBA as an absolute minimum. That will be fundamental to providing security, so that business will be viable for the 97% of post offices that are owned by a sub-postmaster or sub-postmistress. They are the people who have taken on post offices, investing considerable amounts of their own money to set them up at a time when the inter-business agreement between Royal Mail and Post Office Ltd was taken for granted. They would never have dreamt that post offices could face losing Royal Mail business and, with it, the money that accounts for a third of their revenue.

Sub-postmasters and sub-postmistresses will have welcomed the Government announcement to continue the subsidy of the post office network. Indeed, they may be hoping to benefit from some of the money that is being put aside for the refurbishment of post offices. However, they will also be scrutinising the BIS document “Securing the Future of the Post Office in the Digital Age” to see whether they can find anything that guarantees more Government business to post offices, when we have PayPoint challenging the Post Office for the Department for Work and Pensions contract for benefit checks. Sub-postmasters and sub-postmistresses will also be looking carefully to see whether there are any strategies for channelling new types of business through the Post Office, now that the Government have abandoned Labour’s plans for a people’s bank at the Post Office—yet another Lib-Dem manifesto promise broken.

Most of all, however, sub-postmasters and sub-postmistresses will be worried about the future of the IBA, because they know how much the future viability of their business depends on their continuing to provide services for Royal Mail. Indeed, the IBA covers more than just the counter services. As the hon. Member for Northampton South (Mr Binley) pointed out, it deals with sorting facilities in shared premises in some areas. Specific guarantees that business with the Royal Mail will continue are wanted. If someone has invested considerable amounts of money in a business that included Royal Mail services, they would be concerned about whether they could sell their business as a going concern when they decided to retire or move on. They would be very worried about the price they might get if there were no IBA with the Royal Mail, and there would be a real problem in attracting new entrants.

Even without considering the potential loss of the IBA, the Rural Shops Alliance, in the winter edition of its journal Rural Retailer, expresses this view of Government plans to convert post offices to the Post Office local model:

“The logic of this is obvious, but it will involve a reduction in product ranges, longer PO opening hours and a reduction in income—not a model that will encourage subpostmasters to remain as part of the network. It is great that the Government is promising a no closure programme—it cannot however promise that it will be financially worthwhile for anybody to provide PO services.”

That is the case even without considering the catastrophic effect that the loss of the IBA would have on the prospects of post offices and the chances of attracting new entrants.

George Thomson of the National Federation of SubPostmasters told us that there are currently 900 vacancies where Post Office Ltd is struggling to find someone to take on a local post office. It is no good dismissing this as just the regular turnover. I know for a fact from my own constituency—I am sure that other hon. Members do, too—just how long some of those vacancies have been there and how depressing it is for those local communities without their post offices, with some pensioners having to face very awkward and time-consuming bus journeys to access their pensions.

With the prospect that the Post Office could lose the IBA, how on earth is Post Office Ltd going to attract new entrants? Why would anybody want to undertake the not inconsiderable task of establishing themselves as a sub-postmaster, with all the training and investment involved, with the prospect of the Post Office losing the IBA hanging over them?

Consumer Focus has also raised concerns about the impact of the loss of the IBA. It said in written evidence to the Public Bill Committee that

“following privatisation of Royal Mail, subsequent contracts would require a competitive tender process with no guarantee that Post Office Ltd would retain this contract”.

It continued by pointing out that

“for the foreseeable future, the loss of the mail’s contract, even on a partial basis, would significantly undermine the integrity of the post office network. Even if the Royal Mail continued to use the PO in rural areas only, the ability of the network to cross-subsidise from its profitable urban branches would be lost. The future of many post offices, particularly the 6,515 post offices in rural areas, would therefore be in doubt. This would not only threaten access to mail services, but also to the range of services of economic and social interest available through the PO network.”

That is the viewpoint of Consumer Focus, and I am sure we would all agree that it should be listened to.

Many hon. Members have made some good and useful points today. My hon. Friends the Members for Linlithgow and East Falkirk (Michael Connarty) and for Blaydon (Mr Anderson), who both have an excellent track record in standing up for post offices, each made a vigorous and impassioned defence of the post office network.

The hon. Member for Northampton South mentioned the importance of the social role of the Post Office—how people get help from it and how community networking and social work take place. He also mentioned that it is not only older citizens, but young mums who can benefit from the community and help that can be found through the post office. The hon. Gentleman said, “Woe betide any elected Member who ignores the importance of the local post office to the fabric of the community.” He also mentioned the role of the additional 900 post offices that act as mail sorting areas and the problem of post office vacancies and the difficulty of finding new entrants to take on post offices.

My hon. Friend the Member for Edinburgh South (Ian Murray) reminded us that there are other countries where the Post Office is protected in law. The hon. Member for Solihull (Lorely Burt) raised the issue of the need for regulatory reform—something on which we would all agree. The hon. Member for Angus (Mr Weir) said that everything simply cannot be left to warm words. He pointed out that we simply do not know how long the current managers will remain in their posts. He also drew attention to the staggering range of products and services that are now available through supermarkets, which would not have been dreamt of only a few years ago.

16:30

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), supporting his hon. Friend the Member for Colchester (Bob Russell), explained very clearly why he considered it necessary for the Bill to provide for a guaranteed IBA. He cited many examples of agreements, including non-compete clauses, which it was not impossible to provide and to carry over.

My hon. Friend the Member for Islwyn (Chris Evans) emphasised the importance of post offices to the community, and the extra mile that so many sub-postmasters and sub-postmistresses are prepared to go to help to look after members of their own communities. My hon. Friend the Member for Glasgow East (Margaret Curran) spoke of the hardship that would be caused by mass closures of post offices in deprived urban areas. The hon. Member for Foyle (Mark Durkan) challenged the idea that it was “unthinkable” that Royal Mail would abandon the Post Office. He said that, far from being unthinkable, it was quite predictable, and that it was all about pleasing potential purchasers.

My hon. Friend the Member for Glasgow South West (Mr Davidson), the Chair of the Scottish Affairs Committee, reminded us of the recommendation in his Committee’s report that the Government should take a more proactive approach to facilitating a long and robust IBA by removing any obstacles—practical, legal or otherwise—that might exist. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a comparison with the 10-year rail franchises. The hon. Member for Folkestone and Hythe (Damian Collins) stressed the unique reach of the post office network, as well as the importance of the certainty represented by the IBA.

Last but not least, let me refer to the hon. Member for Colchester, who tabled the new clause and who spoke so eloquently in moving it. I take issue with him on only one point: I think that he needs to challenge his own Government about what additional Government business they intend to put through the post offices. We have seen fine words in the document produced recently by the Department for Business, Innovation and Skills entitled “Securing the Post Office network in the digital age”, and we have also seen a copy of the letter sent by the sub-postmasters to the Department for Work and Pensions. However, we have not heard about any additional business so far, and I think that the hon. Gentleman would do well to pursue that. Nevertheless, I thank him for tabling the new clause, which we shall be pleased to support.

Many Members have presented compelling arguments for the inclusion of a guarantee of an inter-business agreement between Post Office Ltd and Royal Mail for at least 10 years. They have pointed out to the Minister that the obstacles are not insurmountable, and that if he has the will to include an IBA in the legislation, he should be able to find a way of doing so. They have said that he really must do that, or he will be remembered as the Minister who refused to take the opportunity to safeguard the post office network, and who left the way open for Royal Mail to abandon it.

We will support the new clause, and I hope very much that the Government will do so as well.

[Mr Davey]

I thank my hon. Friend the Member for Colchester (Bob Russell) for sparking the debate, and particularly for the way in which he introduced it, in his unique style. I thank him for his practical approach to the issue, and for his support for the mutualisation and employee share ownership provisions. I hope I shall be able to reassure him that new clause 2 is not needed, and that our policies for the Post Office will ensure that some of the more scaremongering predictions that we have heard will not come to fruition.

Members who have spoken in support of the new clause have expressed the fear, which has been debated at length in Committee and in other forums, that taking Post Office Ltd out of the Royal Mail Group of companies will put the commercial relationship between Royal Mail and Post Office Ltd at risk, and thence pose a risk to the post office network. I share my hon. Friend’s laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd. However, the approach taken in this new clause, of legislating a contract of a certain length, is not the way to achieve our shared objective.

In the evidence given to the Public Bill Committee, we heard strong backing for the separation of Royal Mail and Post Office Ltd. These are different businesses, which will benefit from focusing on the different challenges they face. It is worth keeping in mind that postal services account for only about a third of Post Office total revenue, as post offices undertake many other activities. Evidence to the Committee from Richard Hooper—the last Government commissioned him to report on Royal Mail, and this Government asked him to refresh his report—and from Consumer Focus and Postcomm all supported the separation of ownership of the two businesses. I was grateful for the support for this from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso).

Let me reassure Members, however, that the separation of Post Office Ltd and Royal Mail will not lead to the dangers for the post office network that people have talked about. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners, because there will remain an overwhelming commercial imperative for the two businesses to work together.

Let me expand on that a little further. In evidence to the Bill Committee, the chief executive of Royal Mail, Moya Greene, called the post office network

“the best and strongest network in the country, by any yardstick”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

Yesterday, she reaffirmed her commitment to that relationship, saying:

“There is already a very strong and enduring commercial relationship between the Post Office and Royal Mail. It is clearly in the interests of us all that this strong relationship is maintained in the future. We are committed to securing as long an agreement with the Post Office as we are legally able to.”

That confirms what Donald Brydon, the Royal Mail chairman, said in his evidence to the Committee. These are very strong pledges, and both Moya Greene and Donald Brydon make them not for sentimental reasons, but because they are business people and they know this relationship makes commercial sense.

[Nia Griffith]

If this makes such good commercial sense, what is the problem with putting it in the Bill? Royal Mail will still be an attractive proposition to any prospective purchaser.

[Mr Davey]

I will, of course, address that in detail, if the hon. Lady will let me. However, I first want to stress that it is the commercial incentive in the relationship that is so important. The Labour party forgets that commercial rationale is what makes people work together and what makes partnerships successful, not regulation.

I invite Members to consider the counterfactual of why Royal Mail would end its relationship with the post office network. Many of us fought the previous Government’s post office closure programmes precisely because the public value their local post offices so highly and see them as the natural place for high-quality postal services. As I asked on Second Reading, why would Royal Mail walk away from the Post Office, leaving a vacuum which its competitors would willingly fill? That would be commercial nonsense, and it will not do it.

The new clause would put the contract between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 10 years. Let me explain why I am opposed to this suggestion. I do not believe that legislation is appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. I am unaware of any statutory precedent for the Government requiring particular commercial terms between two independent businesses. When we debated this in Committee, I appealed to Committee members to tell me whether they could find such a precedent. None has appeared, and for good reason. These negotiations are best left to the businesses themselves, who know far better than we in this House their customers, the markets they serve, the products and the services they require of one another.

[Mr Binley]

I noted that the Minister said, “I do not believe,” and not, “It is a fact.” His not wishing to include this provision in the Bill is a matter of judgment, not a matter of law. May I add something on the idea of there being two independent businesses? In reality, the nation has a sizeable holding in them, so we are not quite talking about two businesses that are quoted on the open market. Would he therefore confirm that there is no legal reason why this arrangement cannot happen, even though it might be breaking new ground?

[Mr Davey]

I reassure my hon. Friend that I will be coming to this legal point and that I wish to address the remarks made by the hon. Member for Llanelli (Nia Griffith), but I stress that we were not given any statutory precedent for this arrangement. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volumes, service levels and duration. If we adopted the new clause, there is a real danger that we could end up with an IBA that would damage the post office network. That has not been discussed at length and we should concern ourselves with it. The new clause focuses on the duration of the contract and, thus, would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us here in Parliament.

On the key issue, Donald Brydon made it clear in his evidence to the Public Bill Committee that Post Office Ltd and Royal Mail would sign an agreement for the longest legally permissible period before a future separation. As shareholder, the Government will ensure that that commitment is met before any separation. I hope that the House will welcome this new commitment; we are making it very clear that we will ensure that Royal Mail delivers on the commitment that it has given, repeated and outlined to the Committee.

[Mr Binley]

May I press the Minister further? Will he now confirm that there is no legal or statutory reason why the new clause cannot be included in the Bill?

[Mr Davey]

I was coming to that, so I am delighted that my hon. Friend intervened just then. There is a legal barrier—

[Mr Anderson]

Will the Minister give way?

[Mr Davey]

Let me just finish the point, because there is a legal barrier. This also addresses the point made by the hon. Member for Blaydon (Mr Anderson), who asked whether the European Union was involved in creating problems for legislating in the way proposed in the new clause. The legal barrier to legislation requiring an IBA is the EU’s competition framework. Legislation providing an exclusive arrangement between Royal Mail and Post Office Ltd would face a significant risk of legal challenge as being incompatible with competition law. Article 101 of the treaty on the functioning of the European Union contains rules prohibiting anti-competitive agreements between undertakings. Article 4(3) of the treaty on European Union obliges member states not to jeopardise the attainments of the objectives of the treaty. The effect of those provisions, together with article 102 of the treaty on the functioning of the European Union, is that member states cannot introduce measures that would render the competition rules ineffective—that is clear. In addition, legislating for Post Office Ltd to have a guaranteed income stream would risk a successful state aid challenge being mounted. There are real barriers to doing what new clause 2 seeks to do.

However, I can assure the House, as I have done previously, that we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.

[Mr Weir]

I understand that after the Bill is passed, if that indeed happens, one company—and only one—that has a statutory universal service obligation will be entering into a contract with Post Office Ltd. I fail to see where the competition problem lies, because nobody else is offering a universal service obligation to challenge that.

16:44

[Mr Davey]

Let us be clear that the commitment that Royal Mail has made is that the refreshed or new IBA would be entered into before separation. We, and the EU legislation that I mentioned, say that there is a problem if the Government legislate for such a long contractual arrangement. The hon. Gentleman is not paying attention to the constraint on the Government.

[Malcolm Wicks (Croydon North) (Lab)]

Let us put to one side the earlier amusing moment when a radical said that he needed a precedent before acting—fortunately, that did not stop Lloyd George in 1906 with old-age pensions. The Minister has read the careful legal advice from departmental lawyers. Are they saying that it would be difficult to accept the new clause, or have they ruled it out entirely as clearly illegal? Will he tell us what the advice is?

[Mr Davey]

I have made it very clear that it would be open to serious legal challenge and I believe that we must take that into consideration. Let us remember that this agreement is not negotiated by the Government, as some hon. Members seem to think. It is negotiated by two independent bodies. The right hon. Gentleman, as a former Minister, ought to realise that for a Government to intervene in negotiations that involve commercially sensitive terms and to follow that by putting it in the Bill is completely the wrong way of going about things.

[Malcolm Wicks]

As a former Minister in the Minister’s Department, although not one with responsibility for this area, I can recall many occasions on which one was given legal advice and difficulties were presented. Unless a provision is 100% ruled out as clearly illegal, Governments must govern, at the end of the day, and Ministers must act in the interests of the democracy.

[Mr Davey]

This Government are governing. It was the previous Government who moved away from taking action on Royal Mail, who closed post offices and who did not take action. The right hon. Gentleman is absolutely right that we must make judgments, and we are making judgments. I can tell him the judgment that we will not make: the judgment that the previous Government made, which was that the way to sort out the post office network was to close thousands of post offices. We will not do that. The Government can and will help to create the conditions in which both businesses can flourish in partnership with one another.

One thing is certain. A struggling Royal Mail will lead to problems for the Post Office. The Bill introduces the ability to bring in much needed private capital for Royal Mail to invest in its transformation, so that it can offer the best service to its customers. It is important, too, that the Post Office continues to offer the best possible service to Royal Mail as well as to other current and potential clients. I am sure that hon. Members are well aware following the debate that we have committed funding of £1.34 billion, so that Post Office Ltd can invest in its network to ensure that that happens. For example, Post Office—

[Mr Binley]

Will my hon. Friend give way?

[Mr Davey]

In a second.

[Mr Binley]

We are moving on; will he give way?

[Mr Davey]

No, not yet.

For example, Post Office Ltd is piloting branches that offer greater flexibility and convenience in customer services, such as longer opening hours. The Committee heard evidence from Paula Vennells, the Post Office’s managing director, that those branches offer customers opening hours that are between 40% and 60% longer than current opening hours. That is the real change that the post office network needs. That is the change that will attract more customers and will mean that we do not repeat the appalling closure programmes that we saw under the previous Government.

[Mr Binley]

I want to pin the Minister down, because it is vital that we do. He said that there was a “significant risk” that we might be challenged by the European Courts on competition matters. Yet the two organisations have agreed that it is vital that they have an agreement. How can the EU challenge the Government on that matter when there is an open statement to the effect that it is what is needed and what is good?

[Mr Davey]

Let me take my hon. Friend back to the point I was making about articles 101, 4(3) and 102. The point I was making was not that the two businesses cannot have an IBA. That is clear—they have one now, and they have committed to refreshing it or to creating a new one. I gave the commitment to the House today that we, as shareholder, will ensure that that happens before there is a separation. I hope that my hon. Friend will welcome that. The risk is about legislation and I hope he understands that point.

[Sir Alan Beith]

The more I read the new clause, the objective of which I fully support, the more concerned I am that if it were in the Bill the Minister would be open to judicial review from an aggrieved party who made an unsuccessful bid to buy Royal Mail and wanted to judicially review the Minister’s unreasonableness in going ahead with a sale on the basis of an agreement between Royal Mail and the Post Office.

[Mr Davey]

My right hon. Friend is absolutely right. Let us be absolutely clear: the problem with Royal Mail has been the inaction, particularly from the previous Government, that has led to its parlous state. We do not want to create significant risks of legal challenge that would undermine the modernisation and investment process that Royal Mail needs to deliver on the universal postal service and that we need to ensure that the post office network does not have to face the closure programmes we saw under the previous Government.

[Mr Davidson]

Could we possibly agree, first, that the EU is a bad thing? Secondly, is the Minister telling us that he does not wish to have the new clause in the Bill in case the EU steps in, while also promising us that he is going to do all this anyway?

[Mr Davey]

The commitment that I have given today is what the hon. Gentleman and his Select Committee were seeking. That is what I understood from his very well-informed remarks earlier. Now that he has intervened, let me tell him that his point about mobile vans is dealt with in Government amendment 5, which I hope we will get to. There are currently 39 such vans serving 240 communities, and Post Office Ltd has no plans to increase its fleet of vans. I hope that gives him some reassurance on his very detailed point.

[Anas Sarwar (Glasgow Central) (Lab)]

Following on from the hon. Member for Northampton South (Mr Binley) in wanting to pin you down—the Minister that is, not you, Mr Evans—if the legal advice from civil servants is so clear, will the Minister publish it?

[Mr Davey]

The hon. Gentleman is a new Member of the House and he might know that there are various protocols on publishing legal advice.

Our policies on post offices will ensure that people will continue to see their local post office as the natural and convenient place to access Royal Mail products, and Royal Mail’s management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, as laid out in our policy document, which sets out a whole range of ideas for new Government services, we will be able to achieve those objectives.

The new clause tabled by my hon. Friend the Member for Colchester is well intentioned and I have always been impressed by how he, the voice of Colchester, campaigns for his constituents, not least for important services such as local post offices. I hope that I have reassured him that his new clause is not needed to support our precious post office network.

[Nia Griffith]

It still is not at all clear what the Minister is giving away. We have absolutely no idea what agreement he is planning and he has given absolutely no indication that he has had any talks with Royal Mail. He is talking about some sort of negotiation that might take place, but he is not telling us why he cannot explain what the legal problem is. We are not the slightest bit convinced, so will he explain exactly what he is doing to secure the Royal Mail business that provides a third of the post office network’s income? No organisation can survive without a third of its income, so what is he doing to ensure that it does not lose it?

[Mr Davey]

The hon. Lady cannot have been listening. What I have said today is absolutely clear: a commitment has been made to the Committee on which she served by the chairman and the chief executive of Royal Mail that they will refresh the IBA or have a new one before the separation. I am saying that the Government, as the shareholder, will make that happen, and she ought to welcome that.

[Sarah Newton]

I am very much reassured by the clear commitment we have heard today that it is the Government’s intention to support the post office network. To convince our colleagues on the Opposition Benches, would the Minister be kind enough to share with us the conversations he has held with the chief executive about what she thinks is the longest legally possible period for the new agreement?

[Mr Davey]

I think I should definitely be advised to share neither those private conversations nor the legal advice that may or may not have been given to Moya Greene and that she may or may not have shared with me.

The wider policies of the Government for the post office network will prevent major closure programmes. We have heard no apology today for all the closures of post offices under the previous Government. We saw 7,000 post offices close under the Labour Government. This Government have policies to make sure that that will not happen again, and I urge my hon. Friend the Member for Colchester to withdraw the new clause.

[Bob Russell]

When we read Hansard tomorrow, we shall see that there was at least one commitment—if not more—in the Minister’s response. Whatever the outcome of the vote, the fact that we have held the debate is worth while.

To be told four hours into the debate that my new clause may not be lawful was a little strong. I am pretty sure that, if the proposal were not lawful, somebody, somewhere, would have drawn it to my attention, if not when I tabled it, certainly in the few weeks since the Christmas and new year period. When I am told that there could be a serious legal challenge, all I can say is that nobody has challenged me as to the legality or otherwise of new clause 2.

Although I am grateful for all the contributions to the debate, I am disappointed. Had this been a boxing tournament, the ref would have ended the bout at least two hours ago. If this were an Oxford Union debate, the vote in favour of new clause 2 would have been overwhelming, because the case against the new clause is not very strong. It may be that all the Members who oppose new clause 2 are not present, and only the minority who support it have come to the Chamber to speak, but I am grateful to Members on both sides of the House. I think that we all agree that our sub-post office network is a vital part of our communities. Whether it is sustainable communities or localism, all Governments come up with such ideas and then promptly do things that do not appear to be community oriented.

It is on record that I am opposed to the privatisation of Royal Mail, but I accept that it will happen, so this is a question of what is best. I genuinely feel that new clause 2 is a way of taking things forward.

It is less than nine months since the utopian era of 13 years of new Labour came to an end; of course, it was a golden era for Royal Mail and the Post Office, so although I welcome the support that has been given we need to put it in historical context. The closures under the previous Government were the greatest of any time in the history of the Post Office and Royal Mail. I believe that the coalition Government have proposals—

[Nia Griffith]

Will the hon. Gentleman give way?

[Bob Russell]

By all means, if the hon. Lady wants to apologise.

[Nia Griffith]

The hon. Gentleman needs to remember that when we debated how to support the post office network and how to put in the extra subsidy that enabled us to keep open 11,900 post offices, the Minister of State, Department for International Development, who was then the shadow Minister speaking for the official Opposition, made it absolutely clear that the Conservative party would not have put in the amount of money that we were prepared to put in. Of course, the Liberal Democrats were not then promising anything because they never thought that they would have to deliver.

[Bob Russell]

I provided the hon. Lady with an opportunity to apologise for Labour’s mistakes, but an apology was not forthcoming.

I am disappointed that the Minister has not accepted new clause 2. After all, over Christmas, the Government accepted another of my proposals—that a picture of the Queen’s head must remain on stamps—although if we reach that amendment later on, it refers only to Her Majesty, and we need to tighten up the wording because the monarch may not always be female. I wish to press new clause 2 to a Division.

Question put, That the clause be read a Second time.

17:00

Division 163

Ayes: 250

---

Labour: 228
Democratic Unionist Party: 6
Scottish National Party: 5
Conservative: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 2
Green Party: 1
Liberal Democrat: 1

Noes: 308

---

Conservative: 268
Liberal Democrat: 39

New Clause 4

Restriction on universal service provider disposals

‘Any company providing a universal postal service must, prior to selling any part of its business to another entity, first report its intention to Ofcom who must certify the sale does not in any way reduce the company’s ability to deliver its universal service.’.—(Mr Weir.)

Brought up, and read the First time.

[Mr Weir]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment 11, page 15, line 17, clause 28, at end add—

‘(c) the needs of small business users in rural and remote areas’.

Amendment 12, page 16, line 16, clause 30, leave out ‘Friday’ and insert ‘Saturday’.

Amendment 13, page 16, line 28, leave out ‘Friday’ and insert ‘Saturday’.

Amendment 14, page 18, line 17, leave out paragraph (b).

Amendment 23, line 25, after second ‘time’, insert

‘but not before the date five years after this Part comes into force’.

Amendment 24, line 33, clause 33, after ‘time’, insert

‘but not before the date five years after this Part comes into force’.

Amendment 25,  line 36, clause 33, leave out

‘may by order amend section 30’

and insert

‘shall as soon as reasonably practicable after the review of minimum requirements of the Universal Postal Service under subsection (1) has been carried out lay before Parliament a report which shall include a copy of the review.’.

Amendment 26, line 37, clause 33, leave out subsections (6) and (7).

Amendment 29, page 21, line 40, clause 37, after ‘unless’, insert

‘it has been commercially negotiated and’.

Amendment 30, page 22, line 1, leave out lines 1 to 18.

17:15

[Mr Weir]

New clause 4 and amendments 11 and 14, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill’s passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail’s privatisation, the universal service obligation, which is so important to my constituents, is maintained.

Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope—a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.

The new clause is an attempt—perhaps not a triple lock, but at least a lock—to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.

What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.

I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.

The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company—albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.

I raised the matter during the Committee’s eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:

“The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail’s existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create ‘any significant risk that the necessary resources will not be available’ to enable it to continue its business.”––[Official Report, Postal Services Public Bill Committee, 18 November 2010; c. 289.]

The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.

I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.

[Mr Davey]

The hon. Gentleman will know from the debate in Committee that there is the potential for Ofcom to impose a fine on the universal service provider of up to 10% of its turnover. At the moment, that would be a fine of £650 million. Does he not think that that is a disincentive?

[Mr Weir]

The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.

[Tony Lloyd]

As the hon. Gentleman is helping the House, will he help me by saying whether there is a duty on Ofcom to insist on the universal service provision? If not, it makes no real difference whether there is the capacity to levy a fine or not.

[Mr Weir]

There is a duty on Ofcom to ensure the universal service. However, as I was trying to explain, the problem is that Ofcom’s only sanction is to act after something has happened. If the conditions have been breached, Ofcom can take action—it can fine the company a very substantial amount or it can impose other conditions. That is very much a reactive rather than a proactive sanction. If there is nothing there to fine or there is nothing left, it makes no difference whether the fine is £650 million or £20 trillion.

[Tony Lloyd]

What the hon. Gentleman is confirming is that there is, in fact, no duty on Ofcom other than a retrospective duty. That is not a duty, is it?

[Mr Weir]

Indeed. I would put it a different way. There is no effective sanction available to Ofcom to deal with something after it has happened to the detriment of the USO. It is only able to impose conditions or a fine, and fining a shell company is no good. Ofcom cannot prevent the sale; it can react only if what is happening turns out to undermine the ability to provide the USO. As I said, if the company has already sold off all its profitable parts leaving only a shell, what is the point of a large fine that it is not in a position to pay?

The Bill must provide the power to allow Ofcom to take action before a sale is proceeded with and to ensure that the privatised company cannot dispose of all profitable assets to avoid the duty of the USO. I am sure that the Minister will say that that is a burdensome hurdle, but it is not. It is not the first sale that would be required to clear a regulatory hurdle before going ahead—indeed, many deals are done subject to regulatory approval. I am sure that the Secretary of State for Business, Innovation and Skills is only too well aware that the BSkyB case had to go to the European Commission to determine whether it would be blocked at that level before the remaining shares could be put forward.

If the new clause was passed, Ofcom could look at the proposal and ensure that the assets of the company remained sufficient to meet the needs of its social obligation. In most cases, that would be a relatively quick process. However, it would give the reassurance that once there is a privatisation—if that disaster should happen—there would at least be something in place to ensure that the universal service continues in all circumstances. I ask hon. Members to support the new clause to give that extra protection.

Time is short, but I would like to mention briefly the other amendments in my name. Amendment 11 would add to the Bill a reference to

“the needs of small business users in rural and remote areas”

and make it a specific matter to which Ofcom must give concern in considering the USO. The reason is simple. We need to ensure that the universal service obligation is secured for small businesses in rural areas if we are to have any chance of creating new employment opportunities in our rural communities. On Second Reading, Scottish National party Members tabled an amendment supported by Plaid Cymru and all the parties of Northern Ireland because of our huge concern that the Bill would have profound implications for that ability to continue the USO.

It is vital to bear in mind that not only residential but small business customers rely on Royal Mail. They do not have any real options and cannot access the deals that may be on offer from alternative carriers. In the parcels market, if one can get anyone to deliver to large parts of Scotland at all, it is only at a vastly increased price. Not so long ago, the then management of Royal Mail proposed a zonal pricing structure that would have created different prices for different areas of the United Kingdom. In the recent spate of bad weather in Scotland, many of the alternative carriers simply gave up, and several publicly stated that they would not attempt deliveries in Scotland at all.

Throughout this time, Royal Mail did its best to ensure that the mail got through, with postal workers struggling in very difficult conditions to ensure that the mail was delivered. Although there were delays and although, for obvious reasons, some areas could not get mail, most of the mail got through. We should congratulate Royal Mail and its workers on doing that. It shows the difference between a dedicated public company service and the privatised services that operate elsewhere. Amendment 11, allied with the others in the group, is simply an attempt to ensure that if the disaster of privatisation befalls Royal Mail, as much as possible is done to ensure that the USO is watertight and that the interests of all users are adequately protected.

Amendments 12 and 13 are linked, in that the purpose of both is to ensure that the universal service obligation for postal packets is a six-day service.

[Mr Reid]

The hon. Gentleman has a point. Although the USO for parcels is currently only five days, and the Bill does not change that, I hope that the Minister will consider increasing the USO to six days for parcels. He has improved the USO in many ways in the Bill, but I ask him to take this away and look at it again, because I am concerned that if we do not have a six-days-a-week USO for parcels, Saturday parcel deliveries in the highlands and islands will end.

[Mr Weir]

The hon. Gentleman is perfectly right. I hope that he will follow up that strong support for the proposal by coming through the Lobby and voting for it in order to send an additional message to his Minister.

As the Bill stands, we have a six-day service for letters but only a five-day service for postal packets. I am at a complete loss as to the logic behind the differences between the two. One thing that came through loud and clear from Richard Hooper’s report, on which the Government have relied, is that the market for letters is declining substantially. The bulk of private letters are now being sent around Christmas, and they will mostly be Christmas cards. I suspect that I am not the only one who has noticed that the rise of the e-card is biting even into this market, with fewer cards being sent through the post, or perhaps it is just that I have fewer friends this year—I do not know. In any event, the one area where there is real scope for building the business is what we are now told we should call e-fulfilment—in effect, the delivery of orders made over the internet. This is a two-way process. In my constituency, for example, there are businesses in rural areas who sell over the internet and send out packages on a regular basis. They rely on the universal service obligation to ensure that they have access to the postal service at a reasonable cost and that allows them to operate at a reasonable cost.

Interestingly, in research on the business market carried out by Postcomm, more than half the businesses surveyed were of the opinion that they will use the internet more in future, but the vast majority—93%—believe that they will always need to send some things by post. Half of businesses expect more customers to order products online in future, indicating a belief that the market will grow further. Digging down into the figures, it appears that of those who spend between £100 and £500 a month on mail—basically small businesses—72% have either stayed at the same level of usage of Royal Mail or have increased it in the past year.

That is the one growth area within Royal Mail, and not having the universal service obligation cover it in the same way as in the letters market does not appear to make any great sense. Again, I point out that if we are to grow private businesses in rural areas, we need to have the infrastructure to allow them to flourish, and that includes a reliable six-days-a-week postal service.

[Mr Reid]

I am grateful to the hon. Gentleman for giving way again. I reinforce my earlier point that I am concerned that if the USO for parcels is not extended to six days a week, parcels will not be delivered in the highlands and islands on Saturdays. As he said, the delivery of parcels in response to internet selling is such an important growth area that the highlands and islands would miss out if parcels were not delivered on Saturdays.

17:30

[Mr Weir]

I reiterate that the hon. Gentleman may have a chance to vote for that later and to help the Minister make up his mind.

Goods not only go out by post, but are received by post. Raw materials may come in by post. For many constituents, no one is at home during the day from Monday to Friday. I am sure that such people would like packages to be delivered on a Saturday, when they actually might be in and would not have to travel to collect them at the nearest sorting office, wherever that may be after privatisation. If we are serious about increasing business and ensuring that every area of the country has access to a reliable, reasonably priced postal service, it would be daft to exclude from the universal service the one area that has potential for substantial growth.

Finally, amendment 14 would remove Ofcom’s ability to use geographical criteria to suspend the universal service. That has long been a contentious issue, even under the current framework. Households that are difficult to reach can have delivery suspended. The condition in the Bill is far too wide and could result in whole isolated mainland or remote island communities being removed from the universal service. That would be a travesty and lead to a huge increase in costs for such communities. There may always be some individual dwellings where the mail simply cannot be delivered, but those should be looked at on an individual level.

I urge all hon. Members to support the proposals, which all attempt to strengthen the USO and to recognise that the highest priority for the Royal Mail, whether it continues as a publicly owned company, as I hope, or becomes a privatised company, is to deliver to all our citizens.

[Mr Reid]

As I said in my interventions on the hon. Member for Angus (Mr Weir), I hope that the Minister takes away the proposal in amendments 12 and 13 to extend the universal service obligation for parcels to six days a week. As I said, I am concerned that parcels will not be delivered on Saturdays in the highlands and islands without such an extension. Apart from that one remaining concern, I think that the Minister has done a great job in the Bill to strengthen the USO in many ways, which is so important for the highlands and islands.

Amendment 14 deals with the hon. Gentleman’s concern that the geographical exceptions clause will be used to remove large parts of the highlands and islands from the universal service obligation. I do not share that concern. The wording is the same as that in the Postal Services Act 2000. The regulator, Postcomm, has used that exception only in a small number of cases, such as for islands that do not have a daily ferry service. Obviously, it would be nonsense for Royal Mail to charter a boat to an island to which Caledonian MacBrayne does not have a daily ferry service. The solution is for Caledonian MacBrayne to improve the service so that islands such as Tiree, Coll and Colonsay have a daily ferry service, but it is not for Royal Mail to charter special boats. Postcomm has also introduced exceptions on health and safety grounds, such as dangerous dogs. Under amendment 14, Royal Mail would have to deliver to houses with a dangerous path or animal. The wording in the Bill, which is taken from the 2000 Act, is satisfactory. I questioned Postcomm and Ofcom in the Scottish Affairs Committee and Ofcom gave an assurance that it will maintain Postcomm’s regulatory regime for geographical exceptions. Given those assurances, amendment 14 is not necessary.

[Gordon Banks]

I wish to speak to amendments 23 to 26, which we have tabled. Amendments 23 and 24 are similar to those tabled in Committee and are intended to ensure that no review of the universal service obligation can take place for at least five years after clause 33 is enacted. I note that the hon. Member for Northampton South (Mr Binley) tabled a similar amendment that was not selected, and I commend him for doing so. I trust that he will be able to support us in our aspirations tonight.

The minimum service requirements laid out in clause 30 are exactly the same as those set out in the Postal Services Act 2000. However, as my hon. Friend the Member for Llanelli (Nia Griffith) said in Committee, clause 33 will allow them to be eroded. The Bill sets in train a range of processes to reduce the universal service obligation, and I imagine that many Members fear that we cannot even be sure to which Secretary of State the powers in clause 33 will fall. Perhaps it will not be the Secretary of State for Business, Innovation and Skills, and who knows, it may even be the Secretary of State for Culture, Media and Sport. Perhaps, if time allows, the Minister will be able to tell us which Secretary of State will inherit those powers if the Bill is passed, and then I will leave it to my hon. Friends to determine whether that is a good thing.

[Mr Reid]

I point out to the hon. Gentleman that clause 33(7)(a) states that the review of the minimum requirements would be subject to the affirmative procedure, so it would require a vote of both Houses of Parliament. The Secretary of State could not take the decision on his own. Is that not adequate security?

[Gordon Banks]

No, it is not, and I will come to that if I have time. The Minister will be aware of my office’s deliberations with him on parliamentary scrutiny when the Bill was in Committee, and I will deal with that matter if I can.

We believe that it would be better to relieve both potential contenders of the powers to be granted under clause 33(5). At least the current Secretary of State for Business, Innovation and Skills would then know about that change in advance, and it would have been made through the democracy of Parliament and not by the Prime Minister as punishment.

In a letter to the Public Bill Committee, the Minister mentioned the failsafe of clause 29(5), which is relevant to clause 33. However, that failsafe could work only if one had faith in the actions and intentions of the relevant Secretary of State, and we do not.

Restrictions to ensure that there could not be a review before five years had passed would provide important stability to both the business and customers following privatisation. The universal service obligation is of such immense importance that it will need that period to bed down under a new, private provider. I am afraid that throughout the Committee stage, the Minister was unable to convince my hon. Friends and myself why a review should take place after 18 months. We want a statutory period of five years, during which everyone would know that today’s universal service obligation was in place. We want the consumer to be protected. As it stands, the inter-business agreement could be subject to review after 18 months, when an Ofcom review of the USO could also be ongoing. That would mean turmoil. As the Minister heard in Committee and from some of my hon. Friends today, we have only his best interests at heart. I am trying to save him from that turmoil, and that caused by the Secretary of State.

The Secretary of State told Members on 27 October last year:

“The Bill will maintain the universal postal service at its current levels…I have no intention of downgrading this service.”—[Official Report, 27 October 2010; Vol. 517, c. 360-361.]

That does not square with the Bill’s contents, and the Secretary of State needs to come clean. If he has no intention of downgrading the service, why does he need a review within 18 months? In fact, the Bill is riddled with review opportunities. There are three—in clauses 29, 33 and 42. It is obvious that the Secretary of State’s actions in promoting the Bill do not live up to his words. Maybe, in line with other matters that he has promoted, he does not really support the Bill anyway.

We would argue that the modernisation programme under way in Royal Mail needs to be completed and bedded down before any review of the USO takes place. It is only a few months since Postcomm and Consumer Focus completed a review of customers’ universal service needs, and it is against that backdrop that the Government are proposing the minimum service levels in the Bill. There is therefore no good reason to recommence the review process within 18 months of the Bill being passed.

We do not believe that such a review at this time would be in anyone’s interests other than those of the provider, who may want to downgrade the service for a bigger shareholder return. More than anything, we want to protect the interests of the consumer. I believe that, in principle, the amendments have cross-party support. Whereas our appeals to the Minister and his colleagues in Committee fell on deaf ears, I am a little more hopeful today. Indeed, in accepting our amendments 23 and 24 today, the Minister would be committing himself to recognising the value of the current USO, while also alerting potential bidders to his clarity on the matter—after all, we are always told that that is what business wants these days. Our amendments will offer that.

It would be wrong for a business to purchase Royal Mail with the intention—or should we say the hope?—that a quick review by Ofcom and a stroke of the pen by the Secretary of State, or perhaps by some other Secretary of State, would lead to a better deal. Why do we have such fears? It is because we can see how committed the private sector is to the universal service obligation.

The Minister regaled the Committee on more than one occasion with his international understanding of postal services. I would therefore like to refer him to an article in Holland’s De Telegraaf on 9 June last year, so that he can test his Dutch reading skills, as opposed to his usual double-Dutch Government jargon. In that article, Pieter Kunz—I do hope that I have pronounced that gentleman’s name accurately—who is the managing director of TNT’s European mail networks, said that his company planned to cut 11,000 employees from its Dutch mail operations and wanted to move to a three-day-a-week delivery service. Mr Kunz went on to say that collection and delivery services would be outsourced, and that TNT would become managers of mail. However, the worrying bit about how the private sector sees the USO in the round came when Mr Kunz stated that the universal service obligation was

“a kind of Jurassic Park and we should get rid of it”.

The worry is accentuated by the possibility that TNT could be the successful bidder for a privatised Royal Mail.

Although Mr Kunz might think of the USO in such terms, my constituents and the businesses in my constituency see it as a valued, necessary and fundamental service. We want to prevent any such erosion wherever possible. I wish that we had an opportunity to guarantee the current service levels indefinitely, but I recognise that this is not the Government’s will. However, we want the minimum five-year period to be included in the Bill, I suppose for the very same reasons that Mr Kunz, and perhaps the Minister, do not.

Amendments 23 and 24 would allow the newly privatised Royal Mail to be secure in the current service delivery levels for the next five years without change. As the Bill stands, the first review could come along at any time and have far-reaching effects. I referred earlier to our time in Committee, where my hon. Friend the Member for Kingston upon Hull East (Karl Turner) said that a similar amendment was

“a reasoned amendment that turns on the issue of speed versus proper consideration.”––[Official Report, Postal Services Public Bill Committee, 7 December 2010; c. 592.]

He recognised that such a safeguard would prevent Royal Mail’s new owner or owners from exerting any pressure on Ofcom to re-examine the minimum requirements straight after a sale, as a way of trying to secure bigger returns for shareholders. However, he and other members of the Committee recognised too—I hope that other Members will recognise this today as well—that such a safeguard would also prevent Ofcom from undertaking a hasty review before the full effects of privatisation and modernisation were understood and their impact on the service evaluated.

It is not just those on this side of the House who want to protect the USO in the long term. The Federation of Small Businesses also believes that the USO

“must be protected and services must not diminish”,

stating:

“Any change to the scope of the USO could have a negative impact on small businesses.”

Indeed, FSB members have shown their further concern, in that 82% of small businesses want to keep the single UK-wide pricing structure. Then we have the National Federation of SubPostmasters, which has said that

“communities across the UK depend”—

that is the key word—

“on the six-days-a-week collection and delivery at a uniform and affordable price”.

Indeed, in their recent report, that august group of cross-party and pan-UK parliamentarians known as the Scottish Affairs Committee also expressed alarm about

“the Bill’s requirement for Ofcom to review the minimum requirements for the USO within 18 months. We fear this may be seen as an opportunity to decrease the requirements of the USO.”

Many Opposition Members get fed up with listening to the Government telling the country what they are doing to help small business, when there is precious little sign of such help in the real world. Here is an opportunity for the Government to do just that—help small business, support these amendments and support the Federation of Small Businesses.

17:45

The Minister’s previous argument that clause 30 enshrines the minimum requirement and clause 33 enhances the safeguards against changes to those minimum requirements is, quite frankly and at best, smoke and mirrors. He said in Committee that under the European Communities Act 1972, the Government already have the power to change the minimum requirements of the universal service to the level required by the directive, which is five days a week, by way of negative resolution. Of course, he is correct, but he went on to say that that was not acceptable. Quite frankly, the change he proposes in the Bill is little better.

We believe that our amendment 25 is just, as it prevents the Secretary of State from moving changes through this Bill as a result of Ofcom’s reviews. It would empower the Secretary of State only to lay the report before Parliament, whereas amendment 26 would remove the need for any approval process as the power to amend section 30 through this Bill would be removed by amendment 25. This would, we calculate, lead to the need for new primary legislation, with all the necessary parliamentary scrutiny that accompanies it, before any Ofcom-proposed service reductions could be instigated.

The Minister will remember that I tried on numerous, if not dozens, of occasions in Committee to enhance parliamentary scrutiny of these proposals, but he chose to ignore my good and kind offers. He has another opportunity here tonight to add parliamentary scrutiny to the Bill, and he should do so by accepting amendments 25 and 26.

Other hon. Members are waiting to speak on these and other amendments, so I would like to speak very briefly about amendment 29, particularly about what we call the final mile. We moved a similar amendment in Committee and we will support this amendment tonight.

The hon. Member for Angus (Mr Weir) has regaled us with the reasons behind new clause 4. I am glad that he has had that opportunity, which he did not have in Committee, as his was the only new clause that we were unable to discuss because we ran out of time on the final day. The proposal is of merit; it provides another opportunity to protect the universal service obligation. The hon. Gentleman put forward a strong argument. Anything that protects the USO can only be a positive proposition.

To conclude, amendments 23 and 24 would provide a five-year buffer before any Ofcom USO review, and amendments 25 and 26 would remove the Secretary of State’s ability to alter the USO through the powers in this Bill. If the Minister believes the words of his Secretary of State that he has

“no intention of downgrading this service”—[Official Report, 27 October 2010; Vol. 517, c. 360.],

he must accept these amendments. He will have an opportunity to vote for amendment 23, which we intend to press to a Division if he does not accept it. If he does not accept and support these amendments, he will be saying that one of two things will apply. Either the Minister does not believe the Secretary of State or the Secretary of State’s words are an empty promise. Which is it?

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. There are just a couple of minutes before I will invite the Minister to speak. I am sorry that there is not much time left for Katy Clark to speak, but I must bring the Minister in at 5.50 pm.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak to amendments 29 and 30. I fully appreciate the time constraints, given that the Minister must be brought into the debate.

The amendments are designed to look at the issues surrounding regulation, particularly at the legal requirements that oblige Royal Mail to process and deliver its competitors’ mail. Many hon. Members will be fully aware of this problem as whenever they attend a postal delivery depot, postal workers will advise them forcefully about it. At the moment, the reality is that on average every letter that Royal Mail delivers for its competitors leads to a loss of 2.5p to Royal Mail. Amendment 29, which was tabled with the support of communication workers and which I would like to put to the vote if given the opportunity, is designed to address that issue.

Briefly, we have a fully liberalised market, but the way the current system operates goes way beyond that required by the European directive. It requires compulsory access by competitors to every point of the Royal Mail’s network and it provides a guaranteed margin for them. Amendment 29 would ensure that the regulator no longer had the power to set that price. There would be a commercial negotiation, and the price established would mean that it was in Royal Mail’s interest to deliver the correspondence.

At present, a competitor will collect letters from customers who make bulk postings. Those letters will be part-sorted, and branded with the competitor’s stamp. The competitor will then drive the letters to a Royal Mail sorting office, where Royal Mail will sort them and deliver them at a loss.

I know that we have a problem with time, so I shall end my speech now. I ask the House to support the amendment, which seeks to ensure that Royal Mail is able to negotiate freely and deliver letters at a profit.

[Mr Davey]

Because of the shortage of time, I shall begin with a brief overview of our reaction to the new clause and amendments.

The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.

I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail’s existing licence. That prevents Royal Mail from doing anything—such as transferring assets or paying out dividends—that

“creates any significant risk that the necessary resources will not be available”

to carry on its business.

If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman’s speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal Mail’s current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention—although I had told him in Committee—that there are additional protections in company law relating to what the pensions regulator can do.

In my view, new clause 4 is not needed. We already have the necessary protections, and I hope that the hon. Gentleman will at last be reassured and will withdraw the new clause.

In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom’s actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of

“the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas”.

We are extending those duties to Ofcom’s functions in respect of post: “communications matters” in section 3(1)(a) of the 2003 Act will now include postal matters.

[Mr Weir]

The Act refers to

“persons living in rural…areas”,

but my amendment refers to businesses. That is the important point in this context.

[Mr Davey]

It has been well established that, in the Act, “persons” also means businesses.

On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Public Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.

This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.

[Susan Elan Jones (Clwyd South) (Lab)]

Will the Minister give way?

[Mr Davey]

I want to make some progress, as I have a lot of amendments to deal with.

I was grateful to my hon. Friend the Member for Argyll and Bute (Mr Reid) for his welcome for most of the aspects of regulation in the Bill and for how we have sought to ensure that remote rural areas, particularly in Scotland, have the protections they need. However, I gently say to him that there is the requirement for letters to be delivered six days a week. If a parcel is ready to be delivered on a Saturday, Royal Mail will deliver it because a postman or postwoman would be going to that address anyway to deliver letters. I ask him to think about the practicalities of that. Where they are delivering in remote places to remote addresses, they deliver letters in vans. Where they are delivering in towns, increasingly in future, because of the roll-out of this programme, posties will use delivery trolleys. Those are being introduced as a deliberate reform in the way that letters and parcels are delivered. They are being brought in partly to ensure that posties can deliver parcels as well as letters. Given that there is already the minimum service requirement of six days a week for letters, I think my hon. Friend will be reassured on this point.

Amendment 14 to clause 32 is unworkable. It would add disproportionately to the burdens on the universal service provider and it would put at risk the health and safety of hard-working postmen and women. I am surprised the hon. Member for Angus wishes to do that. The exception in clause 32 has been in place for many years. It is in the European postal service directive. Removing it would put at risk the health and safety of Royal Mail men and women. I think he should think very seriously about that.

On amendments 23 to 26 to clause 33, the Bill is about protecting the universal service. Clause 30 enshrines the same minimum requirements in this Bill as are in the current legislation. The power in clause 33 to review the minimum requirements enhances the safeguards against changes to those minimum requirements. As the hon. Member for Ochil and South Perthshire (Gordon Banks) had to admit, at the moment—his Government failed to acknowledge this—there are powers for the Government in this regard. We could, by negative procedure, move the current minimum service requirements down to the level of those in the European postal service directive. I think that is unacceptable, however, which is why we have added extra safeguards to the Bill. They include the requirement that should Ofcom make a judgment that it is in the consumer’s interests for there to be changes, and should the Secretary of State accept that, there would have to be votes in both Houses of Parliament. That is a very strong protection, and he ought to welcome it. Is he going to welcome it?

[Gordon Banks]

No, but what I am going to do is ask the Minister whether he agrees with the Secretary of State that he has no intention of reducing the level of service. If that is the case, the Minister should support our amendments, not talk about what he has put in the Bill.

[Mr Davey]

The problem with the hon. Gentleman’s amendments is that they are very confused. For example, in proposing a review after five years in respect of Ofcom, rather than 18 months, he does not seem to understand how the universal service regulations work. We have the minimum service requirements in clause 30, but there is also clause 29, and the reason why there is an 18-month review is to allow the universal postal service order to be brought in so that the sorts of requirements and the level of universal service that exist at present can be introduced quickly. I would have thought that the hon. Gentleman would welcome that. The fact that he does not shows that, despite all our work together, he still does not understand the Bill.

Amendments 29 and 30 are very important, but I am not going to be able to give them the time that they deserve. I simply say to the hon. Member for North Ayrshire and Arran (Katy Clark) that if we were to accept them, they would remove important safeguards for competitors and consumers, and that would not be welcomed by people at large. It would undermine competition and the incentives for efficiency. Our Bill, unlike the one in 2009, seeks to change the regulatory system—

18:00

Debate interrupted (Programme Order, 27 October).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the clause be read a Second time.

18:00

Division 164

Ayes: 240

---

Labour: 222
Democratic Unionist Party: 5
Scottish National Party: 5
Conservative: 2
Social Democratic & Labour Party: 2
Independent: 2
Plaid Cymru: 2
Green Party: 1

Noes: 315

---

Conservative: 273
Liberal Democrat: 41

The Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Clause 11

Annual report on post office network

Amendments made: 3, page 6, line 24, after ‘offices’, insert ‘in England, Wales, Scotland and Northern Ireland’.

Amendment 4, page 6, line 40, at end insert—

‘(6) The Secretary of State must give a copy of the report to—

(a) the Scottish Ministers,

(b) the Welsh Ministers, and

(c) the Office of the First Minister and deputy First Minister in Northern Ireland.’.—(Mr Davey.)

Clause 14

Part 1: general interpretation

Amendment made: 5, page 7, line 34, leave out ‘premises’ and insert ‘any premises or vehicle’.—(Mr Davey.)

Clause 33

Review of minimum requirements

Amendment proposed: 23, page 18, line 25, after second ‘time’, insert ‘but not before the date five years after this Part comes into force’.—(Gordon Banks.)

Question put, That the amendment be made.

18:15

Division 165

Ayes: 239

---

Labour: 221
Scottish National Party: 6
Democratic Unionist Party: 5
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 2
Green Party: 1

Noes: 317

---

Conservative: 274
Liberal Democrat: 42

Clause 60

UK postage stamps bearing the image of her majesty

Amendments made: 17, page 37, line 21, leave out subsection (1) and insert—

‘(1) The Secretary of State may give a direction to a universal service provider requiring the provider to do either or both of the following—

(a) to issue United Kingdom postage stamps bearing the image of Her Majesty (“relevant stamps”) in cases specified in the direction, and

(b) to comply with provision specified in the direction in relation to any relevant stamps that the provider is required or proposes to issue.’.

Amendment 18, page 37, line 24, leave out ‘this section’ and insert ‘subsection (1)(b)’.

Amendment 19, page 37, line 24, leave out ‘the’ and insert ‘relevant’.

Amendment 20, page 37, line 26, leave out ‘this section’ and insert ‘subsection (1)(b)’.

Amendment 21, page 37, line 28, leave out second ‘the’ and insert ‘relevant’.—(Mr Davey.)

Clause 78

Indemnities

Amendments made: 6, page 47, line 12, at end insert—

‘(3A) As soon as practicable after agreeing to indemnify persons under this section, the Secretary of State must lay a statement of the agreement before Parliament.’.

Amendment 7, page 47, line 23, at end insert—

‘(6A) If a sum has been paid out in consequence of an indemnity agreed to under this section, the Secretary of State must lay a statement relating to that sum before Parliament—

(a) as soon as practicable after the end of the financial year in which the sum is paid out, and

(b) if subsection (4) applies to the sum, as soon as practicable after the end of each subsequent financial year in relation to which the repayment condition has not been met.

(6B) The repayment condition is met in relation to a financial year if—

(a) the whole of the sum has been repaid to the Secretary of State before the beginning of the year, and

(b) the company was not at any time during the year liable to pay interest on amounts that became due in respect of the sum.’.—(Mr Davey.)

Clause 79

Guarantees where postal administration order is made

Amendment made: 8, page 48, line 20, leave out ‘thinks fit’ and insert ‘considers appropriate’.—(Mr Davey.)

Third Reading

Queen’s consent signified.

18:28

[Mr Davey]

I beg to move, That the Bill be now read the Third time.

We have had an excellent debate on the Bill, not just today but throughout its passage through the House. Hon. Members have rightly spent a lot of time scrutinising the detail of our proposals, but I would ask all of them to stand back and remember what we are trying to achieve. We are trying to preserve two great British institutions—the Royal Mail and the Post Office. As we heard from Richard Hooper in his reports, both to the previous Government and to this one, unless we take urgent action, the future of the universal postal service is at severe risk.

Letter volumes are declining faster than anyone predicted—15% in the past five years alone—and some estimates suggest that they could decline by up to another 40% over the next five years. Is Royal Mail yet ready for this most challenging of business trends? Without the Bill, I believe not, for despite some progress on modernisation, Royal Mail has not adapted sufficiently to that market decline. Unless we take action, that will only worsen and Royal Mail’s position will become even more precarious. Let all hon. Members be in no doubt: doing nothing is not an option.

The previous Government recognised that, for in many ways the Bill is similar to that which was put before the other place by the previous Government in 2009. The previous Business Secretary was aware of the need for urgency. He said:

“We cannot simply ignore these facts, or put our plans in a bottom drawer”.—[Official Report, House of Lords, 10 March 2009; Vol. 708, c. 1068.]

Unfortunately, the previous Government ended up ignoring the facts. As they oppose the Bill, I suggest that the Opposition ought to go back to that bottom drawer. If they look hard enough, they might find the bottle that they lost in 2009.

The present Government are aware of the urgency. That is why we have pressed ahead with the Bill so early in the Parliament. We will send to the other place a Bill that is significantly better than the previous Government’s 2009 Bill. It is better for employees of Royal Mail, with employee shares to give them a genuine stake in the future of the business. It is better for the Post Office, setting it free and creating the possibility for a mutual ownership model in the future. Above all, it is better for the universal postal service and Royal Mail, as our Bill takes a more flexible approach to regulation and is much better structured to attract the private investment that this business desperately needs.

The House should have no doubt about the overriding aim of the Bill. It is to protect the universal postal service. I do not believe it is possible to protect that in the public sector any longer—at least, not without ever-increasing levels of taxpayer subsidy, which even Lord Mandelson, as he doled out largesse in the run-up to the last election, would have baulked at.

Royal Mail needs to modernise. Its business is changing with the impact of the digital world. I am sure that I was not alone among hon. Members in paying a Christmas visit to local delivery offices in my constituency. Not only was I impressed by the hard work of Royal Mail employees, dealing with some of the worst weather conditions in living memory, but I was staggered by the huge increase in the volume and size of parcels. No one, none of the posties there, had seen anything like it.

In recent years, the volume of internet shopping has been increasing, especially items such as books and CDs, but now it seems that the British consumer’s confidence in internet shopping has grown dramatically. That is good news for the longer-term future of Royal Mail. Although the increase in parcels will not offset the decline in letter mail, and the parcels sector is intensively competitive, there is a chance—an opportunity —for Royal Mail to grow.

The other dramatic impression that one has after visiting Royal Mail sorting and delivery offices and then visiting similar sites elsewhere—as I did in Berlin, visiting a Deutsche Post sorting office—is the lack of capital investment in Royal Mail so that it can make the best of this opportunity. Since Deutsche Post shares were first sold in 2000, it has invested the equivalent of £11.7 billion and about half of that investment has gone on modernising its parcels and express business because it knows that that is the future for its organisation.

We need to give Royal Mail that sort of freedom to invest in the delivery businesses of the future. We need to ensure that it can access capital, not just for its immediate modernisation plans, but well into the future. I do not believe that if it remains constrained by Treasury borrowing, it could ever access the right amount of cash, with the commercial speed needed.

As we privatise, we are ensuring that the employees get a good deal. Our pension plans and our employee share plans must represent the best deal on offer to any large group of employees in the UK today. I am immensely proud that Liberal Democrats in government with our coalition partners are delivering the deal on pensions that Labour failed to deliver, and I am immensely proud of the strongest legislative commitment to employee shares in any major privatisation.

Given the time, although I want to say something about post offices, before doing so I shall comment on stamp design. The amendments passed by the House will ensure that Her Majesty’s head will appear on stamps in the future.

[Jonathan Edwards]

rose—

[Mr Davey]

Let me anticipate the hon. Gentleman, because the concerns that the nationalist parties expressed in their amendments are unfounded. The Bill will ensure that nationalist emblems can be placed, and be required to be placed, on stamps in future. I hope that he is reassured by that.

[Mr Davidson]

Surely the Minister does not mean “nationalist emblems” can be placed; can he assure us that Alex Salmond’s head will not appear on any stamps provided in Scotland?

[Mr Davey]

I cannot tell the hon. Gentleman how delighted I am to be able to give him that reassurance. It was a slip of the tongue.

Some people have concerns about the wording of our amendments, which ensure that Her Majesty’s head will be on our stamps in future. I can assure hon. Members that, under section 10 of the Interpretation Act 1978, “Her Majesty” can be taken as

“a reference to the Sovereign reigning at the time of the passing of the Act”

and construed as applying to any future Sovereign, so people should not worry about that.

May I turn to the Post Office? There has rightly been a lot of debate about the impact of the Government’s proposals on the network of post offices. First, I want to be absolutely clear that we are talking about a sale of shares in Royal Mail, not in the Post Office. They are both cornerstones of British life, but they are different businesses facing different problems, and that is why separation has been so widely supported by the experts. Of course, their futures are closely linked, and we expect that they will always have a strong commercial relationship, but securing the future of Royal Mail will of course help to secure the future of the Post Office as the natural outlet for purchasing Royal Mail services.

I shall say again something that I have said many times before. There will be no programme of post office closures under this Government. I have been very clear on that, as has my right hon. Friend the Business Secretary. That is why we have pledged £1.34 billion of funding to support the post office network, funding that will ensure the continuation of at least 11,500 post office branches throughout the United Kingdom.

[Ian Murray]

The debate about new clause 2 was certainly robust. Can the Minister give the House a cast-iron guarantee that, as a result of the decisions he is just about to take, no post offices will close?

[Mr Davey]

If the hon. Gentleman had been present for our debates in Committee, he would have found that his Opposition colleagues understand that it is impossible for any Minister in this or previous Governments to say that no individual post office will ever close. Why? Because in large part they are private businesses, and individuals can retire, decide to close their business or, of course, die. So, it is impossible to give him that reassurance. The reassurance I can give him, which his colleagues could not during the previous Parliament, is that no programme of closures will be driven by this Government. That is why we have secured the money, and the deal—the contract signed by the Government with Post Office Ltd—ensures that there will be a network of at least 11,500 post office branches throughout the United Kingdom.

When the Opposition scaremonger on that issue, we simply need to remind ourselves of their record on post offices. When urgency was needed to invest in Royal Mail, the only urgency the previous Government demonstrated was an urgency to close post offices. The numbers do not lie. The number of days the previous Government were in office: 4,753. The number of post offices closed in their two major closure programmes: 4,854. That is a strike rate worthy of an English batsman, not of a Government seeking to protect communities, small businesses and the most vulnerable throughout our country, yet we have had no apology for that appalling record.

Through this Bill, the Post Office also has the opportunity to move to a mutual ownership model, which would give employees, sub-postmasters and communities a real stake in their post office network. With our work to pilot more and more new Government services, both national and local, through the post office network, such new ideas will give local post offices a fighting chance.

Let me end by returning to the universal postal service. I reiterate that this Government are fully committed to that service: six-days-a-week collection and delivery to the UK’s 28 million addresses at uniform and affordable prices. This Bill gives Ofcom an overriding duty to secure the provision of the universal service, and the tools that it will need to do so. It gives greater safeguards to the minimum service levels for the universal service, with parliamentary protections, and it creates a new regulatory regime that can bring rapid deregulation for the universal service provider where there is effective competition in the market. Ofcom has a statutory duty to deregulate where it can, and we are giving Ofcom the tools to do so for the postal sector.

I would like to thank all those who have been engaged in the Bill’s passage through the House, particularly Bill Committee members for their work over the past couple of months. We have certainly had some lively discussions. I would also like to thank the hon. Members for Llanelli (Nia Griffith), for Ochil and South Perthshire (Gordon Banks) and for Angus (Mr Weir). Although we may not have always agreed, I am grateful to all of them for the detailed scrutiny that they have given the Bill.

The coalition Government have not shied away from grappling with this issue, which has defeated two one-party Governments. This shows the Government at their strongest and most radical. This Government are taking decisive action to tackle the problems that the previous Government ducked. I commend the Bill to the House.

18:40

[Mr John Denham (Southampton, Itchen) (Lab)]

I shall make a few remarks on Third Reading to summarise where we are as a result of the discussions of the past few months. The House may be aware that in what I can only describe as a spirit of total selflessness and altruism, I allowed my hon. Friends the Members for Llanelli (Nia Griffith) and for Ochil and South Perthshire (Gordon Banks) to lead for the Opposition in Committee. I thank them for doing so and for the excellent way in which they helped to scrutinise the Bill. I also thank the other Committee members and, indeed, the Minister, who I can see from looking at the Committee records and my colleagues’ reports was open and helpful in responding throughout its 20 sittings. There is no doubt that, including the evidence sessions, there was a great deal of opportunity to consider many parts of the Bill in detail.

The problem is that the Bill comes to Third Reading with many of the fundamental issues and concerns that were raised on Second Reading and that have been raised outside the House still unresolved. The earlier debates, including that on the new clause tabled by the hon. Member for Colchester (Bob Russell), show that concerns are not by any means limited to the official Opposition. This might not have been or have become an issue on which a head of steam builds up into a full- blown parliamentary revolt, but it is clear that the Government have by no means persuaded all their supporters of the wisdom of their policies and approach.

The Bill will now go to another place and no doubt the same issues will be discussed there. Those on the Labour Benches in another place will make every effort to make the progress that we have not made in the House of Commons. The central part of the Bill is, of course, enabling legislation. It enables the Government to privatise Royal Mail and to transfer this vital part of our national infrastructure to a foreign buyer. The Bill does not require the Government to do so and therefore today’s debate is not the end of the story. As I shall set out, too many uncertainties still exist to proceed just on the basis of where we are today. That is not just the view of the Labour Opposition; that is the view of Consumer Focus, which has looked at the matter from a customer point of view. As I shall show, that is also the view of the National Federation of SubPostmasters—the people who in many ways are meant to be at the heart of the Bill.

The House did not agree to secure a 10-year inter-business agreement today, but that does not mean that the campaign to get one will go away. If we have not so far explained to all the constituents of hon. Members who support the Bill why their post offices are under threat, we have plenty of time yet to do so and to push for a change in Government policy. The basic problem is that the Government have still not made the fundamental case for the full-scale privatisation that they have proposed, nor have they addressed the concerns that exist. It is very interesting and, of course, welcome that a new clause has been introduced that is designed to ensure that the Queen’s head remains on postal stamps. That is interesting because it has been made necessary solely as a result of the desire to privatise Royal Mail.

As long as the Post Office and Royal Mail remained in public ownership, as they would have done under the Bill introduced by the Labour Government, no one thought for a moment that it would be necessary to introduce legislative protection to retain the sovereign’s head on our stamps. It is only because privatisation is being brought in that that is at risk. The problem is that the Government, by conceding on this point, have accepted that full-scale privatisation opens up all sorts of possibilities and dangers that simply do not exist if the Post Office remains in public service.

[Mr Davey]

The right hon. Gentleman is incorrect on this point. It was a Labour Minister in the 1960s—Tony Wedgwood Benn—who tried to remove the Queen’s head from the stamp. I hope that he will correct the record.

[Mr Denham]

But the evidence remains, some 50 years later, that that did not happen. My point remains—public ownership, and the debates around it, protected that position.

Before Christmas, when the Minister was challenged on this issue, his response was, “Don’t worry. No sensible private buyer would dream of removing the monarch’s head.” He has now conceded that that response is not enough. Yet when Members asked him today about a private buyer’s relationship with the post office network, the same argument came into play: “Don’t worry. No sane private buyer would take the business away from the post office network.” If the guarantee is necessary for the sovereign’s head, it is necessary for the inter-business agreement with post offices. It will not do to ask the House to accept this on trust, because thousands of post offices are at risk. That is, and has been from the outset, the fundamental argument against a majority privatisation of the Post Office. Although Royal Mail must be run as a commercial enterprise, majority shareholding for the public gives an ultimate protection that privatisation will not provide. If the Bill is flawed, as it is, then that protection will not exist.

The case has not been made in other areas, because, in contrast with the situation just a few years ago, transformation and modernisation are under way. The challenge of bringing in capable, senior management has been met, as I am sure all Members who have met the chief executive will confirm. Investment funds are currently available, and there are mechanisms well short of majority privatisation or a minority shareholding that could be used to raise equity in future.

[Damian Collins]

Moya Greene, the chief executive of Royal Mail, said to the Bill Committee:

“I think that if the Bill does not go through, you will see a continuation of what have been chronic problems for Royal Mail.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 4, Q3.]

She was very clear with us that this is a path that Royal Mail has to go down.

[Mr Denham]

I understand those remarks, but I believe that it would be possible for a Government who wished to do so to resolve the need to bring in additional investment in future through measures that fall short of selling a majority shareholding in Royal Mail. Some of those measures have been proposed by my party in the past, while other mechanisms have been proposed from outside. The truth is that the Government are driven by the desire to raise the albeit relatively paltry funds that they will get from selling as quickly as possible. That is fundamentally why they have refused to provide the safeguards on future business that many Members have been seeking. The highest price will come from giving the buyer the greatest freedom to make money through eroding the quality of service by closing post offices and transferring functions elsewhere.

If the Bill goes through this House today, and if it succeeds in another place, that is not the end of the story, because uncertainties still exist. First, there are the state aid discussions that will have to take place with the European Union. That arises from the need to deal with the Post Office deficit, and it will arise, if not in exactly the same form, if Royal Mail remains in public hands. We do not yet know whether any restructuring of Royal Mail will be required or whether profitable subsidiaries will need to be sold off, as the press have speculated, so we do not know what would be available for sale.

Secondly, there is still uncertainty about the regulatory regime. There is agreement about the transfer to Ofcom, but there is a crucial question about whether it will review the regulatory relationship between Royal Mail and its private sector competitors. Royal Mail has argued, most recently in a letter from the chief executive this week, that the current arrangements are commercially unfair, and that many of the letters that we all saw being delivered on our Christmas visits to post offices were, in effect, costing Royal Mail money because of the terms of the agreement. The crucial question on the proposed privatisation is whether Ofcom will review that relationship and, if so, when. Clearly, any change, particularly if it conceded Royal Mail’s argument, would make a very big difference to the future financing of a publicly owned Royal Mail and a huge difference to the price that could be obtained from a privately owned Royal Mail. We must begin to say that a final decision on whether to sell can be made only once it is clear whether Ofcom will investigate this issue, what the time scale of such an investigation will be, and after there is an indication of the likely outcome. That is the second reason to say that there is great uncertainty.

The universal obligation has been debated this afternoon, and I will not take it further.

The final area of uncertainty is the future of the post office network. The major argument today has been about the inter-business agreement, but there are other questions about the amount of business that will go to local post offices. I welcome the Government’s promise of substantial investment in the network. In some ways, that is a bold decision, because if they are wrong about the future business that goes to local post offices, that will be public money not well spent. Capital investment cannot of itself secure revenue from the Royal Mail. Promises of other work are slim and not tied down. Our plans for a Post Office bank have been dropped, and the promises from other Departments are vague.

The National Federation of SubPostmasters has supported the principle of the Bill, but the briefing it has circulated to right hon. and hon. Members for today’s debate could not be more explicit. It states that

“ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy.”

It goes further and states that if adequate levels of new Government work at post offices are not secured, it believes that the separation of Post Office Ltd and Royal Mail, and the sale of Royal Mail, must be “indefinitely delayed”.

The House has rejected the first thing that the federation asks for, which is a long term deal. The Government have failed, as yet, to deliver the second thing that it asks for, which is a clear commitment for future levels of other Government work. The argument over indefinite delay is, I think, the battleground on which the forthcoming campaign to save our postal services will be fought.

18:53

[Richard Fuller]

Royal Mail is, first and foremost, a people business. It is a people business, or it is no business at all. We know that not only because of the campaigns that hon. Members from all parts of the House have conducted to save post offices in their constituencies, but because of the hard work undertaken by Royal Mail workers throughout the year, particularly in the run-up to Christmas. We also know it because of the hard and vigilant work that the Communication Workers Union has put in to help us understand the issues involved in the Bill, as I experienced when Paul Moffat, the CWU representative for my region, came to see me. We also know it because of the groundbreaking modernisation agreement that the CWU made with Royal Mail. That is a signal triumph about which Mr Hayes and his colleagues can rightly be proud. It is that people aspect of the Bill on which I shall focus my brief comments.

[Fiona O'Donnell]

Does the hon. Gentleman agree that part of the reason workers go the extra distance is that they are public servants, and that the Bill will destroy that ethos?

[Richard Fuller]

No, I do not agree. I believe that they do so because they have in their hearts a sense of public service, and the Bill offers a much better, more secure way for them to fulfil their sense of public service obligation by securing a stronger foundation for the Royal Mail Group. In addition, it contains groundbreaking provisions that extend the principles of employee participation and employee ownership, which are most welcome.

I know that I disagree with the CWU about Government ownership, and in its most recent note it listed some of the things that could happen under continued Government ownership. It stated that the Post Office could move to be more profitable, raise commercial loans or enable the relaxation of competition. Those things could happen, but they could have happened in the past and did not.

What is the legacy of Government ownership of the institution of the Royal Mail Group? It is a revolving door of, let us face it, not particularly competent management until the recent past; a crippling burden of unfunded pension liabilities; and a delay of more than 18 months in giving management access to capital. Those things have held back the Royal Mail Group, so Government ownership is not the answer. The right hon. Member for Southampton, Itchen (Mr Denham) made the assertion, with which I do not agree, that the case for private ownership has not been made. I would say that the case for ending Government ownership has truly been made.

I believe that the CWU and workers now need to look forward at how we can use the Bill to extend further the principle of employee participation, and how we can continue to make it the groundbreaking legislation that many Members of all parties would like it to become. Let us ensure that employee ownership, which the Minister rightly said can be at a minimum of 10%, can truly be a model for how that principle should continue. The mutualisation of the Post Office should be thought through so that long-term business interests are secured when people put their own capital into a business to fulfil a service obligation to the people of this country.

Most importantly, as the Minister goes through the process of looking for the future owners of the business, with the participation of the CWU and the workers’ representatives, it is crucial that he stresses that the management, with the unions, must secure another groundbreaking modernisation programme. That is an absolute prerequisite if any future owner is to secure a bright future for the Royal Mail Group as it goes forward and meets the challenges of the years ahead.

18:58

[Fiona O'Donnell]

Thank you, Mr Speaker, for this short but sweet opportunity to speak on Third Reading.

I am sure that no one in the Chamber would accuse us Scots of being parochial, but I wish to take a moment to thank the posties of East Lothian, who delivered the Christmas mail in the most difficult of circumstances. Even more locally, I thank my own postie, who delivered my Scottish Affairs Committee papers and, I am sure, would have been pleased with the report contained in his delivery.

It is sad that this place has made one so young so cynical so quickly. I have had to learn a whole new language, because this Government speak in code. I could almost hear the theme tune from “Born Free” as the Minister spoke about setting free the Royal Mail.

This is a Government who do not believe in public service. When my hon. Friend the Member for Edinburgh South (Ian Murray) asked the Minister to provide assurances that no post offices would close as a result of the measures in the Bill, I once again learned that Ministers often do not answer the questions put to them. This is an issue of genuine concern to my constituents, but there is nothing in the Bill to reassure them. This is shotgun legislation from an adulterous coalition. There may be no programme of post office closures, but I am sure that post offices will close. I am sure that the Minister must have a trumpeter’s lip by now, because he has been blowing his own trumpet all day, talking about “post office local” and how he has no plans for vans, but there were no plans to raise VAT, so I am not going to take that as a promise.

19:00

Debate interrupted (Programme Order, 27 October)

Mr Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the Bill be now read the Third time.

19:00

Division 166

Ayes: 319

---

Conservative: 278
Liberal Democrat: 40

Noes: 238

---

Labour: 219
Scottish National Party: 6
Democratic Unionist Party: 4
Plaid Cymru: 3
Independent: 2
Social Democratic & Labour Party: 1
Liberal Democrat: 1
Green Party: 1
Conservative: 1

Bill read the Third time and passed.