House of Lords
Charity Commission: Bogus Charities
Lord Naseby
To ask Her Majesty’s Government what assistance they are giving to the Charity Commission to identify bogus charities for overseas freedom movements, proscribed organisations and terrorists to prevent them benefiting from United Kingdom tax relief.
Lord Taylor of Holbeach
My Lords, a number of government departments, including Her Majesty’s Revenue and Customs, work closely on these matters with the Charity Commission, which has a range of statutory powers and regulatory tools with which to investigate allegations of possible abuse and to ensure that charities are complying with their obligations. The commission also works closely with the police and other law enforcement agencies where there is evidence of criminality and works to raise awareness of the risks of terrorist finance to the charitable sector.
Lord Naseby
Is my noble friend aware that there are two further areas on which the Charity Commission needs help? First, in relation to Sharia law, all Islamic financial institutions must by law give charitable donations. Secondly, in relation to Sri Lanka, despite the ending of the war, there are still bogus Tamil charities collecting money for Eelam rather than sending it to Sri Lanka. In both cases, should not there be a case for better monitoring, particularly of where the money has gone that has been collected in the UK? Might Her Majesty's Government consider our embassies and high commissions checking on the ground on what exactly the money has produced? After all, the British public provide gift aid.
Lord Taylor of Holbeach
My Lords, I hope that the House will forgive me if I do not comment particularly on individual cases. It should be stressed that links between charities and terrorism are very rare. By far the vast majority of charities operating overseas are to be commended for their inspirational work and the relief they bring, often operating in very difficult circumstances. We must be able to identify and tackle any abuse but at the same time be careful to enable the vast majority of legitimate charities to get on with their important work without being bound up in red tape. In my view, the regulatory framework gets it about right.
Lord Phillips of Sudbury
Does my noble friend accept that it would be wise for the Government, when they undertake the shortly to be commenced review of the Charities Act 2006, to review the present planned reduction in Charity Commission funding of one-third over the next four years? Will they not at least think to ring-fence that part of the commission expenditure that relates to enforcement, which is vital to maintain the cherished integrity of charities?
Lord Taylor of Holbeach
I cannot deny that there is always a link between resources and function. My noble friend points out that there is a review of the functioning of charities legislation coming up at the end of this year, which will be very important and I am sure will have these matters in mind. But I am also sure that noble Lords will appreciate that the Government’s priority at the moment is about spending priorities, given the need to provide deficit reduction.
Baroness Royall of Blaisdon
My Lords, what criteria does the Charity Commission apply in its assessment of whether UK charities with expenditure overseas do conform to charitable objectives as defined by statute?
Lord Taylor of Holbeach
My Lords, it is up to the trustees of all charities because they are responsible for the audit trail of their financial expenditure. On scrutiny, all charities are subject to proper regulation of their gift aid through HMRC.
Lord Boateng
My Lords, one of the joys of charitable law is the fact that it is possible to establish a charity in England without having to consult a lawyer. Will the noble Lord please make sure that the Government do not introduce such a high level of regulation that the strong and dynamic voluntary sector is held back by the necessity to employ lawyers and accountants before ever getting a charity under way?
Lord Taylor of Holbeach
I hope the noble Lord will accept that in the first supplementary answer I gave I said that I totally agree with that view. It is the voluntary impulse that makes charitable giving and charitable activity so important and useful. On the other hand, in asking the Question in the first place, my noble friend pointed out that Governments do have to be aware that there are people who will use charities for malicious ends, so we in Government have to be on our toes to avoid that happening.
Lord Elystan-Morgan
Does the Minister recollect that our late colleague Lord Pilkington was in possession of clear documentation showing that on many occasions the Charity Commission had been offered confidential information by intelligence agencies on both sides of the Atlantic but did not feel able to avail itself of that advantage on account of the conditions under which such information would be released? Is the Minister aware of that, and is he able to comment on the situation, albeit, of course, in general terms?
Lord Taylor of Holbeach
My Lords, my response will have to be in general terms. I am well aware that the Charity Commission receives quite a lot of information, and the pursuit of validating that information takes up quite a lot of the commission’s time. It is right and proper that any allegations are investigated, and I am sure that that is exactly what happens.
Lord Tebbit
My Lords, I gained the impression from my noble friend’s original Answer that he does not think that anything more needs to be done about this problem than is being done at the moment. Am I right in that assessment?
Lord Taylor of Holbeach
I hope I can reassure my noble friend that I am not complacent on this issue. What I am saying, however, is that considerable resources across Government are devoted to making sure that there is no abuse of charitable funding and no misapplication of funds for terrorism. We have the Charity Commission itself, HMRC, the police and the National Terrorist Financial Investigation Unit. All these bodies, as part of Government, are dedicated to making sure that there is no abuse of charitable giving.
Lord Foulkes of Cumnock
As charity legislation is devolved, will the Minister discuss the issue with the Scottish Executive to make sure that they are also keeping an eye on this?
Lord Taylor of Holbeach
I am sure that the review of the Charities Act 2006 will take into account the connection with the devolved authorities, and we will want to make sure that they are fully in the picture. Indeed, I hope that the noble Lord is in a position to reinforce the determination of the Government here in Whitehall to deal with this problem.
Manufacturing: Economic Policy
Lord Sheldon
To ask Her Majesty’s Government what representations they have received from manufacturers on their economic policy.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Government receive representations from manufacturers and representative bodies such as the manufacturers’ organisation, the EEF, which contribute to the debate on a wide range of topics, including the Government’s economic policy. EEF recently stated that the Government’s growth review has now started to deliver tangible progress in removing barriers to growth, investment and job creation in the United Kingdom.
Lord Sheldon
My Lords, I thank the noble Baroness for that Answer. The United Kingdom, of course, is now the world’s sixth largest manufacturer by output. Although some emerging economies are able to produce goods cheaper than in our country, we still have a number of advantages in design, research, pharmaceuticals and technology. However, there is still a problem between the level of economic activity in high employment regions and areas of high unemployment. What action do the Government propose to limit these variations?
Baroness Wilcox
My Lords, the Government fully recognise that a strong manufacturing base across the whole of the country is an essential component of a balanced and dynamic economy. We are working with business, taking action to strengthen manufacturing capability, addressing the barriers to growth in areas, trying to cut excessive red tape, encouraging innovation, export and business investment and improving skills throughout the country. It is a long haul but we are certainly on the move.
Lord Bilimoria
My Lords, there is a perception that manufacturing in Britain is dead. However, as the noble Lord, Lord Sheldon, said, we are still the sixth largest manufacturer in the world and manufacturing makes up almost 15 per cent of our GDP. What are the Government doing to help address this misperception? Furthermore, does the noble Baroness agree that the increase in manufacturing recently has been as a result of the weak pound and strong exports? Does she further agree that if consumption suffers because of cuts and tax increases, manufacturing may suffer as well?
Baroness Wilcox
My Lords, there were many questions in there and a great deal of good information too. Perhaps I should say that I agree with an awful lot of what the noble Lord has said and see whether that helps me. We are aware that we should look at tax and all the other things which hold back business, and we are doing so all the time. It is important for us to make the United Kingdom Europe’s leading exporter of high-value goods and related services, and anything the noble Lord can do to encourage and help me I will listen to.
Lord Razzall
My Lords, bearing in mind that the clear objective of Her Majesty’s Government, as has been articulated by the noble Baroness, is to rebalance the economy away from financial services, particularly in London and the south-east, is she concerned about today’s statistics indicating that growth in manufacturing is now slowing?
Baroness Wilcox
My noble friend has read the same newspapers as me this morning. I think he is referring to the purchasing managers’ index, which suggests that there is a slowing of the growth rate in orders and output although it remains positive. What has been slowing is consumer spending at home and, in some ways, it is difficult to say that people should go out, get themselves into further debt and spend just to help our industries. The most important thing our industries can do is to make sure that we have the right skills and the right people doing the right jobs. The fact that we are doing so well at exports is the one thing that is absolutely glowing ahead for us.
Baroness Wall of New Barnet
My Lords, we have heard from employers about the importance of apprenticeships and the way in which they are encouraged in economic policy. The Minister referred to the skills which come from apprenticeships. Does she agree that apprenticeships are very important?
Baroness Wilcox
I of course agree with noble Baroness. The Government are putting in place funding for 75,000 more adult apprenticeships than the previous Government were providing—and they were providing a lot, too. So we are on the way. The Government are committed to increasing the number of apprenticeships —particularly advanced apprenticeships—so that we bring people up with the skill base that will be relevant for this century and the next.
The Earl of Courtown
My Lords, as many noble Lords are aware, I have run an SME for many years. One of the real problems we have found is access to funding. Can my noble friend say how Her Majesty’s Government can help access to funding, particularly where growth is concerned?
Baroness Wilcox
My noble friend Lord Courtown speaks well for SMEs, as he always does. We are trying to ensure the flow of credit to viable SME manufacturers. This is essential for support and growth and is a core priority for government. Some of the things we are doing to help include: continuing the enterprise finance guarantee until 2014-15, potentially enabling more than £2 billion of additional SME funding; continuing the enterprise capital funds programme to provide £300 million of venture capital for early stage innovation SMEs with high growth potential; and working with the British Banking Association on a range of commitments to assist SMEs with accessing the finance that they need. In addition, the Government are taking forward a package of investment readiness support for high-growth potential SMEs through the Business Coaching for Growth programme. My gosh, we should not fail with all that going on.
Lord Davies of Oldham
My Lords, the House will have noted that the Minister agreed with the noble Lord, Lord Bilimoria, that the single most positive factor in favour of manufacturing at present is the decline of the exchange rate. What does the Minister say in response to the independent Office for Budget Responsibility which has reported that government policies on the economy and in particular on manufacturing are likely to have a minimal effect?
Baroness Wilcox
My Lords, I repeat what the Chancellor said when we started on this rocky road last summer: we face the deepest recession that we have ever faced and we are going to go through very choppy waters. I have no doubt that, if I read out the hundreds of words that I have here to the noble Lord, we would agree that there are times when we get it right and times when we do not, but at the moment we are on the right trend.
Education: Gypsy, Roma and Traveller Children
(13 years, 6 months ago)
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Baroness Whitaker
To ask Her Majesty’s Government how they will address the shortfall in the provision of the Teachers’ Education Service for Gypsy, Roma and Traveller children.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)
My Lords, this year the Government have allocated £201 million to schools for ethnic minority achievement via the dedicated schools grant. This is higher than the amount provided in 2009-10 via the former ethnic minority achievement grant. Schools may use this grant to purchase additional support for Gypsy, Roma and Traveller children or, if schools forums agree, local authorities may retain some or all of the allocation to deliver centralised Traveller education and ethnic minority achievement services.
Baroness Whitaker
My Lords, I thank the Minister for that reasonably sympathetic reply, but is he aware of the NUT report of last November which found that the Traveller education services were taking a disproportionate share of the cuts? Eight local authorities had completely abolished the service. Does he agree that the 20 per cent drop-out rate between primary and secondary school is disastrous for Gypsy and Traveller employment chances and that the school exclusion rate is higher than for any other ethnic group? What can be done?
Lord Hill of Oareford
My Lords, I agree with the statistics mentioned by the noble Baroness. Exclusion rates are, I think, three times higher for Gypsy, Roma and Traveller children than they are for the average of the population. Their achievement both at primary and secondary school is far lower. Unfortunately, the attainment gap over the past four years has widened rather than narrowed, despite all the efforts that have been made. There is clearly not a simplistic answer to this problem. I know that the noble Baroness has been concerned and acted in this area for a long time, as have other noble Lords. There is no simple answer. Clearly, the Government hope to go in the direction of devolving more responsibility to schools. As I said in my Answer, schools forums can choose to carry on funding a centralised service if they think that will work better. I hope that the pupil premium will provide additional resources for schools where they have Gypsy and Roma Traveller children. A lot of this is cultural and educational. Ideas that the noble Baroness and other noble Lords may have as to how one can chip away at this problem will be gratefully received.
Lord Laming
My Lords, does the Minister accept that the best way of hoping to integrate future generations of children from Traveller families is through education? Because of the higher levels of illiteracy in the adults and the low value which is attached to education in many areas, it is necessary not only to support the specialist service but to ensure that children are helped to get ready for school in the morning and to make sure that they are able to attend school on a regular basis. That is why this service is so important.
Lord Hill of Oareford
My Lords, I accept the points that the noble Lord has made. It is the case that we are already seeing that in some parts of the country where the problem is more acute—because it is not geographically equal across the country—it will make sense for school forums to come together and to continue with that kind of service.
Lord Avebury
My Lords, does my noble friend agree that, without a framework of targeted support at local and national levels, the outcomes for this group of children are likely to remain unacceptably low? Although he says that additional support is being given to the local authorities for deprived and disadvantaged children, does not experience show that local authorities will not spend this money on Traveller education services because they are busy sacking such staff and getting rid of them?
Lord Hill of Oareford
The difficulty that we have—and one of the questions I asked about this whole area—is in trying to evaluate what in the past has been successful in making progress. As far as I have been able to see, the evidence for what has worked in the approaches that have been tried so far does not seem very clear or compelling. Unfortunately, as I indicated earlier, the gap has widened. So I do not believe that there is a simple answer. I know that many Members of this House know far more about this than I do. If the noble Lord has particular suggestions, I would be keen to discuss them with him.
Baroness Hughes of Stretford
I wonder whether the Minister is aware, as noble Lords are indicating, that Gypsy, Roma and Traveller children are much more likely to do better and to get into paid work if they are educated in schools and colleges than if they are not. What assessment has he made of the particular impact on these children of the withdrawal of education maintenance allowance? I ask that particularly in the light of the Government’s equality impact assessment, which I understand now admits that there is likely to be unintended discrimination as a result of the withdrawal of the EMA on certain groups of children, of which these are one.
Lord Hill of Oareford
I clearly accept the noble Baroness’s first point—that if children, wherever they come from, stay on at school and do well there, they are more likely to do better thereafter. As for the education maintenance allowance, one issue that we have with Gypsy, Roma and Traveller children is that half of them are dropping out well before they would be entitled to claim EMA. As I have said before, there is a complex of difficult issues to which there does not appear to be a simple answer; if there were a simple answer, I know that the approaches that were in place under a previous Government would have worked in delivering improvements. Sadly, despite the best efforts of all sorts of people, including local authorities, central government and everyone else, with all the tools that they used, that did not appear to work.
Lord Boswell of Aynho
My Lords, the Minister has already referred to a large number of the matters that have concerned those of us who have taken an interest in this area, including the high level of exclusions. I might add to the pot the concern about current implications of a large-scale eviction, which can of course threaten the viability of an individual school as well as the pupils’ education. Would he or his department be amenable to receiving representations from across the House to try to get to the bottom of some of these issues and to have a more informed and extended discussion on what are clearly complex issues?
Lord Hill of Oareford
Yes, of course, my Lords. I am glad to say that a group chaired by the noble Lord, Lord Avebury, is already in existence, but I shall be very happy to do that and to facilitate a meeting with my honourable friend Nick Gibb, who is the Minister responsible. I would be delighted to do that.
Hallmarking
Lord Trefgarne
To ask Her Majesty’s Government whether they will extend the consultation period in respect of their proposal to abolish hallmarking of items made from precious metals.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, there is no such consultation. The Government recently launched their red tape challenge initiative, aimed at reducing the burden of unnecessary regulation on business. Under its terms, anyone is invited to suggest which regulations might be scrapped or retained, with the emphasis on regulations which impose costs on business. The retail sector is the first theme to be considered and thus hallmarking legislation is among those on which comment is invited. Where regulations are identified as burdensome, Ministers will need to justify to an independent review panel any decision to retain them.
Lord Trefgarne
My Lords, I am grateful to the Minister for that reply. If I am under some misapprehension on this matter, as she appears to suggest, most of the hallmarking industry is also under the same misapprehension, including the heads of the four United Kingdom assay offices. Will she therefore be good enough to receive a delegation from me with such people so that she can set that misapprehension to rights?
Baroness Wilcox
I am happy to see my noble friend at any time and I am happy to see him with a delegation. I was wondering how I was going to answer his second question, which I thought was going to be about why hallmarking was included with this initiative at all. The reason is that we are looking at retail, and things that are sold from jewellery shops are usually retail. That is the only reason why it is in there. We have had an awful lot of responses; more than 5,000 people have contacted us to say how much in favour they are of keeping it. I am sorry that this story has gone out, but it is a misapprehension. Anyone in the retail trade can write in with anything that they think is too much red tape. The consultation is for three months. It finishes for this particular group on 5 May, which is tomorrow. After consultation, a decision will be taken on the letters and e-mails received. I hope that helps.
Lord Corbett of Castle Vale
Is the Minister aware that those who make use of the Birmingham assay office, set up by Matthew Boulton and his chums, do not regard the activities of that office as in any way burdensome? What it does, as the other assay offices do, is guarantee the integrity and quality of the massive array of goods produced by Birmingham’s viable jewellery quarter. Will she feed that in as part of this consultation?
Baroness Wilcox
My Lords, your Lordships can be sure that I will be feeding back in everything that is said in this exchange today. I should add that, when I chaired the National Consumer Council, there was quite a lot of pressure from the European Union for British hallmarking to be considered unnecessary, but it is something that we hold dear. Your Lordships can be sure that I shall be feeding this back in on this, the very last day.
Baroness Trumpington
My Lords, is the Minister aware that I have had the great good fortune of watching the excellent workers in the assay office turn down a large silver tea service because the metal was not of sufficient quality and was therefore returned to its country of origin? Does she not agree that, if it had not been for the assay office, that silver tea service would have been sold on the open market as being the real thing?
Baroness Wilcox
The assay office has always made a very special contribution, as is being shown all through the House today. I am happy to have this exchange sent back.
Lord Palmer of Childs Hill
My Lords, I welcome the Minister’s reply about the length of consultation, but would it not be a good idea to extend the consultation to something like 100 years in order to protect the value of the hallmarking of antiques? To remove hallmarking would destroy things like “Antiques Roadshow”.
Baroness Wilcox
My Lords, this ambitious project, which has been opened up to the public by the Government, is being conducted over a two-year period, during which time some 21,000 individual regulations will be scrutinised. I say again that this affects the whole of the retail sector. I am not really sure—none of us is—why the hallmarking industry feels under such threat, but certainly, from the responses that we have had in support of hallmarking, it can be seen that the general public hold it very dear. Although I cannot say at this stage that things will be done, it is part of the whole project.
Lord Davies of Oldham
My Lords, the Minister doth protest too much. The problem is that the Government that she serves have a slash-and-burn attitude with regard to essential areas of consumer protection on the grounds that all that they are dealing with is so-called red tape and bureaucratic interference. Here we have a very clear illustration of why it would in fact be quite wrong to pursue that policy. I hope that the Minister will think again.
Baroness Wilcox
I hope that the noble Lord will look at the result of this first tranche, which has gone through in the earliest months, and feel at the end that the results coming through were well worth having.
Baroness Oppenheim-Barnes
My Lords, my late father was a royal warrant holder for two generations of British royalty. His hallmark was something of great importance in our family. In subsequent years at the Department of Trade, I introduced regulations to have country-of-origin marking on all manufactured goods in the UK, which was welcomed by all but struck out by the EU, which described it as a non-tariff barrier. If we are to lose hallmarking and country-of-origin marking, it will be a sad day for consumers in this country.
Baroness Wilcox
My noble friend has now put that on the record. It has gone into Hansard and I am sure it will be of great value. For your Lordships’ information, the next section being looked at is hospitality. If any of you wish to write in to the Cabinet Office, I am sure it will be delighted to receive that.
Lord Foulkes of Cumnock
If the Government are going to consider any options for changing this, could this House first be given a vote by first past the post?
Baroness Wilcox
I am checking to make sure that I have absolutely the right answer for the noble Lord. At the end of the three months, an independent panel will review the comments received and Ministers will be asked to justify the retention of legislation proposed for repeal. It is fairly straightforward and an open process, which I am sure your Lordships will be interested to hear the results of.
Charities (Pre-consolidation Amendments) Order 2011
(13 years, 6 months ago)
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Baroness Verma
That the draft Order laid before the House on 3 March be approved.
Relevant Document: 18th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 April.
Postal Services Bill
(13 years, 6 months ago)
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16:02 - Division on Amendment 1 - Ayes: 155 / Noes: 227 - Amendment 1 disagreed.
16:43 - Division on Amendment 2 - Ayes: 165 / Noes: 218 - Amendment 2 disagreed.
17:37 - Division on Amendment 4 - Ayes: 175 / Noes: 198 - Amendment 4 disagreed.
18:19 - Division on Amendment 7. - Ayes: 137 / Noes: 191 - Amendment 7 (to Amendment 6) disagreed.
Lord Lea of Crondall
“Restriction on disposal of shares in a Royal Mail company by Initial Public Offering
A relevant disposal by an Initial Public Offering may only issue or transfer shares representing no more than 30% of the value of a Royal Mail company within the period of one year after this section comes into force.”
Lord Lea of Crondall
My Lords, if the Bill reaches the statute book in its present form, in a year or so we will almost certainly have a repeat of the public interest being prejudiced by the modalities of the sale by merchant banks, as has happened some times before. However, as all noble Lords are surely aware, Conservative Governments have form on the modalities of sales of public assets—in effect, selling the family silver on the cheap. As Harold Macmillan remarked, you can only do that once. How do we then protect the public interest?
During the debate in Committee on the sale of Royal Mail, whenever noble Lords sought to ensure that value for money for the taxpayer would be achieved if Royal Mail is sold, the response came that it would be foolhardy to reveal a valuation, because once the bidders got to hear of it they would never exceed it. One could of course imagine arrangements whereby an independent valuation was obtained and not published for the world to see. It could even be shared on a strictly confidential basis with, for example, members of the Public Accounts Committee. However, that is not the main point. As these arguments flew back and forth, I realised that in some noble Lords’ minds was a fixed picture of a set of competing companies bidding to buy Royal Mail as though it were a valuable silver cream jug at Christie’s—in other words, what is known as a trade sale.
However, I ask noble Lords to consider the scenario that the company will be put up for sale in an IPO—an initial public offering or a sale of shares to the public. From Richard Hooper’s 2010 report, this certainly seems to be a possibility that he has in mind. However, after that report and in our previous debate on 14 March, the noble Lord, Lord Razzall, who I am glad to see in his place, declared that,
“anybody who thinks, in the Royal Mail's current circumstances, that there can be an IPO, is living in a total fantasy world”.—[Official Report, 14/3/11; col. 102.]
Richard Hooper and Ministers, however, have repeatedly included that option. In his most recent report Richard Hooper stated that,
“there are now greater options for introducing private sector capital and disciplines. It does not have to be a sale to a partner. The much needed equity capital could, for example, be raised by means of an IPO (Initial Public Offering), turning Royal Mail into a publicly listed company. The company’s need for cash, and the timing of that need, will influence the choice of preferred option”.
More recently, in oral evidence to the Public Bill Committee in another place, he said:
“There are various ways of getting private sector capital. One is a trade buyer and another is a private equity player”.
He went on:
“There could, of course, be an initial public offering”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 109.]
Coalition colleagues are also open to an IPO. At Second Reading the Conservative noble Baroness, Lady Wheatcroft, in a well-considered contribution, stated:
“I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government's position is that the sale is open to all comers, but an IPO would get my vote”.—[Official Report, 16/2/11; col. 743.]
In the BIS document, Delivering for the Future: A Universal Mail Service and Community Post Offices in the Digital Age, published in October 2010, paragraph 2.6 states:
“We will retain flexibility so that we can negotiate the best possible outcome, including keeping options open as to whether a trade sale or initial public offering is more appropriate”.
Let us consider the possibility of an initial public offering. There is a very strong case that shows that in the heyday of privatisations in the 1980s and 1990s, privatised companies were consistently sold at too low a price. For British Airways, British Gas and British Telecom alone, the undervaluation on the first day of trading amounted to more than £2 billion. Indeed, it has been estimated that for 1986 alone the average share issue premium on major share issues was 7 per cent, but on privatisation issues the average premium on the first day of trading was 77 per cent.
One case illustrates the point very well. British Telecom shares were sold in three tranches. It was difficult to establish a correct sale price. There had not been a market by which to establish a clear and correct opening share price, as there will be for Royal Mail if its sale comes about. After the first tranche of shares was sold, the share price rose. Over the course of a year, the BT shares increased in value by 84 per cent. Several factors could conceivably have caused that increase, very sharp though it was. All share prices could have been rising, or there could have been an improvement in the company’s prospects, but what if I tell noble Lords that on the day after the original flotation anyone who had bought the shares at the offer price saw the value of those shares increase by some 90 per cent in 24 hours? The obvious conclusion is that a higher price could have been achieved for the taxpayer—in other words, the shares were underpriced and the taxpayer was short-changed. Fortunately, not all the shares had been put on the market on that fateful day.
Having regard to that experience, with the second tranche there was still an increase the next day but it was 5 per cent, rising to 22 per cent a year later. In the third and final tranche, the shares rose by just 5 per cent the next day and were still just 5 per cent higher a year later, so the pricing was much closer to the right level and the taxpayer was saved a very large sum. That is not surprising as the offer price in the new tranches could be judged against an existing traded price of shares from the original tranche. Therefore, this amendment proposes that in the event of the sale of Royal Mail by means of an IPO or general sale of shares, the sale should be phased in tranches, with no more than 30 per cent being sold before 31 July 2012 and no other shares being disposed of before 31 July 2013.
Baroness Turner of Camden
My Lords, I rise to support my noble friend’s amendment. As he rightly says, the new clause that he is presenting to the House would set a restriction on the sale of shares in an initial public offering to 30 per cent of the value of an RM company within the first year of the clause coming into force. The text of the Bill places no constraints at all on what the Secretary of State may do. It is true that he has to report to Parliament, but that is after the decision has been taken. No constraints at all are placed on what he may or may not do. That is unfortunate because we are talking about what is after all a major public institution, and it is very important to ensure that it is not underpriced. It is important to avoid a scandal whereby a valuable part of our national infrastructure is underpriced. My noble friend has set this out in detail. The new clause would be an important addition to the Bill. We need to ensure that some constraints are put on what the Secretary of State may do when, and if, the Bill eventually becomes law.
Lord Young of Norwood Green
My Lords, I support the amendment in the name of my noble friend Lord Lea of Crondall. It provides for the disposal of shares to take place in tranches or batches, rather than all at once. The Government have not set a clear timetable for the sale, and they have not explained whether there will be a general sale of shares to the public, an IPO, a restricted sale to certain categories of buyer, or a trade sale by auction to a single buyer, such as a private equity firm or postal competitor, which may raise competition issues. The Government have not explained whether they would sell the whole company at once, with all the risks of selling cheaply, or whether they would be prepared to sell in tranches.
There is a huge amount of evidence, of which we have heard some details from my noble friend Lord Lea, that when privatisations have taken place, the value for which the businesses were sold was too low. That has been most clearly demonstrated when a general sale of shares has taken place and the shares traded. It is easy to see what price they traded at and how that compared with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that shares should have been sold at a higher price. The taxpayer has lost out and someone has made a successful profit as a result.
A number of examples were given by my noble friend Lord Lea. I should also mention other sales. The sale of Associated British Ports was 35 times oversubscribed and the share price rose by 23 per cent on the first day of trading. Amersham International sold for £71 million and the share price rose 32 per cent on the first day of trading. As early as 16 May 1984, the Public Accounts Committee, in its 17th report, expressed concern at stock in public corporations being sold, in the words of the committee,
“at an immediate substantial premium creating windfall gains for the investor at public expense”.
That is what we should be concerned about. The report recommended considering sales in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a number of cases. For example, in the case of National Power, the share price rose by 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. There was a similar situation during the sale of Powergen, whose shares rose by only 3 per cent in the second-tranche offer.
The amendment proposes that shares representing no more than 30 per cent of the value of the business can be transferred in the first year after the Act comes into force. I hope that the Minister can give us a reasonable assurance that serious consideration will be given to the danger of a sale that does not take place in tranches, and that the Government will be prepared to address this issue. I look forward to her response.
Lord Borrie
My Lords, I apologise for not rising quickly enough for my noble friend on the Front Bench to notice that I wished to speak. I do so now because my noble friend Lord Lea of Crondall made a practical, reasonable and strong case for his amendment. We are not at this stage of the Bill discussing or arguing about whether there should be a sale of Royal Mail. We are discussing the practicalities of such as sale. We were all around in some way or another during the 1980s and 1990s, and there is no doubt that when industries were privatised, they were often sold off under value. That has been well recognised after the event, if it was not adequately recognised as being likely before the event.
The practical purposes of the amendment are to ensure that we have an initial public offering, an IPO, of the shares, and that they will be offered in tranches. My noble friend is not rigidly proposing any particular dates or percentages, but in any amendment he tables he must put forward something that is reasonably clear. If an improvement can be made on that, there is no doubt that he would be willing to accept it. However, he wants, and we all should want, a practical procedure for ensuring that the public does not get an undervalue. There is to be a sale. Let the public have a good return on that sale, and that is what the amendment is all about.
Lord Razzall
I stand by the point that I made in Committee: in the current climate, it would be extremely unlikely that there would be an IPO for the Royal Mail.
The noble Lord, Lord Lea of Crondall, demonstrates another reason why that is highly unlikely. The fundamental difference between this and the privatisations to which he and his colleagues referred in the 1980s and 1990s is an ideological belief on behalf of the then Conservative Government that those industries were better held not by the taxpayer but by public shareholders. In those circumstances, there was clearly an interest in creating an aftermarket, so that as many individual shareholders—in the case of BT, it was a huge number of individual shareholders—should have an incentive to buy shares and then make a profit. The reason why that would not apply in this case is that the fundamental reason for the transaction would be to get resources into the Royal Mail. In those circumstances, the Government would not have an interest in creating the sort of aftermarket that the noble Lord, Lord Lea, fears. The significant interest of the Government would be to maximise the financial return for the Royal Mail, because the whole purpose of this is to get investment into Royal Mail, not to provide a windfall for shareholders.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, Amendment 1 would restrict the number of shares that can be sold in an initial public offering—an IPO—to 30 per cent of the value of shares, and imposes a time limit for the sale of one year from the new clause coming into force.
First, the Government believe that Royal Mail needs an injection of private sector capital to meet its needs in a fast-changing postal market. Unlike the previous Government, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. The Government’s objective in disposing of shares in Royal Mail is to secure the future of the company and to secure the best value for the taxpayer. To achieve that, the Government must have flexibility on when to sell shares and how much should be sold.
The noble Lord, Lord Lea, is concerned that previous privatisations have resulted in the taxpayer losing out through undervaluation; the noble Baroness, Lady Turner, spoke in support of his concerns. Noble Lords have a great deal of knowledge of previous privatisations; it is one of the great assets of your Lordships' House. I cannot answer for why they were done as they were, or what were the objectives of those privatisations. I am absolutely clear that our intention will be to secure the best deal for the company and the taxpayer consistent with our objectives. We will ensure that whatever form private sector investment takes in this instance, it will be with those objectives in mind. I thank the noble Lord, Lord Razzall, for his clarifying statement on that.
As I said in Committee, the Bill would allow the sale of a minority of shares in Royal Mail, and a sale by means of an IPO, if either or both were decided to be the best route to achieve our objectives. We do not, however, believe that there should be a time limit on the sale. The Government must have the flexibility to choose the right time to dispose of shares to ensure that we can get the best result for Royal Mail and the taxpayer.
The noble Lords, Lord Lea, Lord Young and Lord Borrie, also asked how Royal Mail will be valued. If I may, I will come back to those issues when we discuss Amendment 3, which directly addresses that point. Arbitrary deadlines in legislation would mean that the process might be rushed through, which is not the best way to conduct what would be a significant commercial transaction. I do not believe, therefore, that Amendment 1 would be in the interests of either Royal Mail or the taxpayer, and I would therefore hope that, following my explanation, the noble Lord will feel able to withdraw his amendment.
Lord Lea of Crondall
I thank the noble Baroness for her courteous reply. I am obviously very pleased to have heard the three contributions from these Benches but I want to pick up on the point made by the noble Lord, Lord Razzall.
Of course, nothing is exactly the same as it was 20 or 30 years ago but it remains the case that the only way that the Government can get a very high price is to say that there will be no universal service obligation. I do not know whether the noble Lord, Lord Razzall, and others would generally agree with that, but clearly the less you guarantee a universal service obligation, the more you can get, whether through an initial public offering, Deutsche Post or anything else. Furthermore, we are still waiting to see the guarantees on the inter-business agreement.
The public interest—that is, the public in cities, towns and villages—is at risk, as is, by the way, the workers, and if I say “by the way, the workers”, noble Lords will know where I am coming from. Later in our debates on the Bill we may hear something more specific and concrete from the noble Baroness in terms of commitments on the universal service obligation or the inter-business agreement. That is the context in which we are talking. As regards arbitrary deadlines, I am not the first person to mention dates with regard to the Bill. Indeed, it is self-evident that you have to mesh what we are talking about today with all the other dates that are flying around.
I do not think that noble Lords should be denied the opportunity to express their opinion on this question and I therefore wish to test the feeling of the House.
“Royal Mail companies to be publicly owned
(1) Each Royal Mail company must at all times be publicly owned.
(2) Accordingly—
(a) any issue or transfer of shares in a company will have no effect if it would cause a Royal Mail company to cease to be publicly owned, and(b) any issue or transfer of share rights to a person will have no effect if the acquisition by the person of the shares to which the share rights relate would cause a Royal Mail company to cease to be publicly owned.”
Lord Young of Norwood Green
My Lords, in rising to move this amendment I cannot help reflecting that last Friday the vast majority of the nation was enthralled by the marriage of Prince William to Kate Middleton, now the Duke and Duchess of Cambridge. Even those who have doubts about royalty as an institution could not help but wish the young couple well. One of the ways in which the nation celebrated the wedding was through a series of special stamps featuring the royal couple during their engagement, and now I understand that stamps are to be issued featuring the wedding itself. What a fitting way to celebrate this royal occasion, through commemorative stamps issued by Royal Mail—and I stress Royal Mail. It is royal because it was founded by the monarch more than 350 years ago; opened to the public during the reign of Charles I, it has operated as a public service ever since. The Bill before us marks a momentous and historic change—it is an iconic Bill.
In Clause 1 the Government have made it clear that they propose to sell off 100 per cent of Royal Mail, albeit with up to 10 per cent of shares held by employees. The Royal Mail Group has an annual revenue of some £9 billion. Royal Mail itself has an annual turnover of some £6.5 billion and employs more than 155,000 staff. That is impressive. However, this privatisation represents something more: the sale of one of the nation’s oldest and most cherished enterprises.
The Royal Mail is a great public institution that has a fine history in the development of the culture, social cohesion and economic strength of this nation, and that still today provides a vital public service. We should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country's development as the railway or the electricity grid. It was an early information superhighway—a social network, in fact, ahead of its time.
As for the modern day, Richard Hooper described Royal Mail and the service it provides as,
“part of our economic and social glue”
that binds communities together. I think that he was absolutely right. Many Members of this House have praised the work of Royal Mail and the social value of the country’s 11,900 local post offices, but let us also remember that despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, Royal Mail still delivers some 70 million letters a day to the 28 million homes and businesses of the United Kingdom. The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard. I am sure that the whole House appreciates that regardless of whether they support the move.
Referring to the Postal Services Bill in 2009, the noble Lord, Lord Hunt, said that all those on the Front Benches were in favour of it. Indeed they were. However, I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned, which meant that it must be in overall public ownership.
The Postal Services Act 2000, still in force today, permits joint ventures between Royal Mail and private companies. Though the 2009 Bill envisaged a minority private-sector partner, majority ownership would remain within the public sector. Neither the 2000 Act nor the 2009 Bill permitted 100 per cent privatisation, which the Bill before us today proposes. The amendment that we have tabled reinserts the original intent of the 2009 Bill that each Royal Mail company should remain in overall public ownership, with the majority of the company in public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time, and indeed the Liberal Democrats, supported that proposition. At the time, there was broad consensus that Royal Mail should remain in overall public ownership, with the possibility of a joint venture or a minority private sector partner but, I repeat, not 100 per cent privatisation of Royal Mail.
We might find a clue in the 2010 general election manifestos of the two parties that came together to form the coalition Government. If you searched in the Conservative or Liberal Democrat manifestos of 2010 for the privatisation proposals in the Postal Services Bill, you would search in vain. Even the coalition agreement speaks cryptically of introducing private capital into Royal Mail, but does not say that that would mean 100 per cent privatisation. There was no Green Paper or White Paper to pave the way for this Bill, but our debates on Royal Mail have been usefully informed by two reports produced by Richard Hooper’s panel in May and December 2008 and by him, sitting alone this time, being asked by the current Government to review his work in 2010.
We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year, Royal Mail experienced a drop of 7 per cent in letter volume. Other operators taking advantage of liberalisation and of what are now regarded as generous terms for access to Royal Mail networks have been taking over upstream business faster than expected. Royal Mail’s competitors have already won more than 60 per cent of the upstream, pre-sorted bulk-mail market and deliver their customers’ mail into the Royal Mail system for final delivery. The pace of technological change continues apace through e-mail, web-based advertising, text messaging, mobile phones and all the other means we have of communicating with each other. Other developed countries are facing the same issues. The worldwide postal market is expected to decline by 25 per cent to 40 per cent over the next five years. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have been recounted.
There was therefore a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper’s report entitled Modernise or Decline recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in the structure of Royal Mail: the injection of private capital and the involvement of private sector management. However, he rejected full privatisation, declaring:
“This option would only be appropriate and feasible if modernisation had been completed”.
He concluded:
“In short, we believe that partnership is the only approach which can deliver Royal Mail’s … universal service”.
At that time, there was a wide degree of consensus in this House about the nature of the action that needed to be taken. Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations. There was agreement that regulatory oversight should be by Ofcom dealing with the wider world of communications rather than by a body restricted to the postal sector only. There was consensus that access pricing needed to be addressed, which is still a live issue.
Richard Hooper's 2010 report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change, given the changes that had already taken place. It states that:
“The specific need for corporate experience is reduced today”.
He praised the progress that had been made by Royal Mail’s management and by the CWU in adopting a ground-breaking modernisation agreement, which is proceeding and has done significantly well.
The chief executive of Royal Mail, Moya Greene, giving evidence to the Public Bill Committee in another place on 9 November, said:
“I look at what Royal Mail has been able to do in just two short years, when they finally got access to capital, and it has been amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs”—
hand-held personal digital assistants to help with tracking and tracing postal items—
“for all of our letter carriers. We have been able to introduce 10 new world-class mail sites. I invite you all to come and visit them—they are now being recognised internationally as some of the best mail processing centres in the world”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 8.]
Hooper maintained his stance on those issues, but he came up with a different recommendation on the future of Royal Mail in proposing a 100 per cent sale. There are a number of elements in this Bill that we would broadly support, including employee share ownership. The possible mutualisation of the post office network deserves positive examination. We agree with the recommendation of Sir Richard Hooper, this Government and others that the historic pension fund deficit must be dealt with. We agree that regulation should move to Ofcom, but we fundamentally disagree with the 100 per cent privatisation of Royal Mail.
Although Richard Hooper recommended the 100 per cent sale of Royal Mail in his 2010 report, he seemed less sure in giving oral evidence recently. On 11 November 2010 he said:
“The important point I want to make is that private sector capital is needed in this business—it is needed urgently, it was needed two years ago and it is needed now. Whether it is a minority or majority shareholding, I would prefer to leave that to the political process”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 108.]
We probably endorse that view, but it is an interesting shift from that previous rather firm statement.
The debate over whether to privatise Royal Mail is about what kind of postal service the public want. We all want a strong, universal, six-deliveries-a-week, one-price-goes-anywhere service and a network of post offices at the heart of our communities. The universal postal service is a public service of vital infrastructure that supports the entire UK economy. Though the postal market might be changing, it remains central to businesses in the UK.
A survey by the Federation of Small Businesses conducted by ICM found that 84 per cent of small businesses use Royal Mail to despatch parcels and express items; 88 per cent of small businesses send post every day; and 59 per cent deliver goods and services by mail. Clearly it is a vital part of our business community. If we are to deliver on growth in those local communities and encourage small businesses and entrepreneurial activity, the Post Office will be at the heart of that success. There are many similarities between the Bill that we proposed in 2009 and the Bill before us today, but there are also glaring differences. Moving from overall public ownership to 100 per cent privatisation of Royal Mail makes a massive difference. All that has been cast aside by the Government.
Our Bill was a proposal for partnership. This Bill is a proposal for privatisation. We were in favour of employee shares, but in a different context. It is interesting that the majority of incumbent postal operators in western economies remain publicly owned. The United States, Canada, Australia, France, Italy, Spain, Switzerland, Ireland, Finland, Israel, Japan and Norway have all retained fully publicly owned postal services, so this is a big and fundamental change. Some would say that it is a bit of a leap in the dark.
Richard Hooper’s underlying point, which I do not fundamentally contest, is that additional access to capital is necessary, and that capital might well need to be private capital. However, that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government members need to justify and validate that stance.
Royal Mail already has a substantial modernisation programme that is worth some £2 billion. It has reached an agreement with the workforce to implement modernisation, which everyone giving evidence to the Bill Committee in another place confirmed was an important landmark agreement and, as I have said, is making substantial and significant progress. Royal Mail’s modernisation programme is fully funded and expects to make normal profit levels by the end of the programme in 2012-13. Furthermore, it will benefit from the Government’s proposed action on pensions and hopefully from changes to regulation, which will provide a more substantial buffer during the current difficult economic climate.
We also need to look at the consequences of 100 per cent privatisation. It is at the heart of our concerns about the future of the universal postal service and the future of the nation’s post office network. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business that is burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of the universal service. Noble Lords might recall that Pieter Kunz, the managing director of TNT, said that the universal service obligation was,
“a kind of Jurassic Park and we should get rid of it”.
Clause 30 sets out the terms of the universal postal service obligation, which include the requirement to collect and deliver mail six days a week at one price anywhere in the country. The USO has other elements, including packet delivery, letter and packet collection, affordable and uniform tariffs, registered and insured items, legislative petitions and addresses. It also includes, as we agreed during the course of the last Bill, services for the blind and partially sighted. We know from the contributions of the noble Lord, Lord Low, how much they are valued, but this Bill, particularly in Clause 33, proceeds to provide for changes to the level of the universal service. Later we will look at the ways in which this Bill might deliberately or inadvertently open the door to the diminution of the universal service.
Lord Jenkin of Roding
My Lords, it was interesting to hear how the opposition Front Bench justifies the amendment. The noble Lord, Lord Young of Norwood Green, has not disappointed us. It took him 18 minutes to do it, but he has done it and he has made the case that he said. However, I think he is wrong and I shall explain briefly why.
During the debate on the previous amendment there was a question about what the objective was, for instance, of the privatisation of British Telecom, which I mentioned briefly at Second Reading because I was the Secretary of State who published the White Paper and put the Bill before Parliament. The objective there was absolutely clear: the chairman of British Telecom, Sir George Jefferson, came to me early on after I had become the industry’s Secretary and said, “We are not going to be able to develop this business without access to a great deal more capital investment”—and he mentioned very large figures indeed. I had previously been the Chief Secretary to the Treasury and I said, “You do not think you are going to get it from the Treasury, do you?”. He said, “We need it”. I said, “The only way you are going to get it is for 51 per cent, at least, of shares in the BT company to be in the private sector”. He was quickly persuaded that that was an overwhelming argument for privatisation and we moved ahead from that.
It is exactly the same with Royal Mail—it needs capital for investment. I have discussed this with Moya Greene, the chief executive of Royal Mail, and she is very clear that we cannot develop this business unless we have a greater introduction of new capital. She is very clear, too, that this has got to come from the private sector. The amendment requires that a Royal Mail company shall at all times be in the public sector. I do not know whether the noble Lord, Lord Young, recognises that, if it is, it cannot then borrow without the borrowing going on to the public sector borrowing requirement—and that, in the present circumstances, would be totally impossible. British Telecom, by becoming 51 per cent privately owned in its initial stages, was immediately able to go to the market and borrow money without having to bother the Treasury at all. For that reason, the majority of shares being in the private sector was an integral part of the process of getting new capital into British Telecom.
Exactly the same applies to Royal Mail. If the majority of Royal Mail is going to remain in the public sector, as the amendment requires, then the Government can say farewell to any suggestion that they will be able to raise substantial capital sums from the market. It will be difficult enough to sell the company anyway, but to require that a majority of shares should remain in the public sector is a complete nonsense. I listened carefully to what the noble Lord, Lord Young, said. He marshalled his arguments, as he always does, with considerable skill but they were totally unconvincing. If he decides to call a Division on the amendment, I hope my noble friend will advise the House that we should vote against it.
Baroness Wilcox
My Lords, Amendment 2 seeks to keep the Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009. As I said earlier in response to Amendment 1, the difference between the position of this Government and the previous Government is that we do not believe it is necessary for the Government to retain overall ownership of Royal Mail. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the universal postal service, and that is what we are committed to doing.
The noble Lord, Lord Young, questioned the Government’s mandate for the Bill. The Liberal Democrat manifesto was explicit about the need for private sector investment and employee shares. The coalition agreement was explicit that:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill does exactly what we said we would do. There are several reasons why we should not seek to retain Royal Mail in public ownership. I covered these at length in Committee but, to summarise: first, the Government cannot provide capital fast enough and any funding we provide has to be cleared by the EU under state aid rules. My noble friend Lord Jenkin of Roding spoke most eloquently from his past experience in support of that. Secondly, limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company.
The noble Lord, Lord Young, asked about the provision to amend the minimum requirements of the USO in Clause 33. Again, I will come to those issues when we discuss his Amendments 65 and 66. I ask the noble Lord to withdraw his amendment.
Lord Young of Norwood Green
My Lords, I listened carefully to what the noble Lord, Lord Jenkin, said. I remember that occasion well, given my interests at the time and the continuing interest which I declared on a previous occasion. As I said, we do not seek to oppose the injection of private capital. Interestingly, there was almost unanimous support for the 2009 Bill, which applied the same formula that I applied to the House today. I hear the points made by the Minister on private sector investment but it is not quite true that it said “100 per cent privatisation” in either the coalition agreement or Liberal Democrat manifesto; I noticed that those were not the words that she used. I stick by my original assertion that this is new territory. It is an important and fundamental decision and one on which we should test the opinion of the House.
“( ) Before making a decision referred to in subsection (1), the Secretary of State shall lay before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, and shall make available to the Public Accounts Committee of the House of Commons an independent overall valuation of the business.”
Lord Young of Norwood Green
My Lords, before I get on to this amendment, one problem with quoting when you have the author of the report in the Room is the danger of being corrected. I feel that I owe an apology to Richard Hooper, who said to me that he studiously avoided mentioning 100 per cent privatisation in his more recent report, for which error I humbly apologise. I wanted to put the record straight—before I see him in court.
The ability of Governments to value a utility accurately at the point of its privatisation is mixed. The first two large privatisations of the 1980s, British Gas and British Telecom, saw the share values of those businesses rise quickly following privatisation. That was of course the objective then; privatisation had to achieve legitimacy and the Government of the time was about creating a shareholder democracy. However, our economic needs now dictate that the Government cannot be so generous towards shareholders if privatisation goes ahead in the form of a share sale. They should set a share price for Royal Mail that properly reflects its valuation. As the noble Lord, Lord Lea, said in Committee—he reiterated this view in today's debate—the public have on many occasions not got a particularly good deal out of privatisations.
Ministers have been coy about the value of Royal Mail. Estimates have ranged from £700 million to £7 billion but the managers and employees who stand to gain 10 per cent of the value of the business will be particularly keen to know whether the upper or lower ends of the estimates are correct. They will want to know that the Government have undertaken a forensic and accurate valuation of the business prior to putting it up for sale. In Committee, my noble friend Lord Stevenson made a strong case for Parliament to receive a report on the valuation of Royal Mail. We believe that it is wrong to ask Parliament to give approval for the disposal of Royal Mail while denying it the powers to scrutinise the effectiveness with which the Executive go about their tasks in this regard.
Amendment 3 seeks an independent valuation of Royal Mail to be made available to the Public Accounts Committee prior to any sale of the business. Such a valuation can be received and scrutinised by that committee in full commercial confidence. The PAC and other committees regularly receive restricted or confidential briefing. Parliament has a long tradition of receiving evidence in confidence. If necessary, the PAC could call the Minister to give evidence in camera but any parliamentary body tasked with ensuring good governance in this area would want to be reassured that an effective valuation of the business has taken place. That would include an assessment of its assets and liabilities, along with the proposed regulatory regime and how that would impact on its future prospects.
The coalition Government make a strong case for transparency in government. We are able to access limitless information about government and local government spending. Freedom of information laws and parliamentary questions and debates are all there to oil the wheels of our democracy. As another great historic public institution sadly shrugs off the blanket of public ownership, it is only right that the people who once owned it are allowed to know how the Government have come to their conclusions of the value of that business.
Baroness Wilcox
My Lords, Amendments 3 and 13 seek to place additional reporting requirements on the Secretary of State, while Amendment 5 would introduce additional parliamentary procedures before there can be a disposal of shares in a Royal Mail company.
Amendment 3 would require the Secretary of State to report to Parliament how the value will be assessed, and to make available to the Public Accounts Committee of the other place an independent valuation of the business. As we debated in Committee, there are incredible sensitivities about revealing the estimated value of Royal Mail shares prior to a commercial negotiation. We would be giving the whip hand to the potential investor. This does not make commercial sense and would greatly reduce the potential for getting the best value for the taxpayer from any future transaction. The Government will work with their advisers to consider the potential value of Royal Mail so that they can properly assess bids from buyers. Before a sale, the accounting officer for the Department for Business would need to scrutinise any future transaction to ensure that it represented value for money for the taxpayer.
I reiterate what I said in Committee: we would expect that, after a sale had completed, both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is completely in line with the reporting requirements for previous sales of government assets.
Amendment 5 would require that the Secretary of State made an Oral Statement and that an order was laid that was subject to the affirmative resolution procedure before there could be a relevant disposal of shares in a Royal Mail company. As I said in Committee, further parliamentary procedures should not be required before there can be a disposal of shares in Royal Mail. The disposal of shares, as set out in the Bill, has been debated fully in both the other place and this House. The Opposition’s Postal Services Bill of 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As they said at the time, such a requirement would cause uncertainty for potential investors. That uncertainty is the same whether we are selling a majority or a minority stake. I said in Committee that I fully agreed that an Oral Statement might be appropriate for the first sale of shares. We will discuss with the House authorities the appropriate format for such reports at the relevant times.
I turn to the last amendment in this group, Amendment 13. The purpose of Clause 2 is to ensure that Parliament has transparency about the way in which shares or share rights in Royal Mail that reduce the proportion owned by the Crown are disposed of. The amendment would require reporting on any subsequent disposal of shares by the original purchaser. I do not consider that such a reporting requirement is appropriate. I know of no precedent for this type of “open-ended” reporting in any previous privatisation. The Companies Act requires that a private company has to disclose a full list of its shareholders on incorporation and then with the first annual return to Companies House following incorporation. It then has to provide such a list every third annual return after a full list has been provided. Information on ownership of Royal Mail will, therefore, continue to be publicly available.
As with discussions we had in Committee on other aspects of the Bill, I see no reason to impose more onerous reporting requirements on a privately owned Royal Mail than those that are currently imposed on privately owned companies. Clause 2 does, of course, continue to apply to any disposals of shares by the Secretary of State himself after the initial sale. The crucial issue, however, is not ownership but securing the future of Royal Mail, and in doing so securing the future of the universal postal service. Regardless of who owns the company, it would still be the universal postal service provider in the United Kingdom. It will still need to comply with any conditions issued by Ofcom in the universal postal service order to be made under Clause 29 of the Bill. The purchaser would, therefore, be fully aware of the obligations that the company it is purchasing must deliver.
The initial conditions in the universal postal service order will follow those currently set out in the licence issued to Royal Mail by Postcomm. Condition 12(5) of that licence requires Royal Mail to notify the regulator if there is any change of control in the company. It will be for Ofcom to decide whether to impose similar conditions in the future as part of delivering its overall duty to secure the future of the universal service. With these reassurances, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I have listened carefully to what the Minister said and I welcome her assurance regarding the Oral Statement. That represents some progress, but we still feel that she has not fully addressed our concerns about the presale valuation and the ability to report to the Public Accounts Committee in confidence. We will reflect on the situation, but in the light of what has been said I beg leave to withdraw the amendment.
“( ) A disposal of the Crown’s interest in a Royal Mail company will not be authorised until the Secretary of State has secured a written contract from the proposed purchaser that at least one representative of employees within Royal Mail or its successors will sit on the board of the new body.”
Lord Stevenson of Balmacara
My Lords, we discussed the issue of a representative of employees serving on the board of Royal Mail in Committee and it received support from across the Chamber. The noble Lord, Lord Cotter, from the Liberal Democrat Back Benches, drew on his experience as managing director of a manufacturing company. He said on 8 March at col. 1553 of Hansard:
“It is crucial that employees have not only shares but a real voice in one way or the other. Without that, so many companies fail. We want the new conglomerate to succeed, to go forward and to bring its employees with it, as opposed to management and employees being at each other's throats as has sometimes been the case in the past”.
My noble friend Lord Myners pointed out that the shareholders in a privatised Royal Mail,
“—whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors—will nevertheless individually have a very modest interest in the company … few … will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money invested in a single share and all their employment in one place of work. It is surely right that people who exhibit such a high conviction to a company should have some voice in the leadership and management of the business”.—[Official Report, 8/3/11; cols. 1553-55.]
Postal workers already have a major stake in the company, and their livelihoods are dependent on its viability. This is more than just an issue of immediate employment, because postal staff invest their livelihoods and pensions in the company. We will suggest later under Clause 3 that they should be able to invest in trust-owned employee shareholdings in the company. Surely it is not too much to ask that they have a seat at the board table for their chosen representatives.
What do we see when we look across the channel? Employee representation is commonplace. In fact, some of the companies that are held up as shining examples of privatised postal services have employee representatives on their boards. The Minister for Postal Services, in Committee in another place, stated:
“I have never been opposed to the idea of employee representatives being on boards, or on board committees”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 325.]
We invite the Minister here to go one step further and make provision in the Bill for this good idea. Failure to introduce representation of postal workers would risk missing a real opportunity to create trust and confidence for the long term. I beg to move.
The Deputy Speaker (Lord Skelmersdale)
If the amendment is agreed, I cannot call Amendment 5, by reason of pre-emption.
Baroness Wall of New Barnet
My Lords, I shall speak to my Amendment 11 in the group. Like other amendments, it requires the Secretary of State to lay a report before Parliament detailing his decision to dispose of shares in a Royal Mail company. This must be done within a reasonable and practicable time, as we have discussed. My amendment seeks to strengthen the reporting requirements of Clause 2 and to make sure that Parliament has the opportunity to scrutinise the training and skills agenda of the newly privatised Royal Mail.
Royal Mail has a strong and well established culture of training and development, supported by comprehensive agreements with its union, the CWU. The business is committed to modern engineering apprenticeships through the 2010 business transformation agreement that underpins the current process of modernisation. An illustration of how that takes place and the level of that commitment is that last year the company was involved with 300 core apprentices and 200 advanced apprentices. That is a record about which the Minister will share my enthusiasm.
The Government have been vocal, today and previously, in their support for apprenticeships. In the Budget they announced 50,000 new apprenticeship places at a cost of £180 million. This support should ensure no erosion of current positions and opportunities in Royal Mail. I am sure that the noble Baroness would agree that it would be very disappointing if any of the positive and evolving culture of training in Royal Mail disappeared or diminished.
The Government’s vision is hugely important and has led Royal Mail in many ways. The impact of privatisation and the short-term cost-cutting agenda makes some people worried that the private shareholder may not bring the commitment that I mentioned. Royal Mail’s strong culture in training and skills development is underpinned by a range of robust agreements between the union and the business to ensure effective training for new starters, ongoing training and up-skilling, in line with the introduction of new equipment.
A culture of training and development at Royal Mail is crucial, as it is in many organisations. The noble Baroness will know that most businesses benefit and progress with a culture that encourages apprenticeships and skills improvement at all levels. My worry, and the worry of many people, is that short-term cost savings may need to be made by a reduction in investment in training and development. That would be detrimental to the future success of the business.
Royal Mail and its union, the CWU, have worked hard to introduce a comprehensive training framework that is available to all employees. When employees join the business, they are supported by an induction programme through which they are guided over a 13-week period. This involves induction days, and on-the-job and off-the-job training. This leads to a culture of encouraging further advancement into apprenticeships. Royal Mail embraces and continues many other schemes.
I want to make the quick point that, having grabbed hold of the culture that my Government and now this Government are pursuing and have pursued in apprenticeships, we must at all costs ensure that any sell-off of Royal Mail will in no way be detrimental to the business. A number of young people in Royal Mail are benefiting from that. The whole status of the business is dependent on that skill level being supported. I hope that the noble Baroness will assure me and the House that she is well and truly committed to that and that it will be enshrined in how Royal Mail moves forward.
Lord Clarke of Hampstead
I shall speak to Amendment 36 standing in my name, dealing with trade union recognition. Again, I declare my interest: 65 years ago this month, I joined the then UPW and I am still a member in the retired members’ section.
My amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that existing rights of workforce recognition are maintained. That is very important, and I very much hope that the Government will see the benefit of the amendment.
I shall make two main points. First, the workforce, by its own efforts, has unionised the industry to such an extent that recognition of the union was achieved more than a century ago, when the Fawcett Association became the Union of Post Office Workers, founded in Finsbury Circus. Long before the existence of recognition rights, postal workers came to agreement with the employers and, behind them, the Government, on the existence of workforce trade unions. This has shaped employment relations in the industry. Both workforce and management have seen the benefit of organised bargaining and representation. We are now looking at a Royal Mail and its staff who have a mature attitude to industrial relations. Both parties know of each other's interests and concerns and are usually able to reach accommodation.
Despite the media caricatures, the reality is that organised industrial relations have created ways of working which make the industry productive and safe. Every day, many thousands of hurdles, small and large, are overcome by timely recourse to the recognised framework of industrial relations in the industry. Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in a right and fair way.
The media are interested only when those relationships break down. They turn an ordinary little conflict in the sorting office or a pillar box into a massive federal case, as the Americans would say. They love that. The media will attack unions just for the sake of it. The reality is that countless efforts by management and union reps ensure that, every day, smooth running of the industry takes place.
The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disposal. Recognition has been won not just as a legal right; it has been established by the efforts of generations of postal workers and managers. Any new owner must begin by recognising that they are buying into an organised workforce.
As an aside from the comments that I have drafted, I have one recollection. After the Second World War, when the Control Commission of Germany was setting up Germany’s new industry on the basis of industrial democracy, it was the British TUC and the UPW, as it then was, who took part in helping that country rebuild itself. As we know, that led to worker participation on boards, which was the subject of the lead amendment.
Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner may be in doubt, the Secretary of State should be obliged to dispel that doubt, as a new owner must learn to live with a unionised workforce.
My second point is that bargaining is a natural part of recognition and relationships. It may be argued that under TUPE the transfer of the workforce will carry across existing terms and conditions. That is true but it is insufficient. It is an organised workforce that will address any new employer with the expectation of its bargaining rights remaining intact too. This is not just about what is currently earned or currently an entitlement, such as annual leave, allowances and so on; it is also about the right of the workforce to address its future conditions with the confidence that it can resolve its problems through negotiations. The past couple of years have shown that after a long period of unhappiness these changes can be negotiated.
Any new employer that buys into Royal Mail on the assumption that it will simply impose its vision, priorities or methods on the workforce will be in for a rude awakening. I do not say that with any sense of a threat, but people who have given their lives to the industry will not just roll over while their conditions are reduced and made much more difficult. The workforce expects any changes to be negotiated, and that is why the amendment is necessary. It is not a conflict-ridden process; on the contrary, the only cost in the vast majority of agreements has been the time and patience of management and union reps. Such rights are valued greatly by the workforce.
Postal workers know that the industry is constantly changing. As a postal worker, I have had to recognise that. Being in attendance at this funeral of our great Royal Mail over the next few hours does not give me any happiness but I have had to come to terms with it. The vast majority of workers have understood that it is constantly changing and that working arrangements and conditions also change, but that is on the understanding that postal workers will buy into the changes by helping to shape them.
We expect the Secretary of State to be entirely clear with a new owner of Royal Mail that recognition of the workforce and its union involves a negotiated and bargained framework for employment relations in the workplace. This fact of life will have to be addressed. It is best that we make this clear in the legislation to any potential investor or buyer of the industry, and carrying this amendment would do exactly that.
Earl Attlee
My Lords, this group of amendments covers matters relating to the employees of Royal Mail, without whom of course there would not be a Royal Mail. These matters are employee representation on the board, union recognition and employee training.
I thank the noble Lords, Lord Kennedy, Lord Clarke and Lord Christopher, for tabling Amendments 4 and 10 relating to employee representation on the board of Royal Mail or any new successor body. I say this because, when we debated similar amendments tabled in Committee, it was clear to me that your Lordships had concerns about my response. These amendments give me the welcome opportunity to provide more clarity about the Government’s position on this issue.
First, I should make it clear that the Government do not have any fundamental or philosophical objections to employee representation on the boards of companies, but we do believe that the make-up of any company’s board should remain the responsibility of the company and its shareholders.
As many of your Lordships said in Committee and again today, employees will have a pivotal role in the future of Royal Mail, and there needs to be continual and meaningful interaction between the workforce and the management. In the CWU and Unite, the employees of Royal Mail have strong, active and effective unions. The business transformation agreement reached in March 2010 laid the groundwork for a new relationship between the management and the CWU. This was a ground-breaking achievement and, as recognised by the noble Baroness, we do not want to see the improvements set back.
I have looked back at whether the Postal Services Bill 2009 contained provisions requiring an employee representative on the board. It did not. In fact, the previous Government rejected such amendments to that Bill. The noble Baroness, Lady Vadera, said in Committee debates on the Bill that the Government would have to be persuaded that direct worker representation on the board,
“would make a real difference to the transformation and modernisation of the Royal Mail and deliver the change that is necessary for the company”.
She said that the Government,
“do not believe that that case has been made”.—[Official Report, 24/3/09; col. 612.]
While this Government have no objections to an employee representative being on the board of Royal Mail, we do not see that it should be a requirement laid down in statute. I do not believe that there is any precedent for this in any previous privatisation. Under the Bill, the employees will have a shareholding of at least 10 per cent. Whether there should be an employee representative on the board is a matter for the company and its shareholders, not something to be laid down in statute.
The noble Lord, Lord Stevenson, referred to the clear example given in Committee by the noble Lord, Lord Myners, of why large shareholders should not have a representative on a company’s board. The noble Lord, Lord Myners, told us that it is quite customary for a body of investors which has a large shareholding, as will the employees under our Bill, to seek board representation. He gave the example of News International and the BSkyB board, but the lesson to draw from this example is that it was a decision taken by the company and was a circumstance of the size of News International’s shareholding. It was not a mandatory requirement. I do not see why Royal Mail should be treated differently from other companies in this regard.
The noble Lord, Lord Stevenson, spoke also about the experience in Europe. There is a mixed picture there. Some member states have mandatory requirements for employee representation on boards in certain circumstances, but the majority do not. The Government consider that placing such a requirement on Royal Mail, when it is not a requirement on companies generally in the UK, is not appropriate. The wider issue of employee representation on boards is best discussed in the context of company law and not this Bill.
Amendment 11 would place a duty on the Secretary of State to report on Royal Mail’s intended policies on training, apprenticeships and skills once a decision has been taken to dispose of shares in Royal Mail. I thank the noble Baroness, Lady Wall of New Barnet, for raising these vital issues. I know that she brings considerable experience to this debate through her work on the sector skills council and her contribution to the All-Party Group on Further Education, Skills and Lifelong Learning. The Government absolutely recognise the importance of training and believe that skills are key to economic competitiveness. Apprenticeships are our preferred vocational route for people of all ages to gain the skills they need to succeed and progress in their careers and for employers to build a workforce with the motivation and expertise they need to compete globally. We are committed not only to increasing the number and range of apprenticeships on offer but also to improving their quality. We want apprenticeships to become the gold standard for workplace training. We are determined to take real action to improve and expand the apprenticeships programme and create more apprenticeship opportunities than ever before.
It has been recognised throughout the debates on this Bill that the workforce is vital to the success of Royal Mail. The company is introducing new working practices and new technology as it adapts to developments in the postal market. It is clear that, to make the modernisation of the company a success, it will need to ensure that its workforce is properly trained and has the right skills, as pointed out by the noble Baroness.
Royal Mail recognises the importance of training, which is reflected throughout the business transformation agreement between the Royal Mail and the CWU. I have no reason to believe that the new owners of Royal Mail would take a different approach given the importance of the workforce. Why would it? The noble Baroness suggested that cost pressures might be an issue, but surely a business of this size must look to the long term and not take short-term decisions. If it did, it could adversely affect its own share price, sending entirely the wrong signals to the market.
Lord Stevenson of Balmacara
I thank the Minister for his comments. I agree that these debates have allowed us to touch on important issues that affect not just Royal Mail but the wider world of work and how Governments should relate to that. I also thank my noble friends Lady Wall and Lord Clarke for their contributions. The Minister responded positively to their speeches, but unfortunately has not been sufficiently moved to incorporate the amendments in the Bill. Perhaps we can come back to them at a later stage.
The issue raised in Amendment 4 is whether, at the point of transition from its present position as a wholly owned subsidiary of government, Royal Mail should be imbued with many attributes that will allow it to sustain and carry on its work. As I understand it, the Minister is very positive about the need for employees to be engaged at all levels in the work of companies, but believes that the responsibility for that must lie with the company and not the Government. We on this side of the House believe that the change from a wholly owned subsidiary to a 100 per cent private company changes the nature of the debate.
History is with us all the time in this debate. It is important to bear in mind that Royal Mail is a public service. It is a company in all but practical separation from the Government, but it is also a public service, and I think that those who work in it believe that that is what drives their motivation and allows them to engage with the public interest more widely than any ordinary employee would do. It also allows them to have high levels of staff retention and works to ensure that their productivity is high. These are public servants in the true sense of the phrase and the change that the Government wish to make—to sell them and their company to a private sector operation—will of course make that completely different. They may or may not be right; time will tell. However, I think that the Government are missing a great opportunity by not building into the new arrangements something of the past and the history of the public service which it represents.
I believe, and I think that many noble Lords on this side would support the view, that company law has perhaps not kept up with the needs of the modern employment world. It does not play well to the idea to which the Minister referred in terms of how companies operate in relation to staff, and it is perhaps not the right place to look for better employee engagement on this. The Government have the option of leaving a mark on the new, privatised Royal Mail. They could do so by a simple amendment—accepting what we have said in this amendment—but they have not done so. The warm words which we have heard are encouraging to those who will read them but they do not lead us to permanent change. I therefore think that we should test the opinion of the House.
Baroness Wilcox
(c) the objective intended to be achieved by the undertaking of it.(3A) The report must—
(a) contain information about the expected commercial relationship, after the proposed disposal, between the Royal Mail company in question and any Post Office company, and
(b) if the proposed disposal would result in shares or share rights being owned by or on behalf of an employee share scheme for the first time, give details of the scheme.
In paragraph (b) “employee share scheme” has the meaning given by section 3.”
Baroness Wilcox
Amendment 6 is intended to increase transparency in relation to any future disposal of shares in Royal Mail, as well as to provide further information on the commercial relationship between Royal Mail and Post Office Ltd. At the same time I will speak to Amendment 7 in the name of the noble Lord, Lord Whitty, and Amendment 8 in the names of the noble Lords, Lord Clarke and Lord Christopher. I hope that Amendment 6 will ease the concerns expressed by many noble Lords in Committee and provide further reassurance that the Secretary of State will be open and transparent about decisions taken on the future of these two businesses. The amendment relates to the report which will be laid by the Secretary of State before Parliament once he has made the decision to undertake a disposal of shares in Royal Mail.
Amendment 6 serves three purposes. First, it clarifies that the Clause 2 report must state the objective intended to be achieved by the share disposal. Secondly, it will ensure that when shares are proposed to be put into the employee share scheme for the first time, the report must include details of the scheme. Thirdly, it will ensure that the report includes information on the ongoing relationship between Royal Mail and Post Office Ltd after any disposal.
Perhaps I may take these in turn. In terms of objectives, I said in Committee that the Government’s overarching objectives from the disposal of shares is to secure the future of the universal service and to ensure that we negotiate the best deal for both Royal Mail and the taxpayer. However, I appreciate that Parliament will want confirmation of these objectives once a decision has been taken to dispose of shares. This amendment will ensure that this is included in the report to Parliament made under Clause 2.
Moving on to employee shares, we understand the concerns of both Houses about the sort of scheme that will be put in place for employees, and I would remind noble Lords that the Bill already makes the strongest statutory commitment to an employee share scheme of any major privatisation. This commitment has been strengthened further by the Minister for Employment Relations, Consumer and Postal Affairs, who put on record in the other place that shares would be put into the scheme at the same time as the first disposal of shares. This commitment was repeated by my noble friend Lord De Mauley in Committee in this House. It is too early to commit to a particular scheme structure as this will depend on factors that are as yet undecided, such as the type of sale, but we have considered how we can provide additional comfort to both Houses. As the amendment sets out, we propose to place a specific duty on the Secretary of State to report on the details of the employee share scheme when shares are proposed to be put into it for the first time.
Finally, the amendment also ensures that the report will include details of the ongoing commercial relationship between Royal Mail and Post Office Ltd after the proposed disposal of shares in Royal Mail. We hope that this amendment will address the concerns expressed by several noble Lords in Committee, in particular the noble Lord, Lord Whitty, and his colleagues on the Front Bench. It will also work in tandem with Amendment 50, which we will discuss later, to ensure that information on the relationship between the Post Office and Royal Mail continues to be publicised in the Post Office’s annual report, as required under Clause 11.
Perhaps it will be helpful if I provide a little more detail about what we expect the reporting requirement will provide in practice. We envisage that the details published will be akin to those which a listed company might provide in relation to a material contract when issuing a prospectus offering shares to the public. This provides a fine balance between ensuring that the public—in that example, potential investors—have sufficient information and making sure that no commercially damaging information is inadvertently disclosed. In practice, the information is likely to include much of that which the noble Lord, Lord Whitty, seeks to include in Amendment 7. The contract has yet to be finalised. It does not need to be finalised until the two companies are formally separated prior to completion of a Royal Mail transaction, but negotiations are under way and we would expect a new contract to be ready to be signed by next spring.
Noble Lords will already be aware that Royal Mail and the Post Office management have committed that the contract will be for the longest legally permissible duration. I would hope that this could be for the 10-year period that noble Lords opposite have sought, but the final duration will depend upon interlinked factors such as volume commitments or exclusivity arrangements. Since the contract has yet to be finalised, the specific details required under Amendment 7 are impractical. For example, it would most likely be impossible to provide accurate annual total contract values to the Post Office as these are likely to depend on the volume of mail and parcels handled over Post Office counters during the relevant years. That is certainly the basis of the current arrangement.
I turn now to Amendment 8, which would require the Secretary of State to include in the report that he has to make under Clause 2 a risk assessment of the proposed disposal and information on due diligence made of the purchaser, along with a comprehensive analysis of the due diligence work. As I have said before, the Government’s intention is that a sale of shares will help to secure the future of Royal Mail, and this in turn will help the company to continue to provide the universal postal service. We will, of course, assess the risks and carry out appropriate due diligence as part of that process. The report in Clause 2 is required when the Secretary of State has made a decision to undertake the disposal of shares in Royal Mail, and the report must include details of the kind of disposal. The process of a disposal is unlikely to have begun and so the information set out in the amendment would not be available at the time of the report.
As I said in response to Amendment 5, we expect that after a sale had completed both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would look at the process that was conducted prior to a sale, including the risk assessments and the due diligence. This is recognised as standard parliamentary process to assess whether the Government have achieved value for money for the taxpayer. I certainly expect that process—that is, the work of the NAO and the PAC—to cover work undertaken by the Department for Business to assess the financial and other risks associated with the buyer because they can directly impact, in the longer term, the taxpayer. We do not believe that Amendment 8 reflects the nature of the reporting requirement in Clause 2, which is to report when a decision is taken to undertake a disposal—not on subsequent activities prior to a sale. We also believe that there are existing parliamentary processes in place to scrutinise risk assessments and any due diligence that has been undertaken.
With the assurances that I have given to the House about what the Secretary of State will intend to include in a Clause 2 report, I hope that the noble Lord, Lord Whitty, and the noble Lords, Lord Clarke and Lord Christopher, will feel able to withdraw their amendments at the appropriate time. I beg to move.
Amendment 7 (to Amendment 6)
Lord Whitty
“(i) the minimum contract length for the commercial relationship;(ii) the details of any contractual break period that may be exercised by any party who enters into the commercial relationship;(iii) the total value of the contract to the Post Office company for the services provided under the terms of the commercial relationship for each year that the contract runs”
Lord Whitty
My Lords, I am grateful to the noble Baroness for both tabling the amendment in her name—particularly the new subsection (3A)(a)—and for the additional information that she has given today. I am not sure, however, whether that goes far enough to meet the anxieties.
As noble Lords will be aware, the interbusiness agreement is absolutely essential for the future operation of both the Royal Mail part of the unravelled company and, particularly, for the post office network, which is my concern. It is therefore important that when the Secretary of State reports to Parliament on the basis of the procedure, the terms of the agreement between the two parts of Royal Mail are clear, understood and give a robust and sustainable basis for both parts to continue. It will also, of course, have a significant effect on the value of both parts of the set-up—the value to investors in the Royal Mail part and the value to the taxpayer and the community of the network.
The specifics in my amendment to the government amendment would require part of the report to set down the minimum contract length. I know that the Government have said that they wish it to be the maximum that is legally possible, but we have never had a proper explanation of why they feel that there is a serious legal constraint on the length of the contract. It is therefore important that, at the point at which the contract is concluded and the report comes back to Parliament, the terms of the contract are spelt out and that any legal reasons for those terms are likewise spelt out. In terms of the risk that both parts of the organisation take in their new form, there is the issue of which party and in what circumstances can break that contract.
Lord Christopher
My Lords, I rise to move Amendment 8. I did not move Amendment 13 because, frankly, I was confused by the way in which the Order Paper came through, but it seems that the essential issues are the same. References have been made to the value of this company and the lack of knowledge of that value. It is certainly not BT or British Gas. The closest I can come to previous privatisation operations is British Rail, which I think at least one Conservative spokesman in the past has said might have been carried out more felicitously. It is still being heavily subsidised. As to value, the only thing I know for certain is that it is not a Glencore, which is valued at the moment at some £34 billion. There are going to be considerable problems in achieving a proper valuation of this company.
The problem with the Bill is that we do not really know what we are addressing. We do not know what the Government will do—I am not sure that the Government know that for sure. There are three options: the sale; the mutual, on which we are waiting a report from the Co-operative Society; and the prospect of an IPO. My purpose is not to divide on this but to persuade the Minister that there are still some safeguards that need to be put into the Bill. It is not good enough as it is, when we are dealing with post that is so close to the public, to sell it, wash our hands of it and leave it all to a regulator. We are here in this goldfish bowl of the House of Lords, yet outside things are happening that are bound to make people uneasy about what might happen to Royal Mail if it is sold off to A, B or C under whatever terms. I have sought in my amendment to tighten up what due diligence means, to widen it beyond finance and to look much more carefully at exactly how a buyer has conducted itself and its business history.
We all remember Ford, which bought Volvo, Jaguar and Kwik-Fit. At the end of the day, Kwik-Fit was sold to a private equity house, CVC, at the third of the price that Ford paid for it. Stagecoach bought the American company Coach USA for £1.2 billion, which almost made Stagecoach broke. Closer to present times, Southern Cross, which is the largest provider of care homes in the country—it has 31,000 homes—was owned by Blackstone, an American private equity company. It ensured massive expansion on the basis of sales and leaseback. In the valuation of Royal Mail, I understand that most if not all its sites and buildings have already been sold and are back on leaseback. Some 17.5 per cent of the shares of National Express are owned by the hedge fund Elliott. It is now actively seeking changes in the board, which has been interpreted as a move to make sure that National Express comes on the market. We need something that ensures not just the prima facie suitability of an initial buyer but the opportunity, if things are sold off—for example Parcelforce, which seems to be Royal Mail’s one growing asset—for the Government to ensure that whatever happens is right and proper.
I mentioned the Netherlands at Second Reading. Four companies now handle the Netherlands’ mail. The people of that country can expect to receive mail delivered from these four companies. There is the half-orange post, which is owned by TNT. It delivers six days a week. There is the blue post, a company called Sandd—an acronym for the “sort and delivery” postal service. It delivers two days a week. There is the yellow company, Selekt, jointly owned by Deutsche Post and DHL, which delivers twice a week. That company is interesting because it has never made a profit and is now, it hopes, going to be sold. It is run by home workers, who sort and deliver at and from their homes. The legal low limit for pay in the Netherlands is between £8 and £9 an hour, but this company is very careful to ensure that none of its workers reaches that figure and that they are kept on a monthly basis below the rate that is required by the Netherlands Government of £580 a month. They are seeking now to sell it to Sandd.
The fourth company is called half-orange, which is owned by TNT, and it calls once a week. Again, that is interesting, because there we have TNT competing with itself. Why? Because it is using not full-time post staff but casual labour. This is not something that is happening in a third world country. It simply carries the somewhat dogmatic belief that we can privatise and get competition and that it always works best. I do not think we want to risk anything like what has happened in the Netherlands happening in this country. If the Government do not make it clear in the Bill that the likes of this will not be tolerated and that that is provided for in the Bill, I will think there is something seriously wrong with the Bill—and if things go the wrong way, we will know exactly who is responsible for that.
We are seeking to sell the service at a very bad time in economic terms. There is no queue out there of people saying, “Let me buy the Post Office”, so I hope the Minister will think hard about what has been said, not just by me but by others, and will try to ensure that the Government come back at the final Reading with some proposals that comfort us and the British people that this is not being sold off just for fun but is something that we are trying to ensure is properly financed and properly run in Britain.
Lord Young of Norwood Green
My Lords, we welcome the amendment moved by the noble Baroness, Lady Wilcox, and believe that it is a step in the right direction. The question is whether it goes far enough in that direction. We welcome the Government’s acceptance of the kind of information that ought to be made available before Royal Mail is sold. We have already stated that there are still many unanswered questions about the disposal—the timetable, the qualification of the future owner, the nature of the sale, how value for money will be secured, the danger of asset-stripping, safeguards for the universal service, and safeguards for the post office network. Yet the scope that is being given to the Secretary of State to make the sale is still very large indeed, with only a factual report to Parliament.
There is a significant improvement in the scale of information that is being offered, but it is certainly not the whole answer. I listened carefully but I did not quite get the assurance given on the nature of the contract between Royal Mail and the Post Office. I would welcome the Minister, in responding, clarifying the point that she made about next spring, when this contract is likely to be signed, and saying how strong the guarantee is on the 10-year period. Is it still just a hope, and are there still likely to be legal barriers to the 10-year period being a part of the contract?
I want to speak to Amendments 7 and 8. The House will be aware that we have consistently put the case for a long-term agreement between Royal Mail and the Post Office, to run from point of sale. We have proposed a 10-year duration. As my noble friend Lord Whitty said, it is certainly not an academic issue; it is a matter of commercial survival. The Government’s assurances are an improvement but still fall short of the commitment that we seek. I have no doubt that we will continue to return to this issue until we get a satisfactory assurance.
My noble friend Lord Whitty’s amendment provides a useful elaboration of the information that we seek, including the contract length, any contractual break period and the total value of the contract to Post Office Ltd. We urgently support his amendment and urge the House to do so.
Amendment 8 seeks further guarantees, and important ones, on the risk assessment of the proposed disposal of Royal Mail. My noble friend Lord Christopher rightly seeks confirmation that due diligence of the prospective buyer has been undertaken. These are sensible steps to take before such an important transaction, and I thought that his graphic and interesting description of the Netherlands postal system was an important contribution to this debate.
Once again, we support this amendment.
Baroness Wilcox
My Lords, I rise to respond to the noble Lords, Lord Whitty, Lord Christopher and Lord Young, on my amendment and the other two amendments. In response to the concerns expressed by the noble Lord, Lord Whitty, about the details to be provided in the Clause 2 report, I reiterate some of the sentiments I mentioned earlier. The information that we propose to include in the report includes much of the information that the noble Lord seeks in his Amendment 7. I would hope that the contract’s duration would be for the 10 years that many noble Lords are seeking, but the longest legally permissible duration will depend on other factors, such as volume commitments, which must be commercially negotiated between the companies. Finally, we must not require in Clause 2 the disclosure of information that might inadvertently damage the commercial interests of either business. That would damage the commercial sustainability of the post office network, which I am sure is not the noble Lord’s intention.
The noble Lord, Lord Christopher, raised a number of important points about how the postal service is provided in the Netherlands. I believe that these are consequences of the regulatory framework in the Netherlands, not of the ownership of its postal companies, but we will come to those matters when we debate Part 3 of the Bill, and I hope I will be able to provide him with further reassurance then.
The noble Lord, Lord Young, asked me to clarify what I said about the timing of a new contract between Royal Mail and the Post Office. As I said, negotiations are under way, and we expect a new contract to be ready to be signed by next spring. I hope that with those reassurances the noble Lord feels that he can withdraw his amendment.
Lord Whitty
My Lords, I appreciate that the noble Baroness has gone some considerable way. However, from what she just said it is clear that the information that the Government envisage in the report is on potential investors and the financial viability of both halves. There is a bigger public interest issue here. The post office network, which is so dear to many of our communities, depends on this agreement for one-third of its income. Unless this Bill spells out that part of the report to Parliament will cover something like the details that I have in my amendment, I do not think that the Government will be bound to provide a sufficient report on which Parliament can judge. Therefore, I would like to test the opinion of the House.
Lord Kennedy of Southwark
( ) how the name “Royal Mail” will be protected and used by the universal postal service provider”
Lord Kennedy of Southwark
My Lords, this is a similar amendment to one that I tabled in Committee. I was not convinced by the Minister’s response then and said I would bring it back. I hope that the Minister has had time to reflect on this. As I said before, people do silly things all the time and doing nothing is, in my opinion, unwise. This amendment would only require the Secretary of State to report on how the name “Royal Mail” will be protected. If the noble Baroness is not minded to accept the amendment, can she explain how we avert another Consignia debacle? Saying that this is such a well-known and recognisable brand name that no new owner would ever consider getting rid of it just does not stack up—Consignia proved that. Future owners may decide to change the name to some other well-known name and Royal Mail as a brand would be lost. That, I contend, would be a matter of much regret. I beg to move.
Lord Boswell of Aynho
My Lords, perhaps I may comment first on the amendment which has just been moved by the noble Lord, Lord Kennedy of Southwark. We all have an interest in the continuation of the proud name “Royal Mail”, which honours those who have worked in that service over 300 years. All of us here should respect that, not only those who are historians or antiquarians. At this point, perhaps I had better declare my interest in archives and my involvement with the all-party group, of which the House may be aware. However, if the noble Lord looks forward to the proposed new clause in government Amendment 54, which has been grouped with this amendment for convenience, we might have a more substantive discussion. I look forward to the Minister's comments on that amendment, on which I shall speak in a moment.
I make no apology for wanting to see that this is got right because it is not necessary to be a fan of TS Eliot’s poetry—although I am one—to understand that the past is very much part of the present and the future and that it should not be possible, in a mechanistic way as it were, to unpick them or to take no notice of them. It is really important that the heritage and pride which have gone with that name and its tradition are celebrated and maintained, not least because it is a matter of obvious sensitivity in relation to the monarchy. We do not need to speak about that in detail but the monarch’s head appears on our postage stamps and her title attaches to our postal service. We hope that will continue.
However, as I said in Committee, any of us who have been to see the Royal Mail’s museum and archive, which is the subject of the government’s proposed new clause tabled in Amendment 54, will know the richness of what is there. There is complexity and fascination in how designs were considered, modified and put into circulation and that is all part of the tradition which should go with this. It is important that we make these commercial changes—I am not resiling from that—and that we do not spend unreasonable money on resourcing the past, however important it is. I said in Committee that there were some concerns about the resources available for the existing archive.
I thoroughly welcome the proposed new clause in Amendment 54 which is really, if I may say so, a considerable tribute to the noble Lord, Lord Clarke of Hampstead, to his colleague, the noble Lord, Lord Christopher, to my noble friend Lord Brooke of Sutton Mandeville and, modestly, I hope, to the little contribution that I made on a warm early April afternoon when we first discussed this in Committee. We raised it with the Minister, who said that she would go and think about it. She has clearly done so and we should give her a good measure of credit for that.
The proposed new clause which the Minister intends to bring forward in the Government's name is promising. For a start, it is prescriptive as to duty in that the Royal Mail company will have to send a report, which she will have to consider. That report will have to come to Parliament and anyone who has been here for any length of time is aware that that provides a channel for questions, an opportunity for expressions of dissatisfaction and so forth. Yet it does not inhibit the company in the nature and form of what it does, which is the right approach. If we sat there saying, “This is what we will do with the archive and this is the precise specification of the new and successor arrangements”, we might live to regret that and not be able to deliver it, so flexibility is desirable.
However, because these things tend to be forgotten—unless I am under a misconception; if so, my noble friend the Minister will no doubt disabuse me—it is also probably right to record that in creating this new duty, which goes beyond the existing obligation of Royal Mail, there will be obligations in relation to the archive and what we call the state process of the business. The opportunity to retain postal material and the obligation to report on what is being done is a new and welcome duty. However, we are substantially talking about a concern, which we should never forget when the ownership of public assets is moving from the public to the private sector either in whole or in part, to impose the right kind of traditions and conditions to ensure that the element of public service is not overlooked and that a great archive’s future is adequately secured.
Finally, the Government have been wise in not being too precise on the nature of this by providing, in effect, an ongoing and if necessary contingent liability on successor organisations. I do not particularly mind who owns the archive, provided that it is available publicly as a jewel in the crown and an asset that is on display, that it is adequately resourced and that we may long continue to celebrate it despite the ownership changes which are taking place under the Bill.
Lord Clarke of Hampstead
My Lords, first, I thank sincerely the Minister and her team for producing Amendment 54. I am touched by how this has been done, which satisfies to a great extent concerns that have been in my mind ever since privatisation was first mentioned—I think that was in 1970-something. Amendment 55 may appear to be going over the top a bit but any report dealing with sold-off public assets should have some reference in the accounting procedure to the donations received in cash or in kind by the museum, so that people can keep track of what has come in and what is going out.
Before I sit down, I should say that I have slipped up, as I should have mentioned in an earlier discussion the wonderful GPO film unit, which is another one that seems to have slipped off the edge. Anybody who wants to see how the GPO prepared for the Second World War—for maintaining its services during that period—should go to the archives, where the DVDs are on sale. They really are worth watching. Again, I thank the Minister for her courtesy.
Lord Young of Norwood Green
My Lords, I also support Amendment 9 in the name of my noble friend Lord Kennedy. It asks that the report should include information about how the name of Royal Mail is to be protected and used by the universal postal service provider. I listened with interest to the noble Lord, Lord Jenkin, when he mentioned the value of the brand. We should remind ourselves that it was not that many years ago that the dreaded Consignia reared its head. Nobody understood why such an appalling name was chosen. It received no public understanding or acclaim, but no doubt the consultancy did quite well out of it. There is a bit of previous in this respect, which is why my noble friend Lord Kennedy was absolutely right to draw this aspect to our attention.
I will deal also with Amendment 54. As others have said, the House will agree that we owe a debt to my noble friends Lord Clarke and Lord Christopher, who deserve enormous credit for persuading the Government to bring forward this amendment, which will require the Post Office to tell us in an annual report how these collections are being looked after. I also pay tribute to the enthusiasm of the noble Lord, Lord Boswell, in his support for this. He made the point about ensuring that the collection is on public display and adequately resourced. While we welcome the amendment, producing a report is not the same as making sure that the heritage is taken care of. However, it will certainly concentrate minds and provide a degree of transparency that was not in the original Bill. Again, I congratulate my noble friends Lord Christopher and Lord Clarke, and the Government for listening to their case, which we welcome.
We also support Amendment 55, which would improve the government amendment by requiring that the report include details of donations, both in money and in kind, from Royal Mail to the British postal museum and the Royal Mail archive. I hope that the Government feel able to take another positive step in this direction by supporting the amendment.
Baroness Wilcox
My Lords, I will respond to the amendment of the noble Lord, Lord Kennedy, and then move on to Amendment 54 and also respond to Amendment 55 at the same time.
I said in Committee that I fully appreciate the sentiment behind the amendment of the noble Lord, Lord Kennedy, and understand why he seeks reassurance that the Royal Mail name will be preserved. However, the name of the company that delivers the universal postal service should be a commercial decision for that company and its shareholders. As the noble Lord, Lord Kennedy, said in Committee, Royal Mail is a great brand name. My noble friends Lord Jenkin of Roding and Lord Boswell have agreed. The commercial reality is that any owner will see this name as an asset. It is instantly recognisable in the United Kingdom in relation to the provision of the universal postal service. As a brand it is up there with Coca-Cola and McDonald’s—brands and goods that your Lordships might not necessarily purchase but will no doubt recognise.
I have heard what has been said about companies doing daft things. I agree that this can happen, but it is very rare for any company completely to abandon its leading brand. For example, there has been much discussion of the decision by the Post Office corporation in 2001 to change its name to Consignia once its operations were transferred to a public limited company. With hindsight, all involved—Parliament and the general public—saw this as a poor decision. However, even in this situation the brand name Royal Mail was not abandoned, nor was Parcelforce or the Post Office. These brand names continued to be used in all customer-facing operations, regardless of the name of the top company. A similar example is Centrica’s continued use of the brand name British Gas. To all intents and purposes, the public-facing side of the business in the United Kingdom is British Gas. This can be seen in its advertisements in newspapers and on television. I have listened carefully to the points raised in the debate today but I am not persuaded that it is necessary to include in primary legislation a requirement for a company to be called a particular name after a privatisation. This would not be good use of the legislative process.
Lord Brooke of Sutton Mandeville
The following line is not totally transparent:
“Before preparing the report, the company must consult any Post Office company”.
Consultation can take a wide variety of forms. Could the Minister give your Lordships’ House some idea of what kind of consultation she envisages?
Baroness Wilcox
I will get a note and come back to that. I will continue with my point for the moment. Amendment 55, tabled by the noble Lords, Lord Clarke and Lord Christopher, would amend Amendment 54 to require the Royal Mail company’s report to include details of financial support, both in cash and in kind, for the museum collection and its archive. In tabling Amendment 54 we have not been prescriptive about what should or should not be included in the report. As I have said, we fully expect a Royal Mail company to continue to recognise the importance of its heritage. How it chooses to support the museum and archive will be a matter for the company. However, any support that it gives to the museum and archive will be an intrinsic part of its activities, and it follows that the report will include these details. It is not, therefore, necessary specifically to include this requirement in the new clause.
The Government want to see the heritage of Royal Mail preserved. Amendment 54 provides the right balance and places a sufficient spotlight on Royal Mail’s activities to ensure that the Government and Parliament have the opportunity to scrutinise those activities, and for Royal Mail to demonstrate its ongoing commitment to its heritage. I hope that your Lordships will be able to support Amendment 54. I ask the noble Lords, in view of the reassurances that I have given, kindly to withdraw Amendment 9 and not to move Amendment 55.
Lord Kennedy of Southwark
My Lords, I thank all noble Lords who have spoken in the debate. I also thank the Minister for her response, although it was disappointing. My amendment does not seek to affect the disposal of Royal Mail; it seeks merely to protect the name. I will not press the amendment to a vote, but the Government have taken an unnecessary and risky decision. I hope that they are right, but if they are proved to be wrong a tragedy will result which could so easily have been avoided. I beg leave to withdraw the amendment.
Lord Rogan
“( ) The Secretary of State shall submit a report to the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly setting out the impact of the proposals in Scotland, Wales and Northern Ireland respectively, including the effect on post offices, small and medium-sized businesses, rural communities, pensioners and people with disabilities.”
Lord Rogan
My Lords, I wish to move Amendment 15 standing in my name and that of the noble Lord, Lord Laird. This amendment seeks to ensure that there is adequate consultation with the devolved Governments, small and medium-sized businesses, rural communities, pensioners and people with disabilities prior to the disposal of shares in Royal Mail. In light of the news I read this morning that 9,000 post offices could close under the current proposals, this amendment seems all the more important and pertinent.
As the Bill has progressed through the House, noble Lords from Scotland, Wales and Northern Ireland have been keen to ensure that it protects the current level of postal services in those nations. We have sought, and received assurances from the Minister, that consultation will take place with service-user groups prior to any changes being made to the universal service obligation. This is most welcome. I now ask the Minister to ensure that that same sensible process is undertaken for largely the same reasons prior to the disposal of shares in Royal Mail.
In Committee, the Minister referred to Sections 3 and 7 of the Communications Act, which gives Ofcom a duty to have regard to a specified range of groups when carrying out any of its functions. In particular, Ofcom must have regard to the needs of four user groups: persons with disabilities; the elderly; those on low incomes; and the devolved Administrations. This amendment refers to matters that I believe fall outside Sections 3 and 7. It relates to the need for consultation to take place with the devolved Administrations as soon as is practical after the Minister has taken the decision to dispose of shares in Royal Mail.
I am somewhat bemused that Clause 2 does not already contain this provision. Noble Lords on all sides of the House have been keen to ensure that this privatisation does not result in services being cut back in remote rural areas. I believe that noble Lords are equally keen to ensure that what we broadly call “vulnerable service users” do not see their postal services denuded. Let us be clear: this legislation is not without controversy. I believe that it will benefit from a far greater sense of legitimacy if Ministers are able to report on their intentions to the devolved Administrations and key service user groups as the Government undertake a share disposal in Royal Mail.
The postal services are not devolved matters for logical reasons, as my noble friend Lord Empey so eloquently put it in a previous debate. Royal Mail is a part of our national infrastructure which is highly valued by the British public. I would not want to see the type and quality of postal services that we receive differ from one area of the United Kingdom to the next. It is precisely because this is not a devolved matter that I believe the Government must go that extra mile and ensure that their intentions in respect of privatisation are communicated to the devolved Administrations.
As many noble Lords have explained in Committee, small businesses in Scotland, Wales and Northern Ireland are particularly reliant on Royal Mail services and it would seem sensible that this user group is consulted prior to disposal, particularly in the current economic climate. Other key service user groups, such as people living in rural communities, pensioners and disabled people in the devolved Administrations could be affected by the sale of Royal Mail, and as a result deserve to be consulted prior to Royal Mail moving from the public to the private sector.
This amendment, and others similar to it, that were moved during Committee reflect deeper concerns about the impact that privatisation of Royal Mail will have on services in our communities, particularly in rural areas of Scotland, Wales and Northern Ireland. Noble Lords set out in Committee a number of worries they have about the lack of a commitment from the Government to use this Bill to ensure that postal services are continued at a level users currently enjoy, and that no one user group is impacted on negatively.
We are equally concerned that plans to privatise Royal Mail will be forced on the devolved areas without a meaningful consultation with the devolved Administrations. There is real concern about the consequences of Royal Mail privatisation on service users in Scotland, Wales and Northern Ireland. Failure to consult specifically in these areas will lessen the credibility and legitimacy of the privatisation—a potential problem that is easily rectified by Ministers agreeing to the terms of this amendment.
I trust that your Lordships will be able to support this well intentioned amendment, which aims to increase the legitimacy of this legislation and ensure that the Government's plan to privatise is fully communicated through the proper channels to those who most rely on Royal Mail services.
Lord Low of Dalston
My Lords, I apologise to the House for missing my cue at the beginning of this group but I should like to speak briefly to my Amendment 14, which is in this group. It seeks to ensure that service-user groups are consulted before Royal Mail is sold off and would require the Secretary of State to bring a report to Parliament setting out how the universal service provider will maintain the minimum requirements contained in the universal postal service obligation. Before I do that, I want to say a word about the debate we had on this issue on the second day in Committee on 14 March. In that debate, the noble Lord, Lord Razzall—I am not sure whether he is in his place today—whom the Minister described as having all the subtlety of an air raid, said:
“If we are to preserve the reputation of this House for knowing the facts and having expertise, we really must not say things that are not true … I said earlier, it is more expensive for the Royal Mail to deliver to Norwood Green or Hampstead than to maintain the service to the Orkneys and Shetland … if we are to be the serious House that knows the facts, we should take that on board”.—[Official Report, 14/3/11; cols. 113-14.]
Having a concern for the truth which is at least as great as that of the noble Lord, Lord Razzall, I undertook to follow up the matter and come back to it on Report, if it was necessary to set the record straight. The Minister helpfully sent us a note on the subject and I have also taken the matter up with the Royal Mail. From this it appears that the cost of delivering the universal service in urban areas other than London is approximately 11 per cent lower per postal item than the average cost across the country as a whole. The cost of delivering the universal service in rural areas is approximately 11 per cent higher per postal item than the average cost across the country as a whole. However, the cost of delivering the universal service in London is an anomaly at approximately 10 per cent higher per postal item than the average cost across the country as a whole, largely due to higher wage rates in London.
From this it is apparent that the cost of delivering to London and rural areas is roughly the same and far higher than the cost of delivering to other urban and suburban areas. Royal Mail comments that, other than in London, delivery of an item to an urban area is on average 22 per cent less costly than delivery to a rural area. I repeat that the claim of the noble Lord, Lord Razzall, that it is more expensive to deliver to Hampstead and Norwood Green than to Shetland and the Orkneys is not quite correct. I have actually toned down what Royal Mail said. As Shetland and the Orkneys are more remote than the average rural area, delivery costs substantially more per item than it does in London—more than double. It is not clear where the noble Lord was getting his figures from. He was probably comparing wage rates that are higher in London; and he was probably not comparing like with like. Myriad other costs are involved in delivering to places such as Shetland and the Orkneys. I hope that that is now clear and that we can put that matter behind us.
Lord Empey
My Lords, I should like to speak briefly. I am sure that the Minister in her response will argue that the amendment is not required because the main purpose of the Bill is to ensure the survival of the universal service obligation. However, the amendment indicates the level of concern in rural and remote areas that somehow, once the service is passed into the hands of the private sector, other things may happen. I hope that the Minister will again attempt to allay those concerns, which I know are real.
I said in my previous remarks in this House that many people regard the Royal Mail as a piece of national infrastructure. It is in that context that people, particularly those in remote areas who are already disadvantaged, fear—perhaps irrationally, but I nevertheless assure the noble Baroness that their fears are genuine—that somehow, despite the intentions of the Bill, things will ultimately change. I hope that that is not the case, but perhaps I may assure her that these concerns are genuine, and I hope that in her response she can give comfort to those of us who have these anxieties.
Lord Whitty
My Lords, I support the amendment in the names of the noble Lords, Lord Rogan and Lord Laird. The Minister will be well aware of my past engagement with Consumer Focus, the statutory body for postal services, which operates as separate entities in Scotland, Northern Ireland and Wales. It has become apparent, when assessing the needs of domestic consumers of postal services and post offices, and also those of small businesses in using those services, that there are somewhat different considerations relating to the firm commitment to the network and the universal service, particularly in rural areas and in those countries.
In Northern Ireland, there are particular issues relating to the north and the south, to An Post, and to getting mail across the sea. While preserving the universal service, the body of the post office and the body of Royal Mail as parts of our United Kingdom national infrastructure, it is important that we recognise that any dilution of the service or differential treatment of the parts of the United Kingdom would be particularly detrimental to those countries. It is therefore important that the devolved Administrations are fully involved in any changes.
Perhaps I may gently say to the noble Baroness that it has been obvious that her department in Whitehall has not always been the best when consulting devolved Administrations on a whole range of issues, including this one. The department is getting better, but acceptance of at least the principle of the amendment would be appreciated and would help the Government’s approach. It would meet the fears of many businesses and individuals in those countries, particularly in rural areas and small towns.
Lord Razzall
My Lords, I was not going to intervene, but because the noble Lord, Lord Low of Dalston, raised the point I made in Committee, we should put on the record that after the noble Baroness looked into this point she wrote to both of us and said that we were actually both right. As the noble Lord indicated, the cost of delivering items of mail in London is more or less the same as the cost in rural areas, and is significantly greater than the cost in other United Kingdom cities. The point that I was trying to make, obviously inelegantly, was that if I was really worried about what would happen I would worry about London. It is not only that the cost of delivery in London is greater, but London is such a huge element in the costs of Royal Mail, which has huge overheads, any third party looking at the overall cost of the Royal Mail—rather than looking at the Orkneys and Shetland—will have to look at the costs in London. It is Hackney that ought to worry, rather than the Orkneys and Shetland. That was the point I was trying to make.
Lord Low of Dalston
If it is truth that we are concerned with, as a serious House concerned about its reputation, it is not correct to say that it is more expensive to deliver to Norwood Green and Hampstead than to the Orkneys and Shetland.
Lord Stevenson of Balmacara
I hesitate to interfere in what is obviously an important battle of words; perhaps the Minister will take on the mantle of responding to ensure that we have equity at the end of this debate.
I shall speak to the substance of the amendments in the names of the noble Lords, Lord Low and Lord Rogan. The sale of Royal Mail and the separation of the post office network is a momentous event and is bound to cause concern and have genuine repercussions on the universal service and on the post office network, as we have heard and will continue to hear during debates on Report. We are very pleased by the stress that the Government are placing on retaining the universal service. There has not been a sitting in which we have discussed the Bill without that provision being at the heart of the remarks that have been made; we welcome that.
I pay tribute to the noble Lord, Lord Low, whose representations led the then Government to incorporate a service to blind and partially sighted customers into the universal service minimum requirement and to put it in the 2009 Bill. Nine million items a year are sent free of charge through the Articles for the Blind service, and the Bill carries through that decision, a move which will be welcomed on all sides of the House.
That experience illustrates the value of proper consultation to improve results and help people to feel part of the decision rather than the victims of one. It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups, but the amendments would require—just at the time it is needed—proper consultation with user groups, including small business, pensioners, people with disabilities and people in rural areas. People with a disability are more likely to use mail services as a means of communication. Disabled people visit the post office to post mail more than the average. Equally, other groups who I mentioned in that list need to be consulted, and the amendments would ensure that.
The other amendment deals with concerns in those parts of the UK which would be most vulnerable to any reduction in the USO or the post office network. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK.
I am not sure whether Ministers have had the chance to read the current edition of the London Review of Books and, in particular, the article by James Meek entitled “In the Sorting Office”. It is an extremely good tour d’horizon of some of the problems facing modern post services. He spends some time describing his experiences visiting the Netherlands and the operations being carried on there, some of which were mentioned by my noble friend Lord Christopher.
In particular, I draw attention to the points Mr Meek made in the article about when he visited rural parts of the United Kingdom. Muck is a Scottish island two and a half miles south of Skye. The article states:
“There are 12 households on Muck, and they get mail when and if the ferry arrives from Mallaig … Bad weather can cut the ferries down to one a week in winter. There have also been times—it happened the other day”—
when one puts a first-class letter on the early ferry and it reaches London the next morning. So they get a very variable service. The problem is that Muck now has a satellite dish for broadband internet. You can even, if you are lucky, catch a mobile signal in some parts of the island, if the wind is in the right direction—I added that last bit, but it is true.
“Nowadays email’s so important for communication that the post is getting less and less important”,
says one islander:
“I'm afraid the Royal Mail's in a losing battle”.
The article goes on to draw something to the wider public's attention which I had not known, which is that Jersey,
“has just announced it is abandoning Saturday deliveries in an attempt to staunch the flow of red on its balance sheet”.
I think that Jersey is still a part of the United Kingdom, although it is obviously a separate entity, so we are in danger of some dilution of the USO.
We will return to the question of the USO and how we will protect it. We know that the Government are on our side, but I think that there are measures that might strengthen that protection. The amendments are about consultation to make sure that user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas, are consulted, and I urge the Government to accept them.
Baroness Wilcox
I turn first to Amendment 14. As I said earlier, Ofcom will be required to report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay this report before each House of Parliament.
In performing all its duties—those in this Bill and those in the Communications Act 2003—Ofcom must have regard to various areas and groups as set out in Section 3(4) of the 2003 Act. These include: the needs of persons with disabilities, of the elderly and of those on low incomes; the opinions of consumers in relevant markets and of members of the public generally; and the different interests of persons in the different parts of the United Kingdom, of the different ethnic communities within the United Kingdom and of persons living in rural and in urban areas.
That list covers all the groups set out in the amendment tabled by the noble Lord, Lord Low, and I hope that he will be reassured by that. As I said in Committee, those requirements on the performance of Ofcom’s duties will apply to all future regulation of the postal sector. That is far more enduring than a snapshot assessment at the time of a sale.
The noble Lord, Lord Low, mentioned the power in Clause 33 to amend the minimum requirements of the universal service. We will come to that power when we discuss amendments to Part 3, but I know now that the power in Clause 33 is subject to the affirmative procedure.
On Amendment 15 in the name of the noble Lords, Lord Rogan and Lord Laird, to which the noble Lord, Lord Rogan, spoke this evening, I reiterate what I said in response to a similar amendment laid by the noble Lord, Lord Touhig, in Committee. The overarching objective of the Bill is to secure the universal postal service in the United Kingdom. It is about securing a postal service that is available to all in the United Kingdom and delivers to all addresses in the United Kingdom.
As I said in Committee, the Government have already produced an impact assessment on the Bill’s proposals. The assessment considered the impact of the proposals on all parts of the United Kingdom, together with the impact on small firms, rural communities and disadvantaged groups.
As I said earlier, Ofcom will report annually on its activities, including ensuring the provision of the universal service throughout the United Kingdom. In addition, we expect Royal Mail to continue to report on its quality of service performance, broken down by postcode area, so that there continues to be transparency about the provision of the universal postal service to all parts of the United Kingdom.
With regard to post offices, the Government recognise the need for accessibility by specific groups. The report by a Post Office company required by Clause 11 must include information about that. Clause 11 also requires that the Secretary of State give a copy of the report to Ministers in the devolved Administrations, as well as, of course, laying the report before this Parliament.
The information that is already in the public domain and that which will be provided as a result of the Bill will provide long-term transparency on the protection of the universal postal service and the accessibility of post offices throughout the UK. Those reports and the activities of the regulator will, as I have explained, take into account the needs of disadvantaged groups and those in rural areas.
I hope that, with these reassurances, the noble Lord will withdraw his amendment.
Lord Rogan
My Lords, I thank those Members who have spoken to my amendment. I have listened to the Minister and thank her for her remarks. I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, the amendments make the case for employee shares being held as a trust and for employees to have a voice on the board in the light of the employee share scheme being established. We agree that that should be in the Bill because we have heard a lot of Ministers’ warm words for employees, but we need more assurances.
The benefits of employee share schemes, which were rehearsed to some extent in Committee, are widely recognised. They can include motivating employees to become more productive, helping to align employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do that on their own. They have to be part of a wider approach to good industrial relations. Employee shares will not be welcomed if they are felt to be a sop, to be at the expense of pay or a substitute for the usual channels of interaction between management, unions and staff.
However, given the more generalised benefits of such schemes and the very significant efforts made by current employees to implement the modernisation programme within Royal Mail, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. Carole Leslie of the Employee Ownership Association spoke of the benefits of such a scheme in evidence to the Public Bill Committee in another place. She said:
“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding … the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 76.]
If we accept the principle of employee shares, we are still short of detail. The Government have said that there will be a scheme but they have not said exactly what it will be. Having said that, we welcome two important concessions that the Government have made. First, we have pressed for greater detail about the scheme and are therefore pleased that the Government have brought forward an amendment so that, before the disposal of Royal Mail takes place, there will be a report to Parliament setting out the detail of the proposals for an employee share scheme.
Secondly, in Committee we pointed out that the Bill as it stands requires employee shares to be offered only when the last Crown share in Royal Mail has been sold. We argued the case for a trigger that kicks in when the first shares are sold. I think I heard the Minister suggest that that might indeed be acceptable to the Government, in which case we welcome that as well. However, whenever it is, we think that the Government should make some employee shares available when the first disposal is made.
The amendment proposes that shares should be held in trust for the benefit of employees, as we think that that is the right way to settle this matter. We now understand that this would be difficult for some employees to accept, as they would expect to be able to cash in the shares if they were taking them up, but we do not think that that is the right way forward to build in long-term value in the company. We believe that, for example, on leaving employment, shares held by employees should be disposed of only by way of transfer for consideration through the trust. It is obviously fair that employees who leave employment and leave a scheme should be able to capitalise on their shareholding, particularly if there has been capital growth. That is a scheme incentive. However, to maintain the integrity of the scheme as a whole, the disposals should go back into the scheme.
The amendment also calls for representation on the board for the employee share scheme once it is established. I have already made the arguments in favour of generalised employee representation but I think that they acquire additional merit when it is seen that some 15 per cent, we hope—but certainly 10 per cent under the Government’s proposals—of the shares will be available to be held by the employees of Royal Mail. This means that they should as of right have a chance to have a collective voice at the highest level, and we think that that should be stated in the Bill. I beg to move.
Lord Razzall
My Lords, having sat through what I would describe as “Lord Mandelson’s Bill” under the previous Government, I am absolutely delighted at the Labour Party’s conversion on the road to Damascus regarding their commitment to employee participation here. The noble Baroness would not be surprised if I indicated that, were the Government minded to go from 10 to 15 per cent, I could not be more delighted. However, whether she can persuade the Treasury of that, I have my doubts.
Lord Brooke of Alverthorpe
My Lords, I support my noble friend Lord Stevenson. I do not think that there has been any conversion on the part of the Labour Party. I was an employee when NATS was a PPP. I was an employee share representative acting on behalf of the employees and I was a partnership director. It is true that the employees had 5 per cent of the shares, which is less than what is on offer at the moment, but the Labour Government’s policy was to try to develop more employee involvement than there had been in the past. I suspect that, had they stayed the course with the previous Bill, we might have seen the emergence of something like that. There were certainly plenty of private discussions about the possibilities. Indeed, prior to the Bill being presented, some of us had conversations with Royal Mail about the prospects of creating a trust for employee shares, and we tried to be quite innovative in our approach. Some of us identified that one of the major issues facing postal employees was problems over home ownership. If we created employee shares within the company, while those shares would not be on the open market but would be kept within the trust, why could an arrangement not be created whereby the share ownership was offset against support from building societies to assist employees in purchasing or part-purchasing their homes? Royal Mail looked into that at one stage. Therefore, I welcome what the Government are trying to do. Perhaps the Minister, with all her powers of persuasion, can get round the Treasury and convince it that it should move from 10 to 15 per cent.
It has been pointed out to me that this offer is the biggest ever to be made during the course of a privatisation. I believe that if we check the records to see what happened with the bus industry, where deregulation and privatisation took place on a great scale around the country, we will find that many employees and managers had the opportunity to purchase shares in many of the bus companies in the country. Indeed, in some instances, they took them over 100 per cent, some of them also being put into trusts and some into ESOPs. Therefore, I believe that there is a precedent for offering a level of ownership higher than 10 per cent. I suggest that the Minister has a look at the bus industry if she needs some supporting evidence for her arguments in persuading the Treasury to go beyond the 10 per cent offer.
Secondly, I believe that there should be a trust, although I shall not repeat all the arguments that have been made before. There is a natural temptation for some people to get their hands on the shares and perhaps to dispose of them fairly quickly, as we have seen happen in several privatisations, but I believe that a trust provides a means for an employee to be more permanently committed to the company and to the welfare and profitability of the company in the long term. I hope that the Government will come forward with proposals on a trust.
Thirdly, that leads me to the final point made by my noble friend Lord Stevenson concerning representation on the board. I hope that shares will be issued on the basis of equality, regardless of people’s grades within the company, so that the managing director will get no more shares than a postal worker. Equally, I hope that, if there are instances in which votes have to take place within the trust, each vote will carry the same weight and value. In particular, an opportunity should be created—probably for the first time; certainly my Government did not do it—for there to be an employee director on the company that would be created under the privatisation proposals to represent the interests of the employees’ shares.
This is a chance for the Government to be progressive and to effect some changes in a new way. I see that on 7 June Mr Francis Maude is to speak to a gathering on employee ownership in the Strangers’ Dining Room in the other place. Perhaps he will float what the Government have in mind regarding further changes in the nature of ownership within the public service, with a greater push for employees to have a greater stake in the ventures in which they are involved. This could be linked up with what is happening in Royal Mail.
The Deputy Speaker (Lord Brougham and Vaux)
My Lords, I should have announced that, if this amendment is agreed to, I cannot call Amendment 17 due to pre-emption.
Lord De Mauley
My Lords, I again say that I am grateful to noble Lords on the opposition Front Bench who agree with us on the establishment of an employee share scheme. I think that we all agree that this is a key feature of the Bill and will help improve employee engagement and the culture of the company.
However, we should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and secure the future of Royal Mail. A key means of doing that is enabling the introduction of private capital. In a previous debate, the noble Lord, Lord Tunnicliffe, stated that the Government should strike the right balance between employee shares and attracting private capital. He also said that we should learn lessons from previous privatisations. Yet, through their Amendments 16 and 17, noble Lords seem to suggest that we have not gone far enough.
So let me put in context the commitment we are already making through Clause 3. The minimum 10 per cent share requirement in this Bill is the largest statutory employee share scheme of any major privatisation. There is no doubt that it is a meaningful share, but one which, in our judgment, will not harm our ability to attract private capital. As I have said previously, most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the eventual share schemes in those past privatisations offered generally smaller stakes—5 per cent in the case of BT and British Gas and less than that for the other utilities of electricity and water. Only Rolls-Royce and BA came close, at 10 per cent and 9.5 per cent respectively, but I reiterate that we are committed to at least 10 per cent. The noble Lord, Lord Brooke, referred to the bus companies. We of course looked at them, but they were generally very much smaller companies. We consider that a stake of at least 10 per cent already strikes the right balance between a meaningful stake and attracting private capital.
Amendment 16 would also require that the shares be allocated to employees on a pro-rated basis in line with the reduction of the Government’s shareholding. The Bill already allows for that and, as the noble Lord, Lord Stevenson, mentioned, the Government have committed to place shares into the scheme simultaneously with the first sale of its shares.
In Amendment 18, noble Lords have sought to specify the design of the scheme such that it is structured as a share trust. As I said during our debate in Committee on a similar amendment in the name of the noble Baroness, Lady Dean—ably spoken to by the noble Lord, Lord Brooke of Alverthorpe, in her absence—an employee share trust certainly has its attractions, particularly its ability to deliver the Government’s objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services, too, has been clear that he sees many attractions to establishing such a trust. However, it is important to keep options open on the design of the scheme at this stage. Individual share ownership also has its merits, giving employees a very real sense of ownership through their share certificates.
The design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be appropriate if Royal Mail were floated on a stock market. There are circumstances where it could also make sense to have some combination of a trust and individually held shares. The noble Lord, Lord Tunnicliffe, suggested in our debates in Committee that perhaps some shares could be used for training or bursaries. Again, there could be merits in such ideas. However, until we have reached a firm decision on the form of a transaction, it would be unwise to set in stone the form of the employee share scheme. However, I remind your Lordships that government Amendment 6, which we debated a little while ago and your Lordships accepted, requiring us to give details of the scheme when we put shares into it for the first time, will provide the House with further assurance about its proposed design at the appropriate time.
Finally, Amendment 18 returns to the issue of having an employee representative on the board. As my noble friend said when responding to Amendment 10, while the idea may well have some merits, it is for Royal Mail and its shareholders to determine whether the board should include an employee representative. Thanks to this Bill, Royal Mail’s shareholders will of course include its employees in the future.
The future ownership of Royal Mail, by both private investors and its employees, inextricably links them. Within the important boundaries set by Clause 3, the exact size and form of the scheme should therefore be informed by the type of transaction and the circumstances at the time of sale. I ask noble Lords to accept that it is imperative that we keep our options open. I therefore ask them not to press their respective amendments.
Lord Stevenson of Balmacara
My Lords, I thank the noble Lord, Lord Razzall, for his support for the amendment, and my noble friend Lord Brooke for sharing again his experience of working in this operation. We can laugh about it even if we cannot always agree on the absolute detail of what the figures mean. My noble friend Lord Brooke said that this was an opportunity for the Government to show themselves to be progressive in these matters, a theme which has run through most of our debate today. I am grateful to have had confirmation that the Government feel that the employee share scheme should be pushed forward and supported. We are pleased to have had confirmation that shares will be available from the first tranche.
The Minister said that the Government were minded to go for a trust but were not quite sure. There will be a point where they have to come down on one side of the fence or the other. We can see the argument for keeping options open—we are not so daft as not to—but what the purchaser is going to get needs to be clear. I would have thought that any purchaser who wanted to put a very large stake into Royal Mail would want to know that it is a well run and productive corporation and will do the job in which they are investing. That must require them to have good employee relationships, and we have argued—I think that the Minister agrees—that there is a case for ensuring that the employees’ involvement is proper, appropriate and at the level which will mean that we will get a well run and productive firm.
We have argued for greater than 10 per cent—I got a sense of some support from the noble Lord, Lord Razzall, on that. I do not think that the Minister is minded to go that way and he produced a long list of previous privatisations. But it is the future. Why not boldly go where others have not gone and take it up to 15 per cent, and then reflect on that? However, I shall withdraw the amendment.
Middle East Peace Process
(13 years, 6 months ago)
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Baroness Tonge
To ask Her Majesty’s Government what assessment they have made of progress in the Middle East peace process.
Baroness Tonge
My Lords, I was going to apologise this evening for drawing your Lordships’ minds away from the tumultuous events in the Middle East, the dubious NATO campaign in Libya and the capture and assassination of Osama bin Laden, but I shall not in view of other developments over these past few days. This debate is very timely.
I want to make an appeal that we all remember the Palestinians and the injustice that has been meted out to them since 1948. It is an injustice which lies at the very heart of Arab Muslim angst against the West and which has allowed one country, Israel, supported by the USA and the European Union, consistently to break international law since 1948, when it was decided that the Palestinians would pay the price of the Holocaust even if they had had nothing to do with it.
Let us remind ourselves quickly of the facts on the ground. The wall or security barrier has been built between Israel and the West Bank. Fair enough, I would say. I witnessed during the second intifada the sheer terror of Israeli citizens as they experienced the suicide bombers—the al-Aqsa martyrs as they were then—encouraged and supported by Fatah. Let us remember that Fatah is now Israel's chosen partner for negotiations. The barrier was quite understandable, but what was outrageous was that the course of that barrier grabbed a huge amount of land and water in the West Bank from Palestinian farmers and families.
Palestinians have difficulty accessing healthcare and education, and humiliation continues daily at the check-points. The settlements go on expanding despite exhortations from the international community and repeated criticism from this Government. Farmers are attacked, crops are ruined and children are brutalised and imprisoned. Nowhere is this better demonstrated than at al-Walaja near Bethlehem. The town and its people are being strangled. I have no time to give noble Lords the details, but I hope that the Minister will comment on what is happening.
In Gaza, little has changed. Food is scarce if you are poor, as most Gazans are. Together with the terror of constant overflying and sonic bombing, and the poor education that the children are getting, the international community, by its inaction, is allowing a whole generation of children to grow up malnourished, undereducated and deeply traumatised by the actions of their neighbour, Israel. A more recent development is the targeting of children by snipers as they attempt to collect gravel for building purposes, because building materials are not allowed in. Gaza is an academy for the terrorists of the future: I cannot repeat this often enough.
We must not forget, in this overview of the situation, the plight of Israeli Arabs and Palestinians living in Israel, who are subjected to an apartheid-like regime of control and lack of freedom, let alone the 7,000 to 8,000 prisoners languishing in Israeli jails. Will the Minister update us on the humanitarian situation in Gaza and the West Bank, and on what the Government intend to do about it?
There have been great changes recently in the situation. In March, after a meeting with Mahmoud Abbas, the Foreign Secretary said:
“The Peace Process must not be allowed to become a casualty of uncertainty in the region. It is too important to be allowed … to falter”.
He said that a big hindrance to any negotiations taking place was the divisions between Fatah and Hamas. He also cited the problems of the settlements, East Jerusalem and Gaza. William Hague looked forward to the upgrading to mission status of the Palestinian delegation to the UK, but did not comment on the fact that, a month earlier, the USA had vetoed a UN Security Council resolution condemning the settlements, even though it used the same words that Hillary Clinton used a year before when the USA called for an end to settlement expansion. Is this yet more evidence of the power of the Israel lobby in the United States?
The Palestinians have made progress and, thanks to the good offices of the new Egyptian Government, and Mr Al-Arabi in particular, a reconciliation has been brokered between Hamas and Fatah, and promises have been made by Egypt to open up the Egypt-Gaza border crossing at Rafah. Mr Al-Arabi is a very distinguished man and a former judge at the International Court of Justice. He is to be applauded for his efforts and I hope that we will encourage him in every way possible.
The Israeli Government, predictably, has said that Fatah must chose between Israel and Hamas. They always produce another hurdle when one is removed, and never miss an opportunity to miss an opportunity. They have also decided to withhold taxes worth $56 million that they have collected on behalf of the Palestinian Authority on the grounds that the money may be used by Hamas to buy arms. Mr Al-Arabi has made it clear, as have the negotiators in Cairo, that a unity Government composed of independents and technocrats from the West Bank and Gaza will run the Palestinian Authority until elections have taken place. It will not be run by Fatah or Hamas. Israel must be told that this could be its last chance to get a two-state solution. A huge opportunity was missed after the Palestinian elections in 2006, when we refused to give the Palestinian people the Government they wanted after a monitored, free and fair democratic process.
Israel's fear of Hamas is based on the old Hamas charter, which is a relic, and on the fact that neither Israel's leaders nor ours have ever bothered to talk to Hamas leaders. On numerous occasions I and other parliamentarians have been assured by Hamas leaders, in particular Khaled Meshaal, that they will accept a two-state solution based on the 1967 borders, and will maintain a truce. However, things are getting more difficult. The rockets fired recently were from dissident groups in Gaza, which get more numerous and better supported as Hamas is seen not to be able to make progress in its negotiations with Israel.
Finally, Israel has been indulged for too long in the interests of American foreign policy as well as its own. The rights of Palestinians under international law have been ignored, and much suffering and injustice have been endured. International law was not mentioned in the 2003 road map, which was meant to provide a framework for negotiations. The International Court of Justice ruling on the separation barrier was ignored, and President Obama, after he took office, ignored completely international law in his speech in Cairo on Israel and Palestine. Why?
International law is for everyone. It is for Israel, Palestine, Bahrain, Syria, the European Union—and even the United States of America. If we continue to apply it selectively, there will be no future for Israel, and the world order will ultimately collapse. I implore the Minister to tell the House that we will bring pressure to bear on Israel to co-operate with Egypt and the Palestinian negotiators in Cairo. We must not miss the great opportunity of the Arab spring—however difficult it is, and however many road blocks are put in the way—to bring justice also, at last, to the Palestinians.
Baroness Northover
My Lords, I gently remind noble Lords, before we move into the main part of the debate, that it is time limited and that when noble Lords see two minutes on the clock, their time is up.
Lord Dobbs
My Lords, I thank the noble Baroness for introducing this very important debate. I remind the House that peace is a puzzle of many parts, and in the Middle East one of the important parts is Pakistan. It is a country in great crisis. It also has an arsenal of nuclear weapons. The price we would pay for the failure of Pakistan would be devastating. It would destroy the prospects for peace in Afghanistan and infect the entire Middle East. That failure would almost certainly be lived out also on the streets of this country. It could put in the hands of extremists like bin Laden the most terrible weapons of destruction.
It is very easy to lay blame. Did Pakistanis know that bin Laden was hiding there? Of course some of them did, but it would be folly to kick over the entire barrel simply because some of the apples are rotten. Perhaps it is scarcely surprising to see the media sneering, but I was desperately disappointed to hear the CIA director, Leon Panetta, publicly proclaiming that Pakistan could not be trusted over bin Laden. In one broad, sweeping, trite statement, he humiliated them all. It is precisely that sort of insensitivity that could push Pakistan into the abyss.
The country needs help, not humiliation. A stable Pakistan is a precondition for a wider peace. We in Britain have a unique role to play. Our ties are abundant. We have educated their politicians, trained their officers—and one day we might even beat them at cricket. Britain needs to be the sort of good and patient friend to Pakistan that only we can be. Restoring stability will not be easy. It will not be completed in one year, or probably even in 10; but the prize is worth every effort, because if we fail, the alternative is not just a subcontinent but an entire Middle East in nuclear chaos.
Lord Anderson of Swansea
My Lords, I will make four points. First, the prospect six months ago of achieving peace in the Middle East through the peace process appeared very bleak. Progress made by Prime Minister Olmert and President Abbas in 2008 was reversed by the new right-wing coalition led by Prime Minister Netanyahu, who could plausibly point to the fact that there was no negotiating partner on the other side who could deliver, and to the increasingly sophisticated rocketry passed by Iran to Hezbollah and Hamas. Again the hopes raised by President Obama's Cairo speech were dashed, and most commentators at the time were confidently predicting the renewal of armed conflict.
Secondly, much remains unchanged, but there are now flickers of a positive movement both in the Palestinian economy and in their security services. The Arab spring has weakened the rejectionist Syria, and the new Egyptian initiative today unites the Palestinian factions. It would be helpful to have the Government's analysis of the significance of this. However, the way in which Hamas is mourning the death of bin Laden is surely not helpful.
New factors put Israel on the defensive; Egypt will shortly open its borders with Gaza, and a Government responsive to their people in Egypt might in fact repudiate the 1979 treaty with Israel. Again, the Palestinian Authority will press the United Nations General Assembly in September for recognition. There will be much international support, and this Government will have to have a clear position by that time.
Finally, the status quo is no longer tenable. Friends of Israel should urge Prime Minister Netanyahu to respond positively to the new challenges. Time is not on their side. One hopes that the challenge today of President Abbas—choose settlements or peace—will be answered positively.
Lord Alderdice
My Lords, the strategy that has been adopted for some time—isolating Hamas in Gaza—seems no longer tenable. As many of us have advised, it was not a long-term option. In the case of Egypt itself, the Arab spring has meant that instead of standing in the way of an accommodation between Fatah and Hamas, Egypt has within weeks facilitated it. It has also, as the noble Lord, Lord Anderson, indicated, pledged to open the borders. This in practice makes the siege of Gaza impossible to sustain. However, while we might focus on others in the few minutes available to us for this debate, I should like to put to the Minister the question of how Her Majesty’s Government will respond to two developments.
The first development is the move towards a Palestinian Government who are more inclusive and supported by Fatah and Hamas. Will Her Majesty's Government engage with that new Palestinian Government, or will they do what they have done in the past, and what they did after the Mecca agreement, and avoid engagement because of the support or participation of Hamas?
Secondly, in the event—as seems extremely likely, as the noble Lord, Lord Anderson, said—that the United Nations General Assembly approves a Palestinian state on the 1967 borders, albeit a relatively virtual one, what will be the approach of the United Kingdom Government? Will we support such an application? If it is approved by the General Assembly regardless of whether we support it, what will be the attitude? This is not, of course, a question only for us or the United States. If Hamas is part of a UN-approved Palestine, what will be its reaction to a UN-approved Israel? Everyone is put under pressure to recognise each other. However, I would appreciate the Minister's response on those two questions.
Lord Weidenfeld
My Lords, I am afraid that the two-minute speaking limit prevents me arguing certain basic facts with the noble Baroness, having myself been involved for over 60 years with Israel. There are many facts concerning even its creation which I should very much like an opportunity to discuss here at greater length.
I think that the Arab spring is a mixed blessing. On the one hand it has given fresh hopes; on the other, the symbolism of Tahrir Square has also meant assault and savagery against a hopeless American woman. I think that the important thing now is the attitude of the reunited two forces, Hamas and Fatah. If Prime Minister Abbas, whose Administration has a great record of economic improvement and recovery, were willing to prove to the whole world that Hamas is unmistakably and irrevocably prepared to accept the existence of the state of Israel and of two adjacent states, an Arab state of Palestine and a Jewish state of Israel—and, indeed, if Hamas itself would endorse that—then I think that the road is open for negotiations.
I had the opportunity in recent weeks to be in Israel and to speak to leaders of the Government, the opposition and other people of importance and influence in the country, and I can tell your Lordships that there is considerable desire for true peace along the lines of two countries, Arab Palestine and Jewish Israel. However, Hamas has to submit to the supreme test—that it is unmistakeably and irrevocably agreeable to the existence of Israel. Nothing else would suffice or enable a negotiation to start.
I also believe that in the shadow of the death of the greatest terrorist of all time, we will all have to be watchful. The fanatical followers of bin Laden will try to wreak revenge. We therefore need to have an iron will, patience and understanding, and still not falter in our desire to have peace.
Finally, I believe that the unilateral recognition of a state of Palestine is a disastrous move that would aggravate the issue unless it were immediately preceded by efforts to get the parties to the table. I know that responsible European leaders are using their influence in every way to prevent this proposal coming before the United Nations, and certainly not before the Security Council.
I believe that we should all now be working together under the leadership of the United States, reinvigorated as it now is by the success against bin Laden; try to see the position fairly; and bring the parties together on the basis of total and unconditional mutual recognition.
Lord Dubs
My Lords, I recently visited the West Bank; it was my first time there. Of course any solution must acquire security for Israel, but also dignity, self-respect and justice for the Palestinians.
As part of the visit I went to see the Israeli military courts in Ofer. I believe that the way in which these courts operate is an obstacle to achieving a just peace in the region. We went to see how children are treated by this system of military justice. Approximately 700 Palestinian children are prosecuted every year in these courts, and at the end of January this year some 222 were in jail. In the court we visited we saw a 14 year-old and a 15-year-old, one of them in tears, both looking absolutely bewildered. What shocked me as much as anything was to see that these young persons—children—had chains or shackles around their ankles while sitting in court. They were also handcuffed as they went into court. Although the handcuffs were taken off while they were in court, they were put on again as they left the court.
When being interogated these young people do not have the security of video recordings, lawyers or parents present. In fact, if parents want to visit, their permission might take 60 days to come through, by which time the young person might have served his or her sentence. The court proceedings are in Hebrew, with translations of a doubtful quality. The verdicts are mostly based on uncorroborated confession evidence. The evidence against one young person that we saw was of throwing stones at an Israeli armoured vehicle, for which he is likely to get 60 days in custody.
I do not believe that this process of humiliation represents justice. I believe that the way in which these young people are treated is in itself an obstacle to the achievement by Israel of a peaceful relationship with the Palestinian people. I think that the Israelis should apply proper standards of human rights to the way in which they treat them.
Lord Hannay of Chiswick
My Lords, I raise three questions, and I hope that the Minister can respond to them.
The first is whether this is the moment at which we should be trying to revive the peace process, or should we be—as the Israeli Government would wish us to—sitting back, waiting for the dust to settle, doing nothing hasty, and making no innovations? I am sad to have to say that I think that the second choice is disastrous. I hope we will explain to our Israeli friends that we think it is disastrous because the new regimes that are emerging in Arab countries will be more sensitive to public opinion and will be open to radicalisation, and if there is no process to engage with we can be quite sure what will happen. We will drift towards confrontation and perhaps even hostilities. I believe in everything that the Minister and her colleagues have said in recent weeks, and I hope that they share this view and will be active in trying to revive the process.
Secondly, how is the vacuum in the peace process best filled? I do not think we can hope that Israel or the Palestinians will fill it spontaneously. In those circumstances, I feel that it is important to argue with the United States that it, together with the quartet, should put some kind of outline down on the table and test the views of the parties to that outline. It need not be anything particularly ambitious. It could be within the parameters of the Clinton negotiations at the White House and the subsequent Taba negotiations, but we need some substance on the table, otherwise the thing will just go round in circles.
Thirdly, who should we, Britain, and our European allies be talking to? I believe we should be talking to everyone, and that includes Hamas. We must surely now make a distinction between talking to everyone and negotiating. That is the essence of diplomacy. We should not negotiate with anyone, including Hamas, who does not desist from violence and does not accept the Arab peace initiative, but we should talk to everyone because we will have something to say if an outline is put on the table, and preserving the old system of boycotting Hamas completely will be counterproductive.
I hope that we can hear a response from the Government on those three points. We are at an important moment, and I hope that we will turn it into an opportunity, not another entry in the long catalogue of missed opportunities.
Lord Palmer of Childs Hill
My Lords, I think it is worth restating that, quite rightly, the coalition Government’s, and I hope most people’s, policy is for a two-state solution. To carry this forward, all sides have to put the past behind them, however unpleasant—and much of it is unpleasant—and concentrate: first, on understanding that Israel's natural priority is its own security; secondly, on ensuring that Israel understands that settlements, other than the large towns grouped near the 1967 border, will eventually need to go, just as Israel moved all its settlements out of Gaza; and, thirdly—these all go together—understanding that Hamas needs to accept, albeit reluctantly, the state of Israel permanently and that no longer will rockets pour down on Israeli towns such as Ashkelon and Sderot.
Progress has been made between Israel and the Palestinian Authority. However, the Fatah-Hamas agreement does raise real difficulties and challenges. The noble Lord, Lord Anderson, referred to this, and I shall give greater detail. Ismail Haniya, the leader of Hamas in Gaza, said about Osama bin Laden:
“We condemn the assassination and the killing of an Arab holy warrior”.
The Times, which is not noted as a pro-Israel newspaper, carried an interesting editorial on 29 April. It stated:
“Hamas … promotes its own concept of peace, founded on the Islamic concept of hudna, or an extended ceasefire. Yet it seeks an Islamic state from the Jordan to the Mediterranean, promulgates The Protocols of the Learned Elders of Zion, launches rocket attacks against Israeli civilians, and has received money and arms from Iran”.
So my question to the Minister is: how does this affect the securing of an eventual settlement that, as the Times put it,
“respects Israel's security needs and creates a viable, pacific Palestinian state”?
I firmly believe that this is the way to create a stable Palestine alongside a secure state of Israel. Both sides have to sit down at the negotiation table, put the past behind them and look towards the future. This Question is about the “assessment … of progress”. That is the future.
The Earl of Sandwich
My Lords, today’s meeting in Cairo provides some hope of reviving the peace process, but we cannot count on it while Mr Netanyahu is in charge of Israel. Our Prime Minister has described Gaza as a prison camp. Conditions there have deteriorated. Far from withdrawing, Israel has in fact tightened its grip, and IDF restrictions have made life for Palestinians almost intolerable. There are innumerable stories of people unable to get even proper medical help.
One aspect of present policies is the trauma and psychological damage done to young children in the West Bank and Gaza. The poorest Palestinian children include those who have suffered from conflict, street violence and the worst kinds of abuse. One admirable service in Jerusalem is the Spafford Children’s Center, which provides counselling and speech therapy to children who would otherwise drop out of the school system. Arts therapy and cultural alternatives to violence have been highly effective in relieving post-traumatic stress disorders. The centre's work now also extends beyond the city and the separation wall through outreach clinics, but it now takes hours for Palestinian health workers and students even to get from Bethlehem to Jerusalem, let alone to obtain visas to train abroad. What are Her Majesty's Government doing to convince Israel that freedom of movement is essential for this kind of work? Are they urging Israel to ease the blockade? Finally, will the EU have to pick up the pieces if Israel suspends payments to the Palestinian Authority?
Lord Sheikh
My Lords, I care about humanitarian issues, and I have been involved in facilitating two convoys of humanitarian aid being sent to Gaza through the Rafah crossing. I have also visited Gaza with the consent of those on my Front Bench and the Conservative Party. I, along with three other British parliamentarians, visited Israel and the West Bank last month. While in Ramallah, we had a meeting with Prime Minister Salam Fayyad of the West Bank. During our meeting, the Prime Minister said that if and when the Palestinians get full independence, the half a million Israelis would be welcome to stay in the West Bank. We also spent the best part of a day with an Israeli army officer and high officials in the Israeli Foreign Office to hear the Israelis’ point of view. I have therefore visited Gaza, Israel and the West Bank and have first-hand knowledge of the various issues.
In regard to Fatah and Hamas, the leaders of both groups have today signed a reconciliation pact in Cairo aimed at ending their four-year rift. The agreement paves the way for a joint interim Government and fixes a date for general elections next year. The Palestinians are aiming for a declaration of statehood in September, and I very much hope that all parties involved in the dispute will have something positive to say before the declaration. I think that the peace plan submitted last month, whose signatories included two former leaders of the Israeli intelligence agency, Shin Bet, a former chief of Mossad and a former chief of the Israeli defence forces, needs to be considered. Israel is a mighty military power, but it must be magnanimous and arrive at a two-state solution whereby it has a guarantee of security and nationhood, but in return it must ensure that Arabs are fairly treated and have full independence. To achieve this, we need active participation and help not only from the two countries involved but from the United States, the European Union and, of course, other members of the quartet.
Lord Judd
My Lords, I am particularly glad that the noble Baroness, Lady Tonge, the noble Earl, Lord Sandwich, and my noble friend Lord Dubs mentioned children in this debate. The plight of children is deeply disturbing. The condition in which children in particular are being held in prison in both parts of Palestine is an affront to any decent humanitarian standards, but it is also totally inexplicable in terms of peacebuilding because of the bitterness it must engender in the young.
The coming together of Hamas and Fatah certainly provides a great opportunity, but I would like reassurance from the Minister that the Government are totally convinced that if a success is to be made of this opportunity, the process, as well as the solution, in making peace must be owned by the parties themselves. It has to be inclusive and preconditions have to be kept to a minimum. The point about peacebuilding is that you build commitment in the context of the process. Insisting on too many preconditions before the process begins prevents the process getting under way. That is the whole challenge of a peace process.
Finally, I believe that the outside world, including the United States—I would like an assurance from the Minister that this is the Government’s position—must realise that it cannot impose or manage a solution here. As I have said, that solution has to be built by the parties. There is a difference between facilitating, which we should all seek to do, and trying to impose or manage, which we must try not to do, because the solution will be the solution of the people themselves.
Lord Pannick
My Lords, the noble Baroness, Lady Tonge, says that we must not miss this opportunity to advance the peace process. But progress depends on repudiating the noble Baroness’s thesis that Israel and what she describes as the Israel lobby are solely responsible for barriers to peace. Progress essentially depends on a recognition of the interests, the concerns and the mistakes of both sides.
Lord Pannick
I will not give way. I have only two minutes.
The unfortunate Palestinian people continue to be denied freedom of expression and an independent judiciary. It is therefore very difficult for leaders to emerge who are able to say clearly to their own people what needs to be said. What needs to be said is, “It is in your interests to abandon the futile attempt to destroy the state of Israel. Let us concentrate on education, prosperity and the development of a civil society of our own”. That, more than anything, would give confidence to the leaders and the people of the state of Israel that a peace settlement can be achieved which is a lasting solution to an extremely difficult problem so that security walls, blockades and military courts are no longer needed.
Lord Sacks
My Lords, I welcome this debate because it allows us to focus on both words of the phrase “peace process”. We who pray for peace understand by that word a state in which I recognise your right to exist and you recognise mine. That is what peace minimally means. How can we be speaking about peace when Hamas remains committed as a matter of principle to the elimination of the state of Israel; when it engages in missile attacks against innocent civilians and uses its own innocent civilians as human shields; when it propagates some of the most vicious anti-Semitic myths ever to have inflamed the hatred and to have anaesthetised the conscience of human beings, and two days ago praised Osama bin Laden as a holy warrior; and when it refuses to agree to the fundamental principles laid down by the quartet, not least of which is the recognition of Israel’s right to exist? Until Hamas undergoes fundamental change, there may be a process but there will not be peace. Peace is more than a resting place on the road to war. I cannot make peace with one who denies my right to exist.
No one familiar with the history of the Jewish people through its 4,000 years of history can fail to appreciate how deeply Jews within Israel and outside long for peace, pray for peace and long for the ability to live as other people live—without fear, without hate, without being treated as a pariah, without being blamed for the troubles of the world and without being denied the right to exist. That is why I urge the Government to be resolute in their insistence that the path to peace in the Middle East must begin with the unequivocal recognition of the state of Israel’s right to be.
Lord Triesman
My Lords, given the time that I have, I am going to have to restate a position. The conditions for peace require a major development in good faith on all sides. Good faith in the pursuit of peace imposes a clear duty. Any progress cannot be destroyed by either party by taking steps or striking positions which they know in advance are abhorrent to the other.
The quartet, which we support, has set out what must be pursued actively, in good faith and in a climate of restraint. Israel should desist from expansion, from building illegally on Palestinian land and from making it ever less possible to create a viable Palestinian state. The question inevitably will arise about the sincerity of a desire for a two-state solution when that two-state solution becomes more difficult by the day in the financial, economic and other arrangements.
An equally plain and equally great impediment is the routine and continuous firing of sophisticated rockets and other munitions into Israel, which undermines confidence among ordinary people that a peaceful solution is possible. The refusal to recognise the right to exist of the Israeli state, not least by Hamas—whatever the noble Baroness may have said at the beginning—speaks to a long-term resistance to peace and that cannot be ignored. In terms of recognition, we also welcome the extension of the diplomatic status of Palestinian entities.
Two viable states, respect for life, respect for law including international law, and recognition of legitimate states and their right to exist are the foundations of what will strike an honourable peace.
Baroness Verma
My Lords, first, I thank my noble friend Lady Tonge for allowing us to have this debate which is so crucial at this time. I should also like to thank all noble Lords for the measured way in which this debate has been approached, considering the circumstances in which we find ourselves.
We are seeing unprecedented change across the Middle East combining immense potential for greater democracy with the risk of instability and violence. Both the Prime Minister and the Foreign Secretary have made it clear that the peace process cannot become a casualty of regional uncertainty. This Government are working with international partners—the US and the E3—to get the Israelis and Palestinians to return to direct negotiations as soon as possible.
The negotiations should be based on a two-state solution on the basis of clear parameters. As noble Lords know, these parameters are: an agreement on the borders of the two states, based on the 1967 lines with equivalent land swaps agreed between the parties; security arrangements that, for Palestinians, respect their sovereignty and show that the occupation is over and, for Israelis, protect their security, prevent the resurgence of terrorism and deal effectively with new and emerging threats; a just, fair and agreed solution to the refugee question; and fulfilment of the aspirations of both parties for Jerusalem. A way must be found through negotiations to resolve the status of Jerusalem as the future capital of both states.
Both the Israelis and the Palestinians must be determined to enter into meaningful negotiations. We look to both parties to return to negotiations as soon as possible on the basis of the clear parameters I have outlined. Our goal remains an agreement on all final status issues. We will contribute to achieving this goal in any and every way that we can. Noble Lords have raised important questions and crucial points, many of which I am sure will be raised this evening when the Prime Minister meets with the Prime Minister of Israel.
I will now respond to some of those points and questions, but I hope I will be forgiven if I cannot answer all of them. I undertake to write to noble Lords and have copies placed in the Library.
The noble Baroness, Lady Tonge, asked about the expansion of settlements, especially at al-Walaja. We are aware of this and the Parliamentary Under-Secretary of State for Foreign Affairs visited the settlement in January during his visit to Israel and the Occupied Territories. Our view is that all settlement activity in the occupied Palestinian territories is illegal and an obstacle to peace, and therefore we will raise this issue with the Prime Minister of Israel again.
We remain concerned about the prevailing situation in Gaza, although some welcome progress has been made on the humanitarian aid side, the move from a white to a black list, and the increased volume of imports. But a fundamental change is needed to achieve pre-2007 levels of exports as soon as possible, along with improved co-operation with the United Nations and the NGOs. The recent Israeli measures to facilitate exports out of Gaza are welcome, but they need to be made swiftly and implemented quickly. This means action on the ground. It is also vital that Israel should allow Gaza to import the raw materials necessary for manufacturing exports. We are discussing with Israel, the EU and the UN how we and others in the international community can help to move the issue forward. We continue to encourage the Government of Israel to enable Gaza exports this year to attain the levels of 2007. The British Government believe that a strong economy in the Occupied Territories is key to promoting peace, stability and prosperity.
The noble Baroness also spoke of Hamas, as did a number of other noble Lords. Our policy on Hamas is clear. The quartet has set out clearly that Hamas must renounce violence, recognise Israel and accept previously signed agreements. Hamas must make credible movements towards these conditions, which remain the benchmark against which its intentions should be judged. The clear focus for now must be on a return to direct negotiations between Israel and Palestine as soon as possible.
The noble Lord, Lord Anderson of Swansea, asked about the United Nations General Assembly in September. Our focus remains on getting the parties back to the negotiations as the best way to achieve a two-state solution, but as we approach September, we are all clearly going to be faced with some very difficult choices which we are currently considering.
The noble Lords, Lord Anderson, Lord Weidenfeld and Lord Hannay, and my noble friend Lord Alderdice all talked about the Fatah-Hamas reconciliation. We renew our calls to both sides to commit to peace talks leading to a Palestinian state that exists in peace and security alongside Israel. Britain hopes that the announcement of reconciliation between Fatah and Hamas will lead to the formation of a Government who reject violence and pursue a negotiated peace, and we will judge a future Palestinian Government by their actions and readiness to work for peace. Intra-Palestinian reconciliation remains a critical component of the peace process. We are of course examining the detail of the recent announcement and we are in discussions with our partners.
On Palestine’s recognition and on state building, we see negotiations towards a two-state solution as the only way to meet the national aspirations of Israelis and Palestinians, leading to a sovereign, viable and contiguous Palestinian state living in peace alongside a safe and secure Israel and its other neighbours in the region. The UK is fully committed to supporting the Fayyad plan and helping to build the institutions of a future Palestinian state, but a negotiated solution remains the only result that will actually bring peace and justice to the Palestinian people. We therefore call on the parties urgently to return to negotiations. The noble Lord, Lord Weidenfeld, can be reassured that our focus is on bringing the parties back to negotiations, that it must be that both parties feel safe and secure, and that it is a settlement which is agreed by all and recognised by all.
My noble friend Lord Dubs was absolutely right about a stable Pakistan. It is crucial that we have a stable region, and that is why our aid programme has been increased. By working with Pakistan, we will be able to tackle terrorism.
A number of noble Lords spoke about the importance of the Palestinian Authority, and that is why we have upgraded the Palestinian general delegation. It was agreed by the Foreign Secretary on 8 March that, in view of the signs of improvements made by the Palestinian Authority in its state-building agenda and the progress being made on its road-map commitments, the upgrade of the delegation office means that it will now be renamed as the Palestinian mission. There will be simplified visa arrangements, but it is important to make it clear that this is not the first step towards recognising the Palestinian state, which I repeat must be achieved through negotiations. Diplomatic status will only be conferred on diplomats from states that we recognise.
There are many points that I have not addressed, on which I undertake to write to noble Lords, but in my closing paragraphs I will address some further questions. The most important lesson we have learnt from the Arab spring is that legitimate aspirations cannot be ignored and must be addressed. If we cannot create a path for those legitimate aspirations to be secured through negotiation, there is a risk of violence and a generation of people who see little hope for the future. This should not be allowed to happen. We understand Israel’s deep and justified security concerns, and we will work with Israel to preserve her security and the stability of the region around her. We hope that the signing today of the reconciliation agreement between Fatah and Hamas in Cairo will lead to the formation of a Government who reject violence and pursue a negotiated peace. As I have said, we will judge a future Palestinian Government by their actions and readiness to work for peace.
We are extremely concerned about the escalating violence and the deaths of civilians in Israel and the occupied Palestinian territories, including the bomb attack at a bus station in Jerusalem and the surge in rockets and mortars from Gaza. We have condemned the extremists for instigating this violence and deliberately attempting to wreck the chances for peace. They should not think that while the attention of the world is elsewhere, we will turn a blind eye to their actions. Israel has the right to defend herself, but we will call on her to be proportionate in her retaliation, and we call on both sides to do all they can to prevent the further loss of innocent life.
We recognise the significant progress made by the Palestinian Authority in building the foundations of a viable Palestinian state in line with its road-map commitments. The UK continues to support the creation of a sovereign and viable Palestinian state alongside a secure Israel, but also continues to believe that the best way to achieve a lasting solution that delivers a sovereign, independent and contiguous Palestinian state alongside a safe and secure Israel at peace with her neighbours is through a negotiated solution. We will be working with the international community to do everything we can to achieve this, and we look to both parties to come to negotiations based on the clear parameters as soon as possible.
I have a note on children being held in custody. I would just like to reassure the noble Lord, Lord Judd, and others who raised the issue that we are taking it very seriously and are raising it with the Israeli Government at every juncture. We continue to monitor the situation, but in the interests of trying to get the two parties back into negotiations, it is really crucial that, while we treat Israel as a close and candid friend, we are also able to be frank about those things that we disapprove of.
I have reached my 12 minutes but I reiterate that I will write to those noble Lords whose questions I have not managed to answer. This has been an important debate and it is one that I suspect we will keep returning to.
Postal Services Bill
(13 years, 6 months ago)
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Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I shall speak also to Amendments 22, 24, 28, 29, 31 and 32 in order to reflect their purpose in its entirety. I shall also address Amendments 21, 23, 25, 26, 33, 34 and 35 in the names of the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, as well as Amendments 20, 27 and 30 in the name of the noble Lord, Lord Kennedy. This is a large group of amendments but it covers ground with which we will all be familiar from earlier stages. I shall try, therefore, to be as brief as I can while still, I hope, addressing the concerns of noble Lords. I hope that the government amendments will help to ease the noble Lords’ concerns as well as the concerns raised in Committee by the noble Lord, Lord Whitty.
All sought to increase the parliamentary scrutiny around the transfer of Post Office Ltd to a mutual ownership structure. The Government believe strongly that a mutual structure should not be imposed on Post Office Ltd from the top down, and this has not changed. We are still of the opinion that Parliament should not dictate the structure of a mutual Post Office Ltd or the make-up of its board. When the company is mutualised these details must be agreed by all of the interested parties and the interests of stakeholders such as sub-postmasters and employees must come first.
As I have said before, the Government have asked Co-operatives UK to report on recommendations for a move to a mutual model. This report will be presented to Ministers shortly and we will of course make it public. Should your Lordships wish, I shall also ensure that a copy of it is placed in the House Library. I hope the report will provide more detail of what a mutual Post Office Ltd might look like in practice. The Government plan to launch a public consultation later in the year, which will develop further details of how a mutual Post Office Ltd might work.
Your Lordships will understand that the suitable model for a mutual Post Office has yet to be designed and that we cannot know its governance structure. As I said in Committee, it is by no means clear at this early stage that the selection of both sub-postmaster and employee representatives to the board would necessarily be the best option. Enshrining governance arrangements in legislation goes completely against our commitment to ensuring that the mutual is developed by the people who know it best. The Government do not, therefore, agree with Amendments 34 and 35 in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe.
I understand the desire of both Houses to be able to exercise further scrutiny over a move to a mutual. Until we have fully consulted, we will be unable to define specifically what the Post Office mutual will look like and we recognise that, in order for Post Office Ltd to transfer to mutual ownership, it must have become commercially self-sustaining. Indeed, the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, recognise this too in their Amendments 21, 23 and 33. We are confident that the strategy mapped out by Post Office Ltd, backed by the Government’s £1.34 billion funding package, will deliver a commercially self-sustaining business.
There are a number of elements to this, as set out in detail in the Government’s policy statement published last November, particularly the aspiration that the Post Office should become a front office for both central and local government. There are great opportunities for the Post Office to develop this ambition and a number of pilots for new services have already been agreed. For example, the Department for Work and Pensions has recently announced plans for three pilots, including document verification for pensioners and support for jobseekers in more rural areas. The DWP has also confirmed that it will work with the Post Office to explore its role in supporting new ways of delivering welfare, including universal credit. Post Offices are also of course a trusted and natural place for people to access face-to-face government services such as identity verification services. Currently, the ambition to be a front office for government builds on existing capabilities and strengths.
As Paula Vennells, the Post Office’s managing director, explained to a number of us at the briefing meeting last week, the Post Office is working closely with the Cabinet Office to explore the services it could offer the Government to help them to make the savings that this demanding fiscal environment requires. Paula has also been working with Martha Lane Fox to ensure that the Post Office can have a sustainable role as services are increasingly delivered digitally—a trend which is set to continue. This could include supporting those who are unable or unwilling to access services in this way.
As Paula Vennells also emphasised last week, the front office for government strategy must not be considered in isolation. The Post Office must continually improve, with quicker transactions, shorter queues and longer opening hours. The better the Post Office’s customer-service offering, the more attractive it will be as a channel for government departments. That is why the Post Office’s network strategy—the introduction of 4,000 main post offices and 2,000 Post Office Locals across a network that remains above a total of 11,500 outlets—is so important. That is why the Government’s investment of £1.34 billion and their commitment that there will be no programme of Post Office closures are also so important. We will no doubt discuss that network strategy in more detail when we come to Clause 11.
On the question of a post bank, I reiterate what I said in Committee. The Government have already looked carefully at the options and arguments for establishing a standalone post bank. Regrettably, our conclusion is that it is just not a viable option, particularly in the current fiscal environment. Setting up and capitalising a post bank would be prohibitively expensive as well as creating a much more volatile and risky balance sheet for the company. Yet it is important to remind noble Lords quite how extensive the Post Office’s existing financial services business already is. For example, the Post Office offers savings accounts, ISAs, mortgages and credit cards and, following the recent agreement with RBS, it will provide access for more than 80 per cent of all UK current account holders. That is in addition to the wide range of basic bank accounts available to those who do not use conventional current accounts. As I said in Committee, from this strong base financial services have significant potential for growth.
These are some of the key strands of the strategy which we are confident will put the Post Office on a commercially sustainable footing. We have been clear that this is not an overnight solution. It will take a few years, and possibly more than the two years allowed under the amendments of the noble Lord, Lord Kennedy, for Post Office Ltd to become self-sustaining—that is, Amendments 20 and 30. The process of moving to a mutual model should not be rushed through and the Government have no intention of setting deadlines which Post Office Ltd and its stakeholders must meet in order to speed up this process. We recognise that some time will pass between the debates we are having now and any subsequent move to a mutual model. As such, Parliament should be given the opportunity, nearer the time of a proposed mutualisation, to scrutinise those proposals in more detail.
The amendments in my name in this group ensure that both Houses will need to approve a move to a mutual through the affirmative resolution procedure before it can proceed. They also ensure that a report giving details of the proposed move to a mutual will be laid before Parliament before any order is made. We hope that this addresses the concerns raised by the noble Lord, Lord Kennedy, and other noble Lords, since the government amendment seeks to ensure that the report will now be laid before Parliament before it votes on whether the company should be mutualised.
I reiterate that the proposals eventually brought before Parliament must be developed with the full involvement of all interested parties. The Post Office’s commercial position must have improved as we expect. Provided that these things happen, I am confident that proposals for a mutual Post Office will, after careful scrutiny, be implemented. The reports in Amendments 21, 23 and 33 will not be required because the improvements to the Post Office’s commercial position on which they seek comfort will necessarily already have occurred. Parliament will in any event have the safeguard of a vote on a move to mutual ownership.
Amendments 25, 26 and 27 are technical amendments that I hope I can clarify as unnecessary. As I stated at Committee, Clause 4(4) makes quite clear the only people who can own an interest in the Post Office. The clarification envisaged by Amendment 25 is not required to achieve this. Amendment 26 seeks to ensure that any disposal made by a relevant mutual would be a disposal of its entire interest. Again, as I said in Committee, we believe this amendment to be unnecessarily restrictive. Clause 7 provides sufficient safeguards to ensure that it is perfectly possible for different stakeholders to form separate corporate bodies to take their interest in the Post Office. Provided the safeguards in Clause 7 were met, why would we want to prevent this prior to completion of the process of designing what a mutual might look like?
Finally, Amendment 27 in the name of the noble Lord, Lord Kennedy, is technically unnecessary as Clause 4(1) ensures that a disposal of shares can be made only pursuant to a direction under subsection (2) or an approval under subsection (3). In addition, the government amendments brought forward today will ensure that any direction made by the Secretary of State under subsections (2) or (3)(b) must be subject to approval by Parliament through an affirmative resolution procedure.
I therefore hope that these government amendments will provide noble Lords with further reassurance regarding the move to a mutual model. I hope, too, that the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, will feel they need not move their amendments. I beg to move the amendment in my name.
Lord Stevenson of Balmacara
My Lords, we welcome government Amendments 19, 22, 24, 28, 29, 31 and 32. They are a very positive response to the representations made inside this House and beyond for greater accountability before Post Office Ltd is made a mutual. They also deal with the case of that mutual disposing of Post Office Ltd subsequently in whole or in part to another mutual or set of mutuals, and we are very pleased to see them. We are particularly pleased that provision has been made for the Secretary of State to come back to Parliament to provide details and seek approval of an order under the affirmative procedure before it is too late to influence events. We welcome these amendments and support them.
I shall speak to a number of the amendments in this group that we have tabled, but I have taken comfort from what the Minister has said in her response and will give her some assurance that we will not press the amendments to a vote. However, one or two points need to be made for the record.
Amendments 25 and 26 seek the safeguard of maintaining Post Office Ltd as a single entity before and after the creation of a mutual. From what the Minister has said, that is probably not necessary. Amendments 21 and 23 seek to ensure the Government give proper consideration to the case for a post bank. We have heard from the Minister that she has looked hard at that proposal. Given that that is the case, would it be possible for the Minister to share some results of the investigation with us? That would put our concerns beyond all doubt. Perhaps she could write to me with as much detail as she feels she can.
What I am left with is to reiterate the comments that we made earlier but to add more flesh to the suggestion about the volume of government business being transacted at post offices before the disposal takes place. We should be given more information about that, and a report should be provided to both Houses.
On the amendment in the name of my noble friend Lord Kennedy, who is not in his place at the moment, I understand the wish to avoid unnecessary sloth over creating the mutual, but I agree with the Minister that the overriding consideration must be to have Post Office Ltd in good shape before mutualisation. That is why we put in Amendment 33 a call for a sustainable development plan for Post Office Ltd before any change of ownership is mooted.
It would be nice to see the Co-operatives UK report when it comes. It was promised in April but has still not been delivered. When it does come, we would like to have a look at it as well. The Minister said that she would publish it, and we are grateful for that. That will get us only to the stage where we understand better what the options are. We will need to know what the Government intend to do; as we have discussed, the Government intend to provide a full report on that before any proposals come through. I hope that in preparing a report for both Houses of Parliament, the questions that we have about what obligations a privatised Royal Mail will be under to utilise the Post Office network will be answered and, in the case of Post Office Ltd, what type or range of mutual bodies may end up owning our post office network. What will the rules be and what will be the extent of its powers? Who will be eligible to be a member? How will a board be constituted and could the mutual-owned post office have ownership and nationality tests that would be appropriate for a company-owned Post Office Ltd? Those are all questions that we will want to come back to at that time.
I turn to Amendment 23 and government business. The amendment puts in context some of the difficulties facing those who run the network of post offices throughout the United Kingdom. The Post Office is a trusted and traditional outlet for government services on the high street, and the future of the service lies in the redevelopment of that role. The post office network needs new sources of revenue to survive without subsidy; the Government need a reliable means of communicating with and serving the public directly in their local communities and, in this time of economic downturn, access to government services is more crucial than ever.
The Government should consider making the Post Office a first-choice provider of local and national government services on the high street. A systematic policy of using the Post Office as a shop front for government services could help the Government reach vulnerable and marginalised members of society in rural and urban deprived areas. Moreover, it could further the Government’s regeneration agenda, tackle the financial exclusion that is rife in communities across the UK and, in so doing, ensure a future for the post office network. Despite some of the removal of government services over recent years, post offices remain a massively popular and a reliable source for information and assistance to the public.
If the Post Office is to survive as a mutual, it cannot continue along its current trajectory. This can happen only if it keeps the work that it gets from two major clients—Royal Mail and the Government. Already there is concern about the Post Office’s business relationship with Royal Mail. A survey by the Communication Workers Union this week, widely published in the papers today, found that nine out of 10 sub-postmasters said that they could not survive without Royal Mail business. Assurances from the Minister about that relationship do not hide the fact that the Bill contains no real protection for Post Office Ltd in that regard. Equally, there are reservations about the so-called locals model of franchised post offices, which by their nature make it difficult for customers to interact with staff on anything other than the most superficial transactions. A recent report by Consumer Focus highlighted some of the problems in this regard.
The Post Office is dependent on Royal Mail’s business for its survival. Over one-third of its revenue, £343 million, and one-third of its sub-postmasters’ pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are forced to separate, a privatised Royal Mail will be likely to look elsewhere for retail outlets to sell its products. There is no guarantee that it will use post offices to the same extent. The loss of accounts such as TV licensing and the “green giro” was a bitter blow, particularly for those post offices operating at very tight margins. Taking those contracts away was a classic case of the Government’s left hand not knowing what the right hand was doing.
Having said all that, we think that the move to mutualisation is highly welcome, but employees and managers within Post Office Ltd will be concerned that the business they inherit has a real future. They will want to know that future revenue streams from the Government are secure and that business planning can proceed accordingly. Our amendment provides that assurance by setting out which government business will be transacted through post offices. Such a report will also enable the Government to consider what other types of their business the Post Office might be able to develop. We have a range of thoughts about that which echo many of the points that the Minister made, and we will be happy to exchange views on that, perhaps outside this discussion today.
We think that the Post Office banking remains a prize that could help sustain the future of the network. I heard what the Minister said about it not stacking up, but it is surprising that many of Post Office Ltd’s overseas equivalents have developed comprehensive banking services to offset losses of other traditional services which have made substantial contributions to the viability of those national post office networks. Even if they are not like-for-like comparisons, they are useful examples of where the future might lie.
The post office network, mutualised or not, can prosper as a standalone business with the Government and Royal Mail as key customers. Our amendments do not seek to force that choice upon the Government but ask them to consider what business they intend to transact via Post Office Ltd over the next few years so that the people who run our post offices, whom the Government want to take ownership of the business, can do so with certainty and security.
Lord Cotter
My Lords, I thank the Minister for putting forward the government amendments, which both clarify and assist us in being sure that various points have been taken on board that have been raised in previous debates. She mentioned Post Office Locals, which are an excellent idea. For example, in my village of Congresbury in Somerset, where I live, the local post office is doing an extremely good job. I welcome what has just been said by the previous speaker—that wherever possible we should do all that we can to expand the sort of services that they can provide. Many suggestions have been made and I am sure that we all look forward to adding to them when we can get some ideas accordingly. I ask the Minister to do the same.
It is tremendously encouraging that the Government are committed to ensuring not only that we maintain services through the local post office network, but that where necessary there will be financial support so that we can carry on having representation of a post office service in all parts of the country.
I referred a moment ago to my local post office. As I said, it provides a wide range of services. I am sure that the Minister will answer me by saying that there is no problem in this direction, and that no post offices that give a good service will be reduced in scope to become just Post Office Locals. The post office that I am talking about gives the full range of services, so I will be urging the Government to maintain that full range where at all possible.
Post Office Locals are a welcome idea as the concept ensures that at least a basic provision will be there. Over time, it will be useful to clarify ideas on exactly how Post Office Locals will operate and what encouragement they will be given to do so. With my congratulations to the Minister on the amendments being put forward tonight, and on the Bill as a whole, I look forward to hearing her response to the various matters that have been raised.
Baroness Wilcox
My Lords, thank you very much indeed for those contributions. The noble Lord, Lord Stevenson, was most reassuring for me. He asked if I could expand in due course on the assessment of the case for the post bank and I will certainly write to him on the matter. I agree that it would be lovely if we could have a Post Office bank. At the moment the numbers do not add up, but that is not to say that it could not be the case in the future so I am with him on that. When the report comes out, he will of course see it. There will be a copy put in the Library and we will make sure that he has a copy too.
My noble friend Lord Cotter gave a vote of confidence in the Post Office Local idea, which I was delighted to hear. In the ones that we have already started, we are ironing out the problems which you always have with a new idea but they seem to be becoming successful. People like them and, because the opening hours are extended, it means that the footfall and the other business transacted within the shop seem to be improving by leaps and bounds. The noble Lord, Lord Kennedy, was not here to be able to speak to his amendments but the noble Lord, Lord Stevenson, did. Unless there is anything further, I hope that covers any of the points that other noble Lords wished to make.
Baroness Wilcox
Baroness Wilcox
“(3A) An order under subsection (2) or (3)(b) is subject to affirmative resolution procedure.”
Baroness Wilcox
The Deputy Speaker (Lord Haskel)
If Amendment 29 is agreed, I cannot call Amendment 30 because of pre-emption.
Amendment 29
Baroness Wilcox
“(2) The Secretary of State must lay before Parliament a report on the proposed issue or transfer before making the order.”
Baroness Wilcox
“(a) give details of the proposed issue or transfer (including the expected time-scale for the issue or transfer),”
“Closure of post offices
(1) Where any company or any other person proposes to close a post office, it shall at the earliest opportunity begin consulting representatives of the employees affected and community and other groups with an interest in the proposed closure, including consulting on that company or person’s plans for alternative provision of services provided by the post office.
(2) No decision to close may be made within the period of six weeks from the start of the consultation required by subsection (1).
(3) No decision to close a post office in a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1).
(4) No decision to close a post office in a rural or a deprived urban area or an outreach service shall be taken within 16 weeks of the start of the consultation required by subsection (1).”
Lord Young of Norwood Green
My Lords, as you are all very aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas, not only through access to postal services but as a shop front for government services, a means of benefit collection and, often, as the only source of cash withdrawal in an area. This amendment aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen stakeholders’ opportunity for input into the consultation process. It also provides for a longer consultation process on potential closures in rural and urban deprived areas.
Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced. At Second Reading, the noble Lord, Lord Dobbs, proposed a 16-week consultation period for rural post offices due to close to give time to find an alternative. Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is in large part due to two major closure programmes: the urban reinvention programme from 2003 to 2005 and the network change programme from 2007 to 2009. Approximately 11 per cent of the post office network is in urban deprived areas. Consumer Focus clearly states:
“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.
The 2003-04 urban reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so-far unplanned decline in network size that arose from sub-postmasters’ decisions to close their businesses. At the time of the programme there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile, or unless there were exceptional circumstances to justify the closure.
The Post Office’s code of practice for network change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was in large part because of the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.
Post offices are still closing every week. More than 150 closed on a long-term temporary basis in 2010 alone. There is no guarantee that these will reopen; many are likely to stay closed indefinitely, as Consumer Focus has said. Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches. According to the National Federation of Sub-Postmasters, 900 post offices—an unusually high number—are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated by some offices. The Post Office is struggling to find alternative premises and service providers. It is vital that adequate measures are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 37, which puts current practice into law, allows extra time for rural post office closures and ensures consultation ahead of any closure, planned or unplanned. It also provides additional protection for rural and urban deprived post offices. I beg to move.
The Deputy Speaker
I have to inform your Lordships that there is a misprint in proposed new subsection (3) in the Marshalled List. It should read:
“No decision to close a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1)”.
Lord Jenkin of Roding
My Lords, one of the best things that the Government have said in the context of the Bill is that there will be no more mass closures of post offices. I am very conscious of the damage done by closures in recent years in an area that is not necessarily “urban deprived” but where quite a lot of poor people live. It is the area surrounding Vauxhall, which in the past few years has lost three post offices. The result is that the nearest post office is right across Vauxhall Bridge, half way to Victoria station. Whenever one goes past or tries to use that post office, there are queues that reach out into the street. It has been a disastrous programme for that part of London. Therefore, I very much welcome what the Government have said about closures. Of course, one cannot have an absolute ban on closures because inevitably sub-postmasters die or fall ill and businesses are sold. Although great efforts are made to try to keep the post office going, it cannot always be guaranteed. However, that is totally different from the sort of mass closure programme that we had over the past decade.
Like the noble Lord, Lord Cotter, I have been very impressed by the potential offered by Post Office Local. Up to 2,000 Post Office Locals may be coming forward in the next few years, offering the great majority of services that are available in a Crown post office. They will be able to offer the customer a much better deal because they will be open during shop hours. One knows that many of the shopkeepers, who are often from minority communities, work very long hours and their shops remain open long hours—and so, of course, will the post office services offered by Post Office Local. This is perhaps one of the brightest and most optimistic scenes on the horizon. It will make post offices a good deal more viable than they have been. However, post offices also need new business. I have been impressed by what I have heard about the plans—in some cases these are already being trialled—to let these post offices offer identity services, as it were. They can check identity through biometric photographs and this service is already being used by the UK Border Agency. There must be government departments which could make good use of such services. I hope that my noble friend on the Front Bench can expand on that.
I too have talked with the chief executive and was impressed by what she had to say about the range of services which need to be available in post offices. This will require investment and nobody is going to pretend that Post Office Ltd will become a fully self-sustaining business; it cannot. It will continue to require support, and everybody has recognised that. However, it seems to me that if it is given the freedom to expand into new areas and the Government support it through government departments using its services, thus enabling it to be, as it were, the front office for government, there is every chance that the post office network will survive and prosper in a way that it has not done in recent decades. Therefore, I very much support what is being planned.
I accept the argument that my noble friend put forward when we were discussing a previous amendment —that some of the proposals we are putting forward may not be necessary, but no doubt we will hear about that. In the mean time, I very much congratulate the Government on the efforts that have been made to make Post Office Ltd a more viable business than it has been in the past.
Baroness Wilcox
My Lords, Amendment 37 seeks to impose consultation requirements on companies or people that propose to close a post office. As we well know, 97 per cent of post offices are privately owned and operated businesses. As I said in Committee, neither Government nor Post Office Ltd can ensure that there is always time to carry out a consultation before an office closes. A sub-postmaster may retire or move away or the premises may be damaged by fire or flooding. It cannot be appropriate to impose a consultation requirement on a retiring sub-postmaster before he can shut his store, as this amendment would do.
My noble friend Lord Jenkin of Roding spoke warmly of the Government’s commitment to ensure that there will be no further programme of post office closures and that the network of at least 11,500 post offices will be maintained. I confirm that commitment. Therefore, if a post office is to close, there is a strong likelihood that this will have been driven by a choice of the sub-postmaster rather than by Post Office Ltd. In the unfortunate event of a post office closure, other than in very exceptional circumstances, Post Office Ltd will seek to maintain services. If a permanent closure without any replacement is proposed, the Post Office must undertake a local public consultation for a six-week period, in line with its code of practice. In addition, Post Office Ltd will contact local councillors and parish councillors about service changes.
It is worth stressing that the code of practice has been agreed with Consumer Focus. I mentioned in Committee that the code of practice has recently been amended to introduce a telephone helpline providing information on temporary breaks in service and on new notification requirements.
The noble Lord, Lord Young, mentioned that at Second Reading and the noble Lord, Lord Dobbs, in his maiden speech, called for a 16-week consultation. He spoke eloquently about the problems faced by rural communities as a result of the previous Government’s closure programmes. However, this Government have committed that there will be no programme of post office closures and a network of at least 11,500 post offices will be maintained. As I said, if a post office is to close, there is a strong likelihood that this will be driven by the choice of a sub-postmaster rather than by Post Office Ltd.
In considering the appropriate duration of local consultations, it is important to strike a balance between giving communities sufficient opportunity to express their views and allowing the Post Office to get on with providing the services on which those communities so rely. A 16-week period—that is four months—as Amendment 37 envisages in some cases, seems to be disproportionately long. That is especially so when we recall that we are talking predominantly about individual small businesses operated by sub-postmasters. Furthermore, the six-week period currently required by the code of practice was introduced, following a national consultation, as part of the previous Government’s closure programme.
I therefore hope that the noble Lord will be reassured by the arrangements already in place and will consent to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her contribution. It goes some way towards providing reassurances and we will reflect on what she said, after carefully reading it in Hansard. In those circumstances, I beg leave to withdraw the amendment.
Lord Whitty
“(i) within three miles of a post office outlet;(ii) within one mile of a post office outlet; (iii) in urban areas within one mile of a post office outlet;(iv) in urban deprived areas within one mile of a post office outlet;(v) in rural areas within three miles of a post office outlet;(vi) in rural areas within three miles of a post office outlet;(vii) at the level of each postcode district, within six miles of a post office outlet,”
Lord Whitty
My Lords, I shall speak also to the earlier amendments that were previously grouped with this amendment, and the amendment to which my noble friend has just spoken. They deal with the criteria for access to the post office network. I very much welcome the noble Baroness’s reiteration of the commitment to maintain a level of post office network and her comments on the criteria in relation to what the Post Office rather bizarrely calls “business as usual” closures, whereby a sub-postmaster gives up or the post office has to close for another reason. The criteria there are much tighter.
I am a veteran of the last stage of the previous closure programme, which was in many ways unsatisfactory and ended in anomalies. I am familiar with the territory in Vauxhall to which the noble Lord, Lord Jenkin, referred, and the effect of what happened on the other side of the river. That experience has been repeated in rural areas and in deprived suburbs up and down the country. The determination to maintain a minimum network is very welcome.
The jury is still out on the move to Post Office Local. There are significant advantages, particularly in relation to opening hours and the flexibility that that provides. Consumer Focus has heard varying reports on the first batch of Post Office Locals, and that the range of services they provide is differentiated. For example, the USO for the parcel service refers to a 20 kilogram parcel service being available in all post offices, but a lot of locals were not doing that until about this time last year, when the Post Office advised them to do so. It is still not the case that all Post Office Locals, or some other post offices, are providing that service. I am not saying that there should be an absolutely rigid range of services available under Post Office Local, but we need to know that what will happen as a result of normal retirements and closures, new post offices opening, post offices opening in host premises will provide something like the previous minimum access criteria.
The new access criteria will be a matter for the Secretary of State and for Ofcom, but the amendments would require that there be a reporting mechanism which indicates not only how good the access is, in terms of mileage in rural and urban areas, to the nearest post office but what range of services is available. In other words, there would be a matrix that would indicate the services available as well as the number of outlets. In order to be able to monitor over time the effectiveness of post office services and the accessibility to them for communities who have, over the past two rounds of closures, seen some diminution in the number of outlets and now some diminution in the range of services, we need reporting criteria roughly along the lines that I propose here, which are the criteria which were broadly agreed at the end of the last round of closures.
I shall not press the amendments tonight, but the Government and the regulator will need a clear reporting process which covers not only the number of outlets but the range of services provided. As others have said, that range of services needs to include some enhanced commitment across Whitehall and local government to provide a wider range of government services—and digital access to them—than currently exists. Unfortunately, over the past 15 years, we have seen a diminution of government business going through post offices. Some of that has been due to technological and behavioural change; some of it has simply been due to false economies. Post offices have missed out there. The post offices should in most communities be the front office of government. In rural communities and more deprived outer suburbs, they are the point at which the community has access to the range of state services. We need to retain that, we need to build on it and we need to know under laid-down reporting criteria how well we are doing.
Although I welcome much of what the Government are committed to in enhancing the number of services that go through post offices as well as preserving the number of post offices in the network, we need to be able to monitor that. That is what my two amendments are about, and I will be interested to hear the noble Baroness’s comments. I will not press the amendment tonight, but we may need to return to it. I beg to move.
Lord Young of Norwood Green
I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.
I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister’s response.
Baroness Wilcox
My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.
Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.
It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.
Baroness Wilcox
However, we believe that obliging the Post Office to report against the access criteria separately for each of England, Wales, Scotland and Northern Ireland would be of limited assistance. The previous Government recognised that too when, following a national consultation in 2007, they rejected suggestions from some that the access criteria should apply at an individual national level. This additional reporting obligation would place a significant additional administrative burden and subsequent cost on the Post Office. For example, 17 postcode districts straddle national borders, such as postal district TD15 around Berwick-upon-Tweed. For this reason, I urge the noble Lord, Lord Whitty, to consider withdrawing Amendment 40, which I think he has already agreed to do, and to reflect on what I have said.
I turn to Amendment 41, which again is in the name of the noble Lord, Lord Whitty. It relates to the services offered over Post Office counters on behalf of a universal service provider—in other words, Royal Mail. I hope that the noble Lord will be reassured by the Government’s Amendment 50, which obliges the network report to contain details of the services offered by the Post Office on behalf of a universal postal service provider. The report must also contain details of the wider postal services that are available, so services that are not regulated under universal service conditions must also be covered.
I also reassure the noble Lord that new Post Office Locals all offer the full range of Royal Mail’s universal service products. Some have voiced a concern that certain Post Office Locals do not offer full universal postal services—for example, through not accepting parcels weighing more than 6 kilograms. However, I reassure noble Lords that the Post Office has, through the current pilot process, now developed the Post Office Local model so that new local outlets will all accept parcels up to the full universal postal service standard of 20 kilograms.
I hope that in the light of those reassurances the noble Lord will feel happy to withdraw his amendment.
Lord Whitty
My Lords, I am grateful to the noble Baroness for those reassurances. Behind them is a recognition that some reporting provisions need to be laid down and maintained.
The main disappointment in her response was the reference to not accepting the need for separate reporting for Scotland, Wales and Northern Ireland. As we said before dinner when debating an amendment in the name of the noble Lord, Lord Rogan, the situation is somewhat different. The criteria need to be universal, but it is also important that the particular positions of Northern Ireland, Wales and Scotland must be focused on. There are some fudges at the border, but they are relatively small, and it is important that the Post Office network is seen as part of the social provision of the Government, particularly in remote rural areas, for the rural population and rural businesses. The devolved Administrations have a role in that. Therefore, it is very useful for them to have a separate reporting provision. This does not mean that the criteria should be significantly different, but it does mean that the kind of problems that meeting those criteria may create in those countries could perhaps be devolved by wider rural and social policy in those areas. I would be disappointed if the final form of reporting did not allow for separate or parallel reporting to the devolved Administrations.
Subject to that caveat, I beg leave to withdraw the amendment.
Lord Lea of Crondall
Lord Lea of Crondall
My Lords, Clause 11 provides for the annual report on the post office network. The amendment seeks to include information in the report on,
“any major change in contractual terms affecting sub-postmasters as a result of the change to the ‘Post Office Local’ model”.
The document produced by the Department for Business, Innovation and Skills in November 2010, Securing the Post Office Network in the Digital Age, claimed success for the local pilots in the Post Office Local model. Under pilot schemes, Post Office Local branches have offered longer opening hours of up to six hours per day. Services have been restricted to core services, with what are described as more complex and time-consuming transactions being channelled through main post offices. Post Office Ltd reports that Post Office Locals are being trialled in around 60 locations across the UK. Many operate a small counter located within the premises of another business such as a supermarket. Some have replaced sub-post offices that have closed and some have been set up as new branches. The physical layout of the counter-based model has been replaced by more open-plan arrangements alongside the retail till.
The BIS report says that over the next four years, 2,000 small sub-post offices will convert to the local model, either on-site or in neighbouring premises, with what is described as a major rollout in 2014 following further piloting. It is unclear whether the rollout will be to reach the figure of 2,000 Post Office Locals—or essentials, as they are called—or whether this marks an intention to roll out beyond 2,000. It could be a precursor to a much wider application of the model.
The paper proposes two key strands of the network. The Government have asked POL by 2014 to have about 4,000 main post offices in towns and city centres and to convert about 2,000 sub-post offices to the local model. The 4,000 main post offices and 2,000 new locals will leave more than 5,500 branches in the current network untouched. However, the BIS paper states that, under POL's commercial strategy, the Post Office Local model will become the mainstay of the smaller post offices over time. This will mean a fundamental change to the current network.
Consumer Focus, which represents post office customers, has said that the conversion of 2,000 sub-post offices into Post Office Locals will be a major change. For millions of people, it will mean a shift from what they know and trust. The problems that people have experienced with pilot Post Office Locals—some of which are known as essentials—include benefit capping, where branches limit the amount of money that people who are collecting benefits such as pensions can withdraw in a single day. This is to prevent the branch running out of money. Other examples of problems which people have experienced with Post Office Essentials include not being able to access counters if in a wheelchair, staff with inadequate knowledge of services and a lack of privacy when carrying out transactions.
A more recent investigation by Consumer Focus, in March 2011, concluded:
“While consumers are likely to welcome the convenience and extended opening hours provided by PO Locals, without clear improvements to the in-branch experience, some consumers will be likely to perceive the shift in provision negatively … In particular, our research has found worrying evidence of examples of cash and benefit withdrawals being capped; temporary breaks in service because there are not always trained staff on hand to serve at the counter; and the inconsistent provision of parcel services, which in many instances seems to vary from one PO Local to the next”.
Just over half of customers—53 per cent—have had to use an alternative post office because their Post Office Local did not offer the product or service they wanted. Some 43 per cent of customers say that the privacy available is poor, especially for banking or financial transactions. Finally, 61 per cent of customers said that their overall experience was good, but a large percentage —38 per cent—said that it was average or poor.
The Post Office Local model clearly has the potential to impact on the terms under which sub-postmasters operate sub-post offices, and the terms and working arrangements of the staff working in them are also significant, not least the significantly increased opening hours. Those issues therefore deserve a word or two.
The changed physical working arrangements in the open-plan post offices envisaged by the pilot carry implications for the terms, safety and well-being of staff members which need to be taken fully into consideration. Some postmasters have expressed concern that they will see a major shift in their contractual terms away from secure payments to income based largely on commission. That is not just a rumour; I think it has been confirmed by the Post Office. While existing sub-postmasters may have their current income protected for a limited time, this would not last. At the same time the range of services on offer under the pilot is restricted to core services, meaning that customers needing to access a more time-consuming or complex transaction will need to go to the main post office. The report does not envisage restrictions being imposed on which services may be regarded as core by a local post office, and which may be dispensed with. Over time this would mean a high percentage of the population having to travel further to access the full range of post office services. I think that I am touching here on some of the points made by my noble friend Lord Whitty.
The problem is likely to be particularly acute in rural areas, where the distance to a main post office is likely to be greater. Although commercial terms between Post Office Ltd and individual sub-postmasters is confidential, it is reported that sub-postmasters converting to the essentials model are seeing a worsening in the terms of their contract and a larger reliance on commission on sales. I shall not cite the many examples from the local newspapers and so on, but Ministers could reassure sub-postmasters by stating that they will not be compelled to move to the Post Office Local model.
The sub-postmasters’ fears are summarised in a survey which was commissioned by the Communication Workers Union and reported in today's newspapers. It says that up to 9,300 post offices could close as a result of the Government’s sell-off. This prediction is worrying for people living in villages whose post office is the only shop that provides a vital service, particularly for those without cars. Perhaps I may read one or two bits of information from this survey; I do not think that anyone doubts the quality of the very well known company which was invited to undertake this research.
More than 90 per cent of sub-postmasters told researchers that they are very unlikely or unlikely to survive without Royal Mail business if it dries up. This clearly overlaps with all the other questions about the interservices agreement and the universal service obligation. Billy Hayes, the general secretary of the CWU, has said that it clearly demonstrates the fears of sub-postmasters about the fate of the network, which faces a greater threat than anyone previously dared believe.
John Denham, the shadow Business Secretary, has said that postal services policy is now in utter disarray. I am sure that the Minister has a brief prepared to read out on all this, and I look forward to hearing it. Then we will have to consider where this question rests before we come to Third Reading.
Lord Young of Norwood Green
My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.
On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.
I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.
Baroness Wilcox
My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office’s interest to introduce a model of contract that is not viable for sub-postmasters.
The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.
In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government’s £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.
I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.
Lord Lea of Crondall
I thank the Minister. However, the competitors of the Post Office may not do this, but they are not the Post Office. They are not what the British people understand to be the service of post offices right across the country. They do not cherry-pick like their competitors, which is why they are part of the fabric of the community. Perhaps one could agree the terms of reference of a public opinion poll whereby all the facts are on the table, as spelt out by the managing director of the Post Office, the noble Baroness and the unions. I include the national federation and George Thompson who, according to the Independent yesterday, said:
“The NFSP has made clear that a minimum 10-year inter-business agreement … between the Post Office and Royal Mail is required if the companies are separated, both to allow the public and business to continue to access Royal Mail services at their local post office and to secure the large proportion of subpostmasters’ income which comes from carrying out work on behalf of Royal Mail”.
Parliament is the backstop if something goes wrong with these negotiations. I am not saying that it is a negotiation between an elephant and a mouse. But the idea that the negotiations have as much leverage on the part of the sub-postmasters as on the part of the Post Office under the plans in this Bill is rather fanciful. We will just have to consider where we are. I asked the noble Baroness whether she would comment on the interesting study which says that sub-postmasters believe that 9,000 post offices could close under the Government’s plans. I should like to know what was wrong with the methodology of this study. The Government have had 48 hours to look at it. I do not know whether the noble Baroness would like to take this opportunity to say more about that.
Baroness Wilcox
Is the noble Lord, Lord Lea, speaking about the CWU’s recent survey on the future of the Post Office?
Lord Lea of Crondall
I am referring to the survey conducted by an opinion research company, which was commissioned by the union.
Baroness Wilcox
I understand that the National Federation of SubPostmasters said in response to recent claims by the CWU:
“We (the NFSP) have played a pivotal role in ensuring that both companies are working well together towards securing a mutually beneficial arrangement and we are confident that a 10-year commercial deal will be achieved”.
It continues:
“Scaremongering about the future without an IBA and the forced introduction of the Post Office Local model does nothing but harm to the post office network and to subpostmasters”.
Lord Lea of Crondall
I thank the noble Baroness for reading out what I have in front of me as well. I was asking whether she thinks this so-called scaremongering is actually the survey of the membership of the national federation. It is all very confusing and I do not know any more than the noble Baroness does how one reconciles these two things. But before we get to Third Reading, it is incumbent on BIS to make a more considered evaluation of this remarkable survey.
Lord Lea of Crondall
That is all that can usefully be said at this stage, and I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
( ) until delivered, the progress of developing the back office integration with credit unions”
Lord Kennedy of Southwark
My Lords, the link-up with the Post Office is one of the most exciting innovations for the credit union movement and my amendment places a requirement on the Government to report back on the progress to achieving this until such time as it has been delivered. Getting people on the lowest incomes into the habit of saving and giving them access through the Post Office network to affordable credit is something that we can all support. Would this not be the big society in action?
What we do have is some of our poorest and most vulnerable people who are unable to get affordable credit. They are either put into the hands of illegal loan sharks or into the payday loan shops with their exorbitant interest rates. The Government need to take action, and take action quickly. The noble Baroness is fully aware that I have pursued this issue with questions to her and other Ministers, as well as in debates such as this one. It is something that I feel very strongly about. It is an area for which I think there is considerable support around the House in all political groups and on the Cross Benches, but it does require the Government to take action to move it forward.
I look forward to the noble Earl’s response. If he is not able to accept the amendment, can I refer him to page 11 of the House of Lords’ Proceedings covering the Questions for Short Debate and my Motion on a similar subject? Any help he can give me with the Government Whips’ Office in getting that Motion brought forward for debate will be much appreciated. We could then spend a little bit longer discussing these important issues and the progress being made by the Government on them. I beg to move.
Lord Young of Norwood Green
My Lords, I rise briefly to support the amendment. Each week something like 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the Post Office card account. It has been calculated that those aged under 65 who hold such an account are 28 times more likely to be unbanked. These same people, those in receipt of state benefits and tax credits, are the most likely to use high-cost credit. That is evidence of the justification of the point being made by my noble friend Lord Kennedy about the valuable contribution that credit unions can make. The Post Office product range is such that it will not make personal loans of less than £2,000, yet evidence shows that sums of between £300 and £600 are the primary amounts sought by those using high-cost credit.
In short, the Post Office has the facilities and credit unions have the ability. Would it not be good if we could bring these two groups together to serve the public?
Earl Attlee
My Lords, since he arrived in your Lordships’ House the noble Lord, Lord Kennedy, has spoken passionately about the role of credit unions, and with good reason. We all know about the activities of loan sharks. As my noble friend the Minister said in Committee, the Government place a high importance on access to affordable credit and believe that the use of credit unions should be encouraged as a means of saving and obtaining access to short-term loans.
Co-operation between Post Office Ltd and credit unions is already very strong and we support an even closer link-up between the Post Office and credit unions. We have demonstrated clear progress against this aim. The noble Lord’s amendment seeks details on that progress and I hope that I can give him some reassurance today. The Department for Work and Pensions recently announced a significant package of support for the credit union sector, including funding set aside for a shared credit union banking platform, which will be subject to a feasibility study, in which the Post Office will participate fully.
The Post Office also continues to develop individual services and assistance to facilitate close working with credit unions, including a new pay-out service which allows people to collect their credit union loans at their local post office branch, and guidance to facilitate local arrangements between post offices and credit unions where both parties wish to participate. These developments build upon existing arrangements whereby many credit union current account holders can access their accounts at post offices through arrangements with the Co-operative Bank. Post Office Ltd expects that around 170,000 credit union transactions will be carried out in post office branches in this way in the coming year. Facilities are also available at post offices whereby credit unions issue customers with a payment card, which they can use to pay off the loans they have received via the electronic bill payment facilities that are available at every post office. More than 60 credit unions have established this facility.
The noble Lord, Lord Kennedy, referred to the possibility of a debate. As he will understand, I can give no assurances on that because it is a matter for the usual channels.
As my noble friend the Minister said in Committee, we recognise the worthy intention behind the amendment and I hope the noble Lord will be reassured by the good work that is already under way in these areas. We will continue to encourage co-operation between the credit unions and Post Office Ltd and to support the Post Office in its provision of wider financial services. However, placing this reporting requirement—and, indeed, others tabled by noble Lords—in legislation would simply increase bureaucracy, and the greater the reporting requirement imposed on the Post Office the greater the cost and, therefore, the impact on its competitiveness.
With the reassurance that I have given today, I hope the noble Lord will withdraw his amendment.
Lord Kennedy of Southwark
My Lords, I thank the noble Earl for his response; he has provided some reassurance. I shall return to this issue again but, at this stage, I beg leave to withdraw the amendment.
Baroness Wilcox
“( ) In subsection (2)(b) the reference to postal services includes postal services provided pursuant to arrangements made with a person who provides a universal postal service.”
Baroness Wilcox
“( ) A Post Office company’s duties under this section are enforceable in civil proceedings by the Secretary of State—
(a) for an injunction,(b) for specific performance under section 45 of the Court of Session Act 1988, or(c) for any other appropriate remedy or relief.”
Baroness Wilcox
“Annual report on postal museum collection and archive
(1) A Royal Mail company must send to the Secretary of State each year a report on its activities in relation to—
(a) the British Postal Museum Collection, and(b) the Royal Mail Archive.(2) Before preparing the report, the company must consult any Post Office company.
(3) The Secretary of State must lay a copy of the report before Parliament.
(4) A Royal Mail company’s duties under this section are enforceable in civil proceedings by the Secretary of State—
(a) for an injunction,(b) for specific performance under section 45 of the Court of Session Act 1988, or(c) for any other appropriate remedy or relief.(5) This section applies irrespective of whether the British Postal Museum Collection or the Royal Mail Archive alters the name by which it is known or forms part of a wider collection or archive.”
Baroness Wilcox
My Lords, during an earlier debate on Amendment 54 the noble Lord, Lord Brooke of Sutton Mandeville, asked what was meant by a consultation with the Post Office company and I should like to respond to that point now. Amendment 54 will require Royal Mail to consult a Post Office company about its activities in relation to the proportion of the archive and museum collection for which it is responsible. I hope the noble Lord finds that helpful. I beg to move.
Lord Brooke of Sutton Mandeville
My Lords, I am most grateful for being guided on the procedures of the House and grateful to my noble friend for remembering that I raised this and providing me with the opportunity of coming to listen to her at this hour. I am still not absolutely certain that I understand what the process of consultation that she envisages will consist of, but at this late hour I would certainly not wish to press her any further than I have already.
Baroness Drake
“( ) Before making an order under subsection (1)(c), the Secretary of State must obtain a certificate from the government actuary stating that in the actuary’s opinion, the allocation of assets between the different sections is appropriate having regard to the liabilities and obligations of each section.”
Baroness Drake
My Lords, in moving Amendment 56, I will also speak to Amendment 57.
I thank the noble Lord, Lord De Mauley, for his courteous and helpful letter that addressed several issues relating to the Royal Mail pension plan raised by the noble Viscount, Lord Eccles, my noble friend Lord Young and myself. I welcome the assurances that: the Government are developing a joint communication plan with the trustees so that members are provided with information on the benefits that will transfer to the new public service scheme ahead of that transfer; active members will receive a seamless service from the new public service scheme and the Royal Mail scheme, including the provision of combined benefits statements; benefits which transfer from the Royal Mail scheme to the new public scheme will be replicated exactly; the governance arrangements for the new public service scheme will be the subject of consultation with the trustees and members’ representatives; and the Government must consult the trustees on the use of powers set out in Clause 17. I welcome that and the Minister’s confirmation that I am correct in my understandings.
However, there remains a matter of continuing concern. The Bill gives the Secretary of State considerable powers to make amendments to the Royal Mail pension plan, including the smaller Royal Mail pension plan—I call it “Mark II”—that is post transfer of assets and liabilities to the new public service scheme. These powers include the ability to transfer assets between the Royal Mail scheme and the new public service scheme, to which accrued pension rights will be transferred, and to divide the Royal Mail scheme into different sections, to allocate assets between the different sections and to determine which company or companies is a participating employer in any given section—this in preparation for the sale, retention and restructuring of different parts of the business. I am concerned that the Bill does not allow for some balancing mechanism of protection for scheme members when the Secretary of State exercises those powers. These amendments seek to address that.
I accept that, on the setting up of the new public service scheme, the Bill limits the assets that the Secretary of State can transfer out of the Royal Mail scheme such that the ratio of assets to liabilities in the Royal Mail scheme is no worse immediately after the transfer of those assets than it was immediately before. However, the valuation of those liabilities and assets is to be done in a manner determined by the Secretary of State. There is no explicit role for the Royal Mail scheme trustees, acting on the advice of their scheme actuary, to exercise a judgment on whether the assets remaining in the Royal Mail scheme are adequate in terms of value or appropriate in terms of the types of assets retained or transferred. Similarly, under Clause 17, when the Secretary of State exercises his or her power to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections, there is again no explicit role for the trustees acting on the advice of the scheme actuary.
Amendments tabled by my noble friend Lord Young in Committee sought to address this concern by strengthening the consultation rights of the trustees and involving the Pensions Regulator in any assessment of the transfer of assets and liabilities, particularly between the new sections of the Royal Mail pension scheme. Having reflected on that debate in Committee, I recognise that the Government would probably not want to give the Pensions Regulator the power to impose any methods, assumptions or penalties on the Secretary of State when transferring assets between schemes or sections of the Royal Mail pension plan. Similarly, the Government may well be reluctant to give the Royal Mail scheme trustees a potential power of veto on the transfer of pension assets, which could impact on the sale process itself. None the less, the concern remains that the Secretary of State retains considerable powers when it comes to determining the adequacy and appropriateness of the actual assets transferred.
The issues that we are dealing with here are fundamentally actuarial, ensuring that the assets of the Royal Mail pension plan and its sections are adequate and appropriate in terms of matching assets to liabilities. If these decisions have to be justifiable as a matter of actuarial opinion and the actuary concerned cannot be the Royal Mail scheme actuary acting for the trustees, the best candidate for the job in my view is the Government’s own actuary, GAD.
Amendment 56 to Clause 17 would address transfer of assets between the newly created sections of the Royal Mail scheme and Amendment 57 to Clause 21 would address assets transferred from the Royal Mail pension scheme to the public service scheme. The amendments would require the Secretary of State to obtain a certificate from the government actuary stating that in his opinion, in the first instance, the allocation of assets between the different sections is appropriate, having regard to the liabilities and obligations of each section and, in the second instance, the selection of assets transferred and the assets remaining in the Royal Mail scheme is appropriate, having regard to the liabilities and the obligations of the Royal Mail scheme and the new public service scheme established under Clause 16. In my view, requiring such a certificate from the government actuary would provide a form of protection to the scheme, its trustees and its members when the Secretary of State exercises his powers under Clauses 17 and 21.
The Secretary of State has very wide powers to allocate assets and liabilities and materially alter the strength of an employer covenant backing any of the new sections of the Royal Mail pension plan. These must be seen in the context that, under Clause 8, the Secretary of State has powers to transfer property rights and liabilities between the holding company and other companies that are wholly owned by the Crown, which may occur prior to, and be in preparation for, sale or mutualisation. These powers in Clause 8 could be exercised so as to have the effect of materially weakening the employer covenant supporting any section of the remaining smaller Royal Mail pension plan. To give an example, the Secretary of State could create a separate section of the Royal Mail scheme for Post Office Ltd under Clause 17 and determine which assets and liabilities are allocated to it. The Secretary of State also has the power to decide which assets and property rights are held by Post Office Ltd as a company under Clause 8. When these are taken together, they are considerable powers and reinforce the need for a protection mechanism for scheme members. I believe that certification from the Government’s actuary will provide, before assets and liabilities between schemes and sections are transferred, that degree of protection. I beg to move.
Lord De Mauley
My Lords, I thank the noble Baroness, Lady Drake, for giving us another opportunity to discuss the vital provisions in the Bill on the RMPP. Amendment 56 relates to the selection of assets left with individual sections of the RMPP created under Clause 17. That clause allows the Secretary of State by order to divide the RMPP into sections. The Government intend that this power will be used to create a separate section in the RMPP for Post Office Ltd. This is necessary as Post Office Ltd will be separated from Royal Mail, because it is not part of the sale under Part 1 of the Bill. Amendment 57 relates to Clause 21 and the selection of assets left with the RMPP as a whole once the deficit is transferred to the Government.
Part 2 of the Bill will allow the Government to take over the historic deficit in the Royal Mail pension plan. We intend to do this by transferring approximately £35.9 billion of liabilities and £27.5 billion of assets from the RMPP to the Government. This means that Royal Mail will be left with an appropriately sized pension plan to manage.
We intend that only liabilities relating to the salary link—that is, real growth in salaries for active members—and ongoing pension accruals will be left with the RMPP. We estimate that the salary link portion will amount to approximately £1.5 billion of liabilities remaining with the RMPP at the point at which the Government implement the measures in Part 2. Subject to state aid clearance, we intend to fund fully the liabilities remaining with the RMPP at the point of transfer, which would mean the RMPP also retaining £1.5 billion of assets.
In dealing with both amendments, I want to provide some reassurance on the process that will be followed to transfer assets from the RMPP to the Government. Before any assets are transferred, a valuation of the RMPP will indeed be undertaken by the Government Actuary. That valuation will follow standard actuarial principles and reflect the assumptions agreed between the trustees and Royal Mail for the March 2009 triennial valuation. The output of that valuation will be an up-to-date view of the value of the assets and liabilities in the plan. As a result, there will be no benefit in value for the RMPP, or a section of it, in selecting one type of asset rather than another. As noble Lords have highlighted in their proposed amendments, however, it is important that careful consideration be given to the type of assets that are left with the RMPP and to how those assets might be allocated between the Royal Mail section and the Post Office Ltd section of the plan.
We fully recognise that the assets to be left with the RMPP, and the individual sections, should reflect the future investment strategy of the trustees, and that it should be the trustees, in consultation with the respective employers, who set that strategy, rather than the Government. Jane Newell, the chair of the RMPP trustees, stated during her evidence to the Public Bill Committee in the other place that she would look to engage with us on the selection of assets to be left with the RMPP. I assure noble Lords that officials, with advice from the Government Actuary’s Department, have indeed been engaging with the trustees of the RMPP and are making good progress. Indeed, the Government are obliged under Clause 24 to consult the trustees before any orders are made under Part 2 of the Bill.
It is also important to bear in mind that the trustees would be free to sell any assets left by the Government and to change their investment strategy as they see fit. Of course, given the costs that this would involve, it is in everyone’s interest that we continue to work with the trustees to reach a satisfactory agreement on this issue.
I understand that concerns have been raised—the noble Lord, Lord Young, and I have corresponded on this—that the Government may seek to make changes to the RMPP by way of the powers in Part 2, even after the pensions changes that I have described have been implemented. I am happy to make clear that the Government intend to use these powers on a one-off basis only, and have no intention of making any substantive changes to the RMPP under Clauses 17 or 18 after the implementation of the pensions solution.
Baroness Drake
I thank the Minister for that detailed response. I am conscious of the lateness of the hour and that the detail of pension valuations is not everyone’s cup of tea. I took from what the Minister said that the Government’s actuaries will be involved in making a full assessment of the value and type of assets in relation to liabilities before any transfers are made under Clauses 17 and 21. It would be very helpful for the record to show that. That is exactly what I sought to achieve.
I noted the assurance that the Government would not seek to deploy Clause 18 in a way that weakened the employer covenant. Wholly hypothetically, if Post Office Counters did not retain the Crown offices on its balance sheets and did not get a good settlement on the transfer of assets and liabilities, my concern is that the combined effect would not be very helpful to the members in that section of the Royal Mail scheme. However, the Minister has given assurances that that is not the Government’s intention, and that they will actively seek to ensure that the application of Clause 18 does not weaken the employer covenant behind any of the sections. Those assurances are very helpful and, if the record shows them, I can withdraw my amendment.