Katy Clark (North Ayrshire and Arran) (Lab)
I beg to move,
That this House recognises the vital contribution that Royal Mail makes to rural areas; notes that the six day a week collection and delivery service to rural and remote areas is invaluable to local life; further notes that the relationship Royal Mail has with the post office network is equally important for the continued survival of post offices; recognises that the impending privatisation of Royal Mail will place a question mark over its willingness to maintain what may be loss-making services; and calls on the Government to provide more concrete, long-term protections for postal services in rural areas, remote areas and islands while ensuring that the postal universal service obligation in its current form endures.
It is a pleasure to have an opportunity to introduce this debate on the future of our post office network in the event of the Government deciding to proceed with their plans to privatise Royal Mail. I thank the Members in all parts of the House who signed the motion that led to the allocation of time for the debate by the Backbench Business Committee. The motion expresses the view that the privatisation of Royal Mail will lead to uncertainty over the continued survival of many post offices, particularly in rural areas where there are often loss-making services, and calls on the Government to provide
“more concrete, long-term protections for postal services in rural areas”.
I represent a rural constituency with many small town and island communities, and I know that there is a great deal of concern among post offices in my area about the impact that privatisation will have on the services that they provide. Post offices are central to the life of many small communities in particular. They provide a number of vital services, enabling people to obtain cash and even to buy a pint of milk.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I congratulate my hon. Friend on bringing this important issue to the attention of the House.
My constituent Hugh Gaffney, who is a leading member of the Communication Workers Union, has on several occasions—along with others—brought to my notice the impact on pensions that will result if the Government proceed with their plans. He and other members of the union consider pensions to be not national liabilities but deferred income, and he has asked me to convey to the House the strong views that they have expressed. Not only are the union members unhappy, but Mr Gaffney feels that if the Government go ahead with their proposals it will be—as he put it—daylight robbery.
Katy Clark
I was contacted by Hugh Gaffney today. He and other members of the union have been lobbying Scottish Members of Parliament in particular. It is vital for many pensioners who live in small communities—and in communities of many different types—to have access to postal services, but such access is also vital for many other people living in small communities.
Mark Tami (Alyn and Deeside) (Lab)
My hon. Friend is making a very powerful case. The post office is often also the only shop in the area, and it is a place where an elderly person can feel safe because he or she knows the person who works in the shop. If such people now have to travel to a much larger town, they will not benefit from the same sort of reassurance.
Katy Clark
My hon. Friend is absolutely correct; if the post office was not there—and if the shop that is part of the post office business was not there—there would not be anything in many communities for many of our most vulnerable constituents.
Neil Carmichael (Stroud) (Con)
I appreciate the opportunity to intervene in this debate, because in my constituency rural post offices are essential, as they obviously are in the hon. Lady’s constituency. Does she not recognise the Government’s wise decision to protect 11,500 post offices, modernising 6,000 of them, and to make sure that post offices that exist today will exist tomorrow and always in the future?
Katy Clark
I am grateful to the hon. Gentleman for his contribution. As he will be aware, however, organisations such as the National Federation of SubPostmasters believe that what the Government have done is inadequate to ensure the future of our post office network, and I suspect we will be exploring such issues in today’s debate. I also recognise that he, too, has a very rural constituency and that this debate is of as great importance to his constituents as it is to mine.
Huw Irranca-Davies (Ogmore) (Lab)
I congratulate my hon. Friend on securing this important debate. Does she recognise that the link between Royal Mail and individual post offices is crucial? We talk about “rural post offices”, but in my constituency, which borders the M4 and is a former coal mining constituency, all but three of the post offices are part of the rural network.
Katy Clark
My hon. Friend makes an incredibly important point, one that has been made to me by many who run post offices in my constituency.
The post office is vital, not only for individuals, but for many rural businesses—that is another point that many people in my constituency have made. I believe that those who work for Royal Mail have a strong public service ethos. They provide a vital service in many parts of the country, and in rural areas nobody else is going to provide it. There are real concerns about the impact that the privatisation of Royal Mail will have on not just Royal Mail itself, but our post office network. I suspect that many issues associated with that will be explored in this debate by many hon. Members from all political parties.
The background to this debate is, of course, the Postal Services Act 2011, which was passed by this House and allows not only for the privatisation of Royal Mail, but for competition for postal services. The Government have not, as yet, specified what form the sale of Royal Mail will take—whether it will be an initial public offering or a sale to private equity—although they have said that an IPO is their preferred method of sale. There is a great deal of concern throughout the country that the Government are rushing their timetable for political reasons. They have said that the sale will take place within the 2013-14 financial year. If that is the case, we will be hearing further details on the privatisation very soon.
The Government have framed their argument for privatisation in such a way as to suggest that Royal Mail is in imminent danger and that privatisation is the only solution, but that is not the case. Royal Mail is doing very well at the moment, and profits more than doubled in the past year, to more than £400 million. That is partly because the Government have taken over the assets and liabilities of Royal Mail’s pension scheme, saving the company £300 million each year. I congratulate the Government on taking that step. Of course Royal Mail needs access to capital for investment, but the urgency of the Government’s case seems to be driven more by a political timetable. There are many ways to get access to capital. For example, Network Rail is a public body that is authorised to access private capital, without affecting Government borrowing. This House has the right to expect the Government to look at other ways in which Royal Mail could get this access without going down the privatisation path.
The privatisation path is deeply unpopular, with not only the public, but Royal Mail staff. When the Communication Workers Union consulted its staff, it found that 96% opposed privatisation. Unite, which represents managers in Royal Mail, has also come out strongly against privatisation. The National Federation of SubPostmasters was originally sympathetic to some of what the Government were saying but it is now calling on them to halt the privatisation of Royal Mail, because of what it says is the Government’s failure to provide new work to post offices. In the briefings that it has been providing to Members throughout the country, which have been given to me by my constituents and when I have visited post offices over the past few days, the NFSP says that no new work has been awarded to post offices since May 2010 and that the new services that have been introduced are one-off transactions available only at a small number of post offices. It says that without the promised new Government work Post Office Ltd and individual post offices do not have a viable future and that a close relationship with Royal Mail is vital and will be jeopardised by privatisation.
One reason people are so opposed to privatisation is the fear that the universal service obligation will be under threat. The affordable six days a week service that is so valued in the United Kingdom is expensive to provide, particularly in rural areas. Rural post offices and rural postal services are most vulnerable because they are the most costly, and private parcel delivery companies routinely charge a high premium for delivering to remote or rural areas or to islands—or simply refuse to deliver at all.
A report by Citizens Advice Scotland in 2011 found that 83.8% of people surveyed living in remote parts of Scotland had been refused delivery altogether by a retailer using a carrier other than Royal Mail and that increased charges are normal. That is, of course, a problem not just in Scotland but throughout many parts of the UK.
Jesse Norman (Hereford and South Herefordshire) (Con)
The hon. Lady mentions the universal service obligation. Is it not the case that the obligation is now better protected than ever as it has been written into primary legislation by Parliament?
Katy Clark
There is not a short answer to that question, but I will try to explore it. My point is that the legal protections are inadequate, as there is a great deal of uncertainty about where we will go. The 10-year agreement that has been entered into is not good enough and does not last long enough. I expect that we will explore those issues as we continue the debate.
John McDonnell (Hayes and Harlington) (Lab)
Is it not true that the industry lost confidence in the Government because of the failure to deliver the additional work promised to the post offices?
Katy Clark
That is indeed the case and that is very much what the people running post offices are saying.
I appreciate the difficulties—the Labour Government grappled with them, too—but I must say to the Government that unless we deliver on providing new services to the post offices, change of this nature is unlikely to be successful. All political parties and all levels of government —not just Westminster, but the Scottish Government and local government—must do a lot more in this area. We need to consider ways in which we can ensure that more services are provided in post offices to ensure a long-term future for them.
Dr Sarah Wollaston (Totnes) (Con)
I am grateful to the hon. Lady, who is being very generous in taking interventions. Although I completely agree that post offices need access to more services, does she agree that allowing greater flexibility in the Post Office Local model about how services are delivered within the business is important? A bakery in Frogmore provided such a service, and the restrictions being placed on it seem entirely unreasonable. Does she also agree that more flexibility is needed in the funding for the Post Office Local model?
Katy Clark
The hon. Lady is correct. Many people who are running post offices are being very innovative in how they are trying to develop the system, but how they operate is very much determined by how the Post Office relates to them and how the commission is calculated. Many of the schemes proposed by the Government mean that they will get less commission in the future, which is another issue that many people who run post offices are raising with me.
As I said, there is a significant problem with the delivery of items in more rural areas unless Royal Mail provides that service. Even in areas of my constituency where private companies are normally willing to deliver, as soon as there is a bit of bad weather only Royal Mail continues to provide a service.
Although I will not have time to develop the point, another major problem is the fact that people in rural areas are disproportionately reliant on Royal Mail. Consumer Focus, which is now Consumer Futures, found that users in rural areas were often more reliant on traditional forms of communication, such as the post, because of the limited availability of others. We could have many debates about problems accessing high-speed internet in many parts of the country.
The Postal Services Act 2011 enabled other postal service providers to enter the direct delivery, end-to-end market, which is already enabling private postal service providers to cherry-pick services. For example, TNT has set up a delivery service in west, central and south-west London. It is able to win business because it can choose where, when and what to deliver. It does not maintain the service and standards that Royal Mail undertakes to provide, and it undercuts the terms, pay and conditions of postal workers so that it can provide a cheaper service.
TNT employs workers on zero-hours contracts, which means that they are not guaranteed any hours. A journalist who went undercover in a TNT workplace reported how workers “hustled” each day to get work. The practice of organisations like TNT is to over-hire staff, meaning that staff are turned away each day without any work and therefore, of course, without any pay.
Ian Paisley (North Antrim) (DUP)
The hon. Lady makes a vital point about how rural areas, especially remote rural areas, will be starved of a service. People on the island of Rathlin, which I represent, will be forced to come to the mainland of Northern Ireland to collect their post, as will people in remote rural areas. Such a strangulation of service cannot be allowed to happen.
Katy Clark
My constituents on islands such as Arran express the fear that they will no longer receive deliveries and will have to go to a central point for collections, as happens in many countries.
Lady Hermon (North Down) (Ind)
The hon. Lady has been generous in taking interventions and it has been helpful to hear her responses. If the Labour party were to win the 2015 general election—I know that an awful lot of people hope that that will happen—what practical steps would a Labour Government take not only to ensure the survival of rural post offices, but to encourage them to expand?
Katy Clark
I suspect that that topic could be the subject of a lengthy debate. I do not want to stray too far from the terms of the motion, but hon. Members on both sides of the House have outlined fully in previous debates what needs to be done to ensure that post offices have a viable and successful future. The Government have a role to play in that. I call on parties on all sides of the political debate to do what they can, because we all have areas where we are in power and can ensure that post offices get more work and receive more support.
The overall package of pay and conditions of not only TNT staff in London but those employed on a similar basis by other private companies, which have been able to operate in such a way only since the 2011 Act was passed, is significantly worse than that of the Royal Mail work force. Ofcom is responsible for regulating the sector. It has explicitly stated that it is regulating TNT, but it has done nothing whatsoever about TNT either cherry-picking services or undercutting wages and conditions.
The fear is that this is the face of future postal services. Although TNT and others might wish to operate in London and other profitable areas, they will not be interested in many other parts of the country, such as North Ayrshire and Arran. Of course, that means that Royal Mail will not be able to use the money it makes in profitable areas to subsidise—to cross-fertilise—services in less profitable areas so that it can provide a national service. The Government say that they support the universal service obligation, as the hon. Member for Hereford and South Herefordshire (Jesse Norman) suggested in an intervention.
Mr Iain McKenzie (Inverclyde) (Lab)
I thank my hon. Friend for giving way. She has been extremely generous, and I congratulate her on securing the debate. Did she, like me, see in the fly-on-the-wall documentary TNT’s habit of calling its delivery people back before they had finished their day’s work, thus returning mail to the depot, so that it took longer for people to receive it? That is an ongoing practice, and it is encouraged.
Katy Clark
My hon. Friend makes an incredibly important point.
If we proceed down this path, the pressures on future Governments and the management of Royal Mail will be to reduce requirements, as they will need to compete on a level playing field with other service providers. They will have to ensure that the universal service obligation is financially sustainable. If we go down the path suggested by the Government, loss-making rural services will be the most vulnerable and will be the first to go.
I appreciate the fact that the Government say that the universal service obligation is enshrined in law, but that covers only the bare minimum. Many of the requirements are set by Ofcom and can easily be changed. The regulator has recently consulted on user needs, including getting rid of first-class mail and thus next-day delivery, and moving from a six-day to a five-day service. That may not happen now, but if privatisation goes ahead it is more likely. The privately run PostNL in the Netherlands has put pressure on both the regulator and the Dutch Government regarding the universal service obligation and there are now plans to drop Monday deliveries.
There is no guarantee that the inter-business agreement that has been entered into between Royal Mail and the Post Office will continue or remain unchanged at the end of the 10-year period. I do not believe that the protections that we have been offered are adequate, so I am asking the Government to halt the sale of Royal Mail to give proper consideration to how rural services can be provided in the longer term, and to put in place stronger legal protections for the universal service obligation. I believe that cross-party support for the motion reflects a genuine concern about the issue, and I urge the Government to look at the issue in detail, and to provide a detailed response today.
Mr Speaker
Colleagues will have noted the 10-minute time limit on Back-Back speeches. I call Sir Paul Beresford.
Sir Paul Beresford (Mole Valley) (Con)
I noted the time limit, Mr Speaker, and demolished about two thirds of what I intended to say.
I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on introducing the debate, and I agree with many of the points that she made. I particularly agree about the need to create opportunities for sub-post offices in rural areas to provide more services, and I intend to discuss exactly that and one other key point. My constituency is bordered by the south-west edge of the M25. It is close to London, but it is rural or semi-rural. Many people will have seen the London Mayor in the recent broadcast of the Surrey cycle race, and some may even have seen Mayor Boris puffing up Leith hill on his bicycle—not a Boris bicycle, but his own bicycle—and the beautiful countryside that is to be found throughout my constituency.
I want, however, to concentrate on something that is on the table. The mainstay of my rural post office services—and this was touched on in the opening speech—is provided by sub-post offices. My constituency has two main towns and perhaps 30 villages. A considerable number of villages have at their core a pub, if not two pubs, and a village shop, which generally incorporates a sub-post office. Between 2001 and 2012, Mole Valley lost a number of sub-post offices, which in turn threatened, sometimes fatally, the associated village shops. I understand that there are 11,800 post offices in the United Kingdom, and approximately 750 are what could be called main post offices. Logically, therefore, the remainder are sub-post offices, of which 55% are in rural areas. In the United Kingdom, 31% of those post offices are the only retail outlets in the area, and 58% provide some of the very few shops in village areas.
Sub-post offices are absolutely key to my villages. The viability of these sub-post offices is what I want to concentrate on, and I shall look at one particular angle. The Government can help us, because there is a move by Post Office Ltd to centralise a key front-office service: the system for the acceptance and checking of the printed photo ID market. Post Office Ltd is the front line in over-the-counter processing of digital photographs for licences issued by the Driver and Vehicle Licensing Agency, passports and other ID photos. This service is being cramped by Post Office Ltd. It is being moved to the 750 main post offices, where Post Office Ltd is installing at considerable expense what are called Cogent cameras, which will take the photograph and transmit it to the DVLA or Passport Office, as appropriate.
I have in my constituency the head office of Photo-Me. This is a business with which many of us are familiar because there are a couple of Photo-Me booths downstairs. There are many such booths throughout our small towns and, in my area at least, some sub-post offices have them. If the proposal to use Cogent cameras proceeds, my constituents will have to travel from their villages to a centre such as Guildford. It does not look far on the map and it is not far as the crow flies, but my constituents do not fly. I am aware that the trend is for on-line services, but according to a recent estimate, 40% of households in my constituency do not have a computer, let alone broadband. For many, the internet is so complicated that they prefer to use the printed form with the printed photograph. These folks will have go to Guildford, with some difficulty, or one of the other 750 main post offices, rather than the 11,500 sub-post offices that could be available. That is inconvenient and takes time. It means time off work and, at various times of the year for various people who work in rural areas, this is impossible.
A proposal has been put to Post Office Ltd by the chief executive of Photo-Me on behalf of a considerable number of photographers who currently produce ID photographs. There are about 1,500 independent photographers nationally, including well-known names such as Photo-Me, Jessops and Snappy Snaps, and a number of small outlets in small towns. The proposal is for the sub-post offices to have a relatively cheap scanner so that the sub-postmaster or staff can go through the transaction and scan the printed photograph into digital form to be sent online to the DVLA, Passport Office or whichever Government Department needs it.
For some years long and technical discussions, in which I have participated, have been taking place, first with the DVLA, which now accepts that that would be possible and is a very good idea. We have now reached the Post Office, which seems to have put up a brick wall. Having got technical acceptance from the DVLA, I hope we can persuade Post Office Ltd to put this cheap and simple system into our rural post offices. I am having difficulty with that. The benefits to the sub-post offices are obvious. They would provide a new, better and increased service, which would also increase the footfall in sub-post office shops, which has a knock-on effect, similar to the system that supermarkets work. If people want to go to the pharmacy in a supermarket, they have to walk past absolutely everything before they get there and on the way back as well. They look and they tend to buy, so they use that service. It is vital, as the hon. Member for North Ayrshire and Arran said, that we keep those sub-post offices in shops going.
Jesse Norman
My hon. Friend is making a powerful case on behalf of sub-post offices, a shining example of which is Hopes of Longtown in my constituency, which has a shop alongside it. Does my hon. Friend share my view that many of these sub-post offices are also rural sorting offices and that it is equally important to preserve that aspect? He may wish to join me in asking the Minister to dwell on that in future reflection and when closing the debate today.
Sir Paul Beresford
I thank my hon. Friend. I would love to be able to do so, but as he knows, we are short of time. He has made the point and the Minister appears to be making a note of it.
I am sure the Minister is as anxious as we are that rural post offices and sub-post offices continue. I would be grateful for an opportunity for two or three of us working in this area to have a meeting with her to discuss progress or, rather, the lack of progress. The chief executive of Post Office Ltd has offered to discuss the matter with me. I accepted her invitation some weeks ago but I await notice of time and date from her.
The importance and vitality of a rural post office and postal service must not be underestimated. Having seen the evidence in my constituency, I believe that the previous Government damaged that, but as many of their Ministers were urban they probably did not realise it or they turned a blind eye. In essence, I am looking forward to the Minister’s agreement and support at a meeting to try to persuade Post Office Ltd to see this as an opportunity to expand a service and increase footfall in the sub-post offices in our rural areas.
Mr Peter Hain (Neath) (Lab)
I agree with many of the points made by the hon. Member for Mole Valley (Sir Paul Beresford). In the remote former mining villages in my constituency, up the valleys, there are many pensioners and others who do not have cars and are not online and for whom rural postal services are absolutely vital. As my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) argued persuasively, the universal service provided by the Royal Mail makes a vital contribution to life in remote and rural communities. However, I think that that public service is currently under threat from the combined effects of Government privatisation and end-to-end competition from private postal operators such as TNT.
The hon. Member for Hereford and South Herefordshire (Jesse Norman) claimed that the universal service will not be threatened because it is enshrined in law through the Postal Services Act 2011, but that covers only the bare minimum of the universal service. Many aspects of the universal service are set by the regulator, Ofcom, and could easily be changed while remaining legally compliant. For example, Ofcom recently looked at various ways the universal service could be changed to make it cheaper to run. It considered getting rid of first-class mail, and therefore the next-day service, reducing quality of service standards and cutting delivery days from six a week to five. Thankfully, it did not proceed with those changes, but with a privatised Royal Mail those options are likely to be raised again and again because of commercial pressures. On 23 December 2012 The Daily Telegraph reported that Conservative Ministers were thinking about future changes to the universal service obligation and that an all-Conservative Government could perhaps seek to relax it.
Privatised postal services abroad have been successful in pushing Governments and regulators to downgrade the universal service. For example, as my hon. Friend the Member for North Ayrshire and Arran mentioned, the plans to drop Monday deliveries in the Netherlands were the result of pressure from the private company PostNL. A privately owned Royal Mail would be under pressure to generate a return for shareholders and might similarly want to cut the burden of the universal service and lobby for similar changes here in the United Kingdom. Downgrading the universal service in that way would disproportionately affect consumers in rural areas. Services outside the universal service would not be commercially justifiable and would either become very expensive or not be sustained.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Does the right hon. Gentleman agree that it is not only consumers in rural areas who will suffer but businesses? In fact, the whole local economy of large swathes of rural parts across these islands will be severely detrimentally affected.
Mr Hain
I completely agree with the hon. Lady, who makes a valid point about the impact on businesses, especially small businesses.
Equally, if quality of service targets were downgraded it would be the harder-to-reach locations that would be most affected. Ofcom’s recent review of user needs suggested that removing Royal Mail’s air network in the name of cost-cutting could mean areas of Scotland, Northern Ireland, south Wales and rural England seeing first-class quality of service fall to just 50% to 75%.
The Government say that they have no plans to change the universal service requirements in law for the duration of this Parliament, but that is hardly a long-term commitment, given that we are just two years away from a general election. Royal Mail privatisation is likely to place pressure on the Government to downgrade those aspects of the universal service that hurt the bottom line. Private companies are primarily responsible to their shareholders, and the public sector ethos behind the Royal Mail’s universal service does not sit well within that model. We need only look at private parcel delivery companies to see what happens when profitability rather than public service is the driving force.
As my hon. Friend the Member for North Ayrshire and Arran said, consumers in remote and rural locations are frequently charged extra. She pointed out that there are reports of £45 being charged for the delivery of £25 phones. The Government say that Royal Mail faces imminent danger and that privatisation is the only answer, but that is simply not the case. The most recent financial results show that under public ownership its profits more than doubled in the past year to £403 million. That demonstrates that Royal Mail can be profitable in the public sector, which is where most people—two thirds of the public, not just the vast majority of staff—want it to remain.
Privatisation of the letters service will also impact on post offices in remote and rural locations. The post office network is reliant not only on Government subsidy but on the commercial relationship with Royal Mail that allows its postal products and services to be sold through that network. The current chief executive of Royal Mail says that the commercial success of both companies is best served by their working closely together, but a new chief executive of a privatised Royal Mail may take an entirely different commercial view. There are legitimate concerns that a privatised Royal Mail responsible only to shareholders would seek to sever this relationship in line with its commercial interests. That would have a disastrous effect on the entire post office network, but branches in remote and rural areas would be at particular risk because of their low population density and their revenues. The last Postcomm annual report on the post office network in 2010 found that fewer than 23% of rural branches generated over £40,000 per annum, compared with 70% of urban branches and two thirds of branches in deprived urban areas.
The Government and Ofcom need to make sure that the universal service obligation in its current form endures and postal services in rural and remote areas are protected. This requires Ofcom to use the powers that it has to tackle the end-to-end competition from private postal operators such as TNT UK. It also requires the Government to consider an alternative business model for Royal Mail that would keep the postal service run in the interests of the public and properly engage the work force. The main problem is that the model of competition under the 2011 Act has meant, in a privatised context, cherry-picking of the most profitable parts of Royal Mail’s business—for example, taking the profitable parts such as business mail, sorting it and then delivering it to city centres, but dumping it back into the Royal Mail network for delivery to the most remote and costly rural areas. That imposes a double burden on Royal Mail, taking revenue away and then forcing it to bear the extra cost.
TNT’s stated aim over the next five years is to increase its end-to-end operations to a work force of approximately 20,000 and to deliver business post—that is, the most profitable post—to doorsteps across the UK. Evidence from Communication Workers Union members in the trial areas of London shows that Royal Mail’s postal volumes have been materially affected because of this competition. Loss of revenues on the scale that TNT is working towards would have very serious consequences for Royal Mail. It means Royal Mail missing out on the most profitable business that would usually subsidise the high cost of delivering to remote and rural locations. Such unchecked competition places the current universal service under significant threat.
Lady Hermon
The right hon. Gentleman may be surprised to learn that I agree with every word he has said on this occasion, though that may not have been the case when he was Secretary of State for Northern Ireland. I think it would strengthen his argument if he could throw a little light on the last part of the motion which
“calls on the Government to provide more concrete, long-term protections for postal services in rural areas”.
Will he explain what concrete, long-term protections for postal services in rural areas would be introduced if there were a Labour Government in 2015? That would be enormously helpful.
Mr Hain
I am grateful to the hon. Lady. I mostly agreed with her when I was Secretary of State, even if she did not agree with me, but there we are. I would want the next Labour Government elected in 2015 to ensure that the competition regime was fair and that Ofcom regulated the market to ensure that competitors did not cherry-pick the most profitable parts of the business. That is quite an easy thing to do, but it has to be driven ultimately by Government policy.
Royal Mail needs a level playing field where its competitors also have an obligation to deliver up remote Welsh mountains, or to the Scottish islands or the Yorkshire dales. That is why Ofcom must use the powers it already has to introduce general universal service conditions on competitors such as TNT which provide services that fall within the scope of the universal service. GUSCs do not require legislative change or ministerial approval, and they provide the best option for intervention on cherry-picking in the short term. Requiring Royal Mail’s competitors to deliver to a minimum area of geographic coverage for a specified number of delivery days and to a representative proportion of the population would go some way towards ensuring that competition was on much fairer terms.
Ofcom could also seek to introduce a universal service compensation fund through which rival postal operators would compensate Royal Mail for the costs of providing the universal service. Similar support funds are being established in a number of other European countries to ensure the long-term viability of the universal service.
Running Royal Mail as a not-for-dividend company, such as, for example, Welsh Water, would provide a suitable alternative model, and that is entirely compatible with the 2011 Act. The Government could choose that model and I urge them to do so.
Royal Mail’s recent profitability shows that it could raise investment capital through its own profits, which would be a step towards becoming a self-financing, not-for-dividend company under the Act. Without changing ownership, Royal Mail could borrow from money markets, at a cheaper rate, as is the case with Welsh Water, even under the terms of the Act. That would be a much better model for protecting rural postal services. Otherwise I fear that the future will be an end to door-to-door delivery in remote rural areas and the appearance of personal letter boxes in village centres, with the post office network all but disappearing.
Dan Rogerson (North Cornwall) (LD)
It is a pleasure to follow the right hon. Member for Neath (Mr Hain). I disagree with some of his conclusions but share his concern for the rural network. He set out well the potential problems that areas such as his and mine face.
I also congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing the debate, which is important and timely given that, as she said, the timetable for making progress on Royal Mail has been set out for the financial year. Although that is what the motion largely refers to, it is inevitable that Members have spoken a lot about post offices, because they are so crucial to our constituents. I will be no different, because I want to discuss the importance of the post office network, which is a key part of the proposals. I also want to talk about issues relating to the universal service obligation that have already been raised by hon. Members.
The constituency of North Cornwall contains 65 parishes. During the previous Parliament, when we had a formal programme of post office closures, it had 70 parishes, so it has shrunk since then. However, it is still a big rural area without a single railway station and where people rely on services that are close to them, wherever possible. It is a huge source of anxiety to them if they feel that a service that provides access to the wider world is going to be withdrawn.
We have also had issues with the provision of broadband, which the hon. Lady mentioned, and I am delighted that the coalition Government have made it a priority to invest in that. Investment in Cornwall is at a particularly advanced stage, because convergence programme money from the European Union has allowed us to get ahead of the game. Many areas in my constituency were so-called not spots where not only did they not have fast broadband, but they did not have broadband at all and were still on dial-up. That was a source of consternation to a few people who had decided to relocate to the constituency to run a business, which was welcome, only to find when they tried to connect to broadband that it did not exist. I am delighted that we are making progress on that front.
Postal services are vital too. That is partly due to the growth of online activity, including shopping. I am sure that many hon. Members visit postal workers at Christmas. Rather scarily, this will be my ninth year of doing so. There has been a huge growth in the number of packages that the Royal Mail delivers on behalf of a number of well-known companies that have hit the headlines and been debated in this Chamber for other reasons, namely their tax practices. That brings work to the Royal Mail and shows again how important it is. If the universal service obligation were undermined, people would be disadvantaged.
Dr Whiteford
My constituency shares with the hon. Gentleman’s the unusual distinction of having no railway stations. It also has problems with its broadband provision. He is making the excellent point, which it is important to emphasise, that such basic infrastructure makes the post office all the more vital to those communities. Does he agree that it is important to see the post office as part of the essential infrastructure?
Dan Rogerson
Absolutely; the hon. Lady is quite right.
Many hon. Members have visited the North Cornwall constituency, including the Prime Minister. Some Members may have seen the pictures in the national media. [Interruption.] He is braver than I am; I would not want to see pictures like that of me in the national media. However, we welcome him and his contribution to the local economy. There are many hamlets within the 65 parishes, so we are talking about lots of communities. If people visit the rural communities of North Cornwall, they will see lots of cottages with the name “The Old Post Office” on them. That is a mark of how many post offices we have lost.
During the last Parliament, from 2005 to 2010, we received a tough deal under the post office closure programme. For example, many of the villages around Bude lost their post offices. They are still suffering from that. I could point to a number of successful voluntary schemes that have brought back local community shops and post offices. The scheme in Blisland predates the closure programme. The community there came together and provided an excellent facility that has an internet café as well as a shop and a meeting place. In St Tudy, where the post office closed, the community recently got together to apply for funding for a new building. That went up incredibly quickly, which is testimony to the hard work of the community. In other places, the publican has provided the post office. The Tree Inn in Stratton, which again is near Bude, has brought the post office back to the community of that market town.
Mr Alan Reid (Argyll and Bute) (LD)
I agree with my hon. Friend on the importance of local post offices. Does he agree that the Department for Work and Pensions has an important role to play by giving business to the Post Office? It is essential that the Post Office card account contract continues and that post offices are used as places where people who do not have access to the internet can apply for universal credit. Does he agree that it is important that the DWP gives that work to the Post Office?
Dan Rogerson
Ministers have felt under pressure to ensure that they provide a level playing field to all people who want to provide such services, but there is no question in my mind that only the post office network has the reach to provide services such as the Driver and Vehicle Licensing Agency contract and to tick all the boxes in terms of accessibility.
Neil Carmichael
It is very generous of the hon. Gentleman to give way. On the services provided by rural post offices, does he agree that the organisation’s strong brand is a good reason why it should introduce banking and mortgages, as it is doing? Those are powerful reasons to maintain the network and justify the Government’s confidence in it.
Dan Rogerson
The hon. Gentleman is right. We must look at the positives. The hon. Member for North Ayrshire and Arran raised a lot of fears, some of which are natural, but we must look at how justified they are. We must ensure that we are not speaking in political terms to draw the attention of the media and to provide a subject on which to campaign, but that we look at the reality. That is why I am delighted that the Government have invested money in the network as part of the programme.
Katy Clark
Does the hon. Gentleman accept that the way TNT operates in London is the reality of what we are likely to see in the future?
Dan Rogerson
The hon. Lady made good points about employment practices, which I think will be of concern to people looking at employment in that sector. However, we are talking about the universal service obligation, and we will probably not find TNT falling over itself to provide alternative services in many areas of the rural network that we are talking about. I am confining my remarks primarily to the rural network, although I accept what she says about zero-hours contracts, which is a debate for another time.
Dan Rogerson
Let me make a little progress and then I will give way.
I was listing the sorts of approaches that people have taken. In my constituency, the community at St Eval was shaped by RAF and Royal Navy housing, and Trevisker probably would not have been built were it not for the service community. That community has now largely left, and the MOD shut down buildings, took away the old NAAFI and so on, which put the post office under threat. Again, the community came together and put forward a good proposal with Cornwall council. It now has a lease on one of the former United States navy buildings to keep those services in the community. That is vital and we are looking to the future of those services as the buildings get sold off. Hopefully such proposals will play a part in shaping the future of that community.
Interaction with other services is also important. A lot of villages may have a small school that is clinging on, although there are of course pressures regarding the viability of such schools, which we all want to protect. The village pub may also be under threat, and those services support each other. If families come to collect children, they might go into the post office at the same time, or if they are going to the shop they might also go into the pub. Such things all support a viable set of services and businesses in the area, and the post office plays a big part in that.
Post Office Local provides an exciting opportunity for many businesses, and a new way of securing the future viability of the service. In some places, however, the sub-postmaster is looking to sell the business, and there is a concern that if they can sell it only as a local, finding a buyer may not prove such an easy prospect. We must get reassurance on that issue to ensure that in villages where a lot of community support has gone into the business, those gains are not lost as the post office moves to the local model.
Much of the motion is about postal services and it is right that the House debates such issues as we are the guarantors of the obligation to provide that service across the country. I was struck by the comments of the right hon. Member for Neath (Mr Hain), who mentioned Royal Mail’s applications to vary some of those conditions, and that the regulator, through discussion and consultation, had decided that that was not the way to go. I do not necessarily think that whether those services are in the private sector—in whatever form—or in the public sector is the ultimate guarantee. That is for us in this House to provide, and the universal service obligation is now protected in law. On the variation of those conditions, we have a prominent role in consultations on whether such things should be changed.
Katy Clark
Does the hon. Gentleman accept that we are talking about a framework that will mean less money is available for Royal Mail, which will mean it will not be able to provide the services we have all been talking about? Parliament must have a framework through which Royal Mail is able to survive and post offices to flourish. Is that not what we are debating?
Dan Rogerson
Absolutely, and for some time regulators in other privatised industries have been looking at what is viable and what is not—water bills are a massive issue in my part of the world, and we have had a long debate about what is necessary for investment in the service, what is an acceptable level of profit, and what will be provided. Ofcom’s role is crucial.
Dan Rogerson
I apologise but I am afraid I do not have time to give way to the right hon. Gentleman.
All parties must look at our future commitments to protect the universal service obligation. I sense that any party that signalled it was abandoning support for that obligation would not prosper electorally, and those of us in rural areas will argue strongly that as we move into a new era for postal services those services must be protected in law. We will campaign vigorously for any variations in that and interact with the regulator to secure them. I think we can have a viable postal service that will hopefully be a lot more protected than it was, sadly, under the previous Government.
Mr Speaker
Order. It might be helpful to the House if I explain that the Chair will look to call the Front-Bench winding-up speakers at 5.40 pm, with a view also to being able to start the next debate, on cycling, which is very heavily subscribed, no later than 6 o’clock.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
I congratulate my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) on securing this debate. I wish, like others, to contribute because a large part of my constituency covers a rural area. I have two rural post offices out of a total of eight across the constituency, which is the lowest number of post offices of any Scottish constituency aside from Glasgow North and one of the lowest in the UK as a whole.
The post is a vital service in rural areas. It goes beyond merely putting mail through the letterbox. For example, people who are not naturally gifted at form-filling can get help at competitive prices from the post office on a range of official documents, including passports, driving licences and tax discs. The post office will check the photo and form for a new driving licence for £4.50; by contrast, private companies offering similar services online can charge up to £60 for passport checking. The difference is between a public service at a modest cost and the free market charging whatever it thinks it can get away with.
When public services began to be privatised back in the 1980s, the mantra from many who occupied the Government Benches at the time was that competition meant a better deal for the customer. However, let us look at some recent examples. The privatised Thames Water makes profits of billions of pounds but surcharges Londoners for upgrading the sewer infrastructure in the city. The energy companies, including British Gas, have put household fuel and electricity costs up to an unacceptable level in recent years—not something they are keen to tell Sid about. The railway companies are allowed to get away with above-inflation fare increases when passengers have to tighten their belts and suffer a drop in their incomes. There cannot be many people left apart from some on the Government Benches who believe that privatisation always means a better deal for the general public.
Mr Reid
The hon. Gentleman is right to criticise the private energy companies, but Royal Mail has been guilty of excessive price increases. Royal Mail, which is under public control, put the price of a stamp up from 36p to 50p last year. Both public and private organisations are equally guilty.
Mr McCann
Yes, but under Royal Mail, we maintain the concept of universal delivery. As the hon. Gentleman has made clear, Royal Mail is profitable—it is earning the country money—which is why, instead of a having a one-off pre-election bonus through the sale of services, the UK should enjoy a regular income from post office services throughout the country.
If privatisation is the trend, will there be other royal privatisations? Can we look forward to the McDonald’s civil list, the Starbucks Duchess of Cambridge, or the Mitchells and Butlers Windsor castle? After all, the latter company already has hundreds of Windsor Castles, so it would only be a consolidation of the brand.
I have said those things in jest, but there is a serious point. A line must be drawn on how far privatisation is allowed to go. Everyone, including the Government, agrees that some things simply cannot be put up for sale. Honours such as peerages fall into that category. Parliamentary seats are legally immune from sale. The Prime Minister’s dinner table ought also to be exempt, although there are reports that donations to one Government party can get people through that front door. The argument is about whether or not postal services are a proper candidate for selling off. I and many other right hon. and hon. Members do not believe that the case has been made. Perhaps it is worth looking at the debate from the other side.
Recent complaints from the head of Royal Mail, Moya Greene, about remuneration for higher executives in the service, suggest that one priority for a privatised postal service will be significantly better pay for those in senior management positions. I am sure that Moya is still smarting from having to agree to hand back the £250,000 she received to get on the UK housing ladder, on top of the £127,000 she receives annually in relocation payments. Marie Antoinette’s riposte, “Let them eat cake” comes to mind. Are those sorts of increases really what the country wants to see—and pay for—at a time when most families have suffered a drop in income as a result of the economic climate?
The evidence does not back up the case for selling off postal services, so what is the real reason behind the Government’s enthusiasm for these projects?
Lady Hermon
I preface my remarks by saying that I do not want the hon. Gentleman to breach confidentiality, but it would provide a helpful contrast to the pay, salary and bonus of the chief executive if he could give us some idea of the income of the sub-postmasters in the post offices in his constituency.
Mr McCann
I am grateful for that intervention, but unlike our salaries, which are publicly available, I do not know the salaries of individual sub-postmasters and sub-postmistresses in my constituency. However, I think we can say that their salaries will be a fraction of the money paid to the chief executive, who appears to be willing to increase the salaries of higher executives under Royal Mail privatisation plans.
The evidence does not back up the case for selling off postal services, so we must ask what is the real reason for this project. For most of those on the Government Benches it is surely a dogmatic belief that, whatever the evidence, private is good and public is bad. I anticipate that the argument that postal services do not really have the same status in this technological age as they may have had in the past may come up. We will be told that people have the alternative of going online or using e-mail, and so do not have to rely on postal services. However, my recent experiences in Blackwood, Kirkmuir Hill and other rural areas in my constituency suggest that that is a rash assumption. British Telecom and the Scottish Government, supported by the UK Government, are rolling out programmes for so-called superfast broadband. In rural Blackwood and Kirkmuir Hill, however, a part of the community—a new development—has been left out due to the rather bizarre claim that they could not be sure of demand. Those constituents may get new broadband speeds in three, four, five or six years’ time, so they cannot rely on the internet and e-mail to conduct their business now. They have to resort to more traditional means.
That clearly demonstrates that communities in rural areas, where it is most expensive and difficult to upgrade online services, are the most likely to have to rely on postal services for the longest time. Yet if postal services are deemed to be too expensive, it will be in those areas that services are most likely to be jettisoned by private sector companies as uneconomical. That has certainly been the experience in New Zealand. In the UK, the number of rural post offices has been cut by 2,765 since 2000. I acknowledge that that cut is less than the cut to the number of urban post offices in the same period, but the accessibility criteria I mentioned earlier mean it is more significant, as rural offices are much further apart. Rural areas suffer in the provision of traditional Royal Mail and Post Office services and in the technological revolution from which urbanised areas will be able to benefit more or less immediately.
There are, of course, questions about access to services for those who do not own cars and have to get to urban centres, where postal services are more profitable and more likely to remain. A recent Library note shows that the accessibility criteria already differ between urban and rural areas, with urban post offices expected to be within 1 mile of the customer, but up to 3 miles away in rural areas. There are bus services from rural areas—my constituency is no different in that respect—but they are by no means as frequent as those that urban users are familiar with. That self-evidently reduces access, compared with being able to walk up the road to a local post office facility in one’s own village.
Then there is the question of whether the public want postal services to be sold off. The evidence from my postbag is that many people are deeply concerned about the proposals and have shown support for the Communication Workers Union campaign. I, too, would like to mention Hugh Gaffney, who has been a regular correspondent and has worked tirelessly on behalf of his union members in my constituency. However, nobody has written to me to say that the sell-off is a good thing and should go ahead. I cannot find any reference to a Royal Mail sell-off in the 2010 Conservative or Lib Dem manifestos, so there can be no claim of an electoral mandate for the proposal.
In the face of public hostility to the idea and the lack of a clear mandate, surely the Government should reconsider their proposals and withdraw them. At the very least, they should defer the issue until after the 2015 election and put it in their parties’ manifestos to ensure that, before any decision is taken, there is a clear and proper mandate for such a potentially far-reaching act, because once services in rural areas have gone, there will be little chance of their returning and our country will be a poorer place for it.
Mr Mike Weir (Angus) (SNP)
Throughout the debates on Royal Mail, I have made it absolutely clear that I am totally opposed to the privatisation of the system. That is not for any particularly ideological motive, but because I am concerned about what will happen to postal services in rural areas such as those that I represent, which have already suffered a reduction in services.
The universal service obligation and the universal tariff are important to rural areas, but both are under threat, not only from privatisation, but because of other changes in the Postal Services Act 2011. The hon. Member for North Cornwall (Dan Rogerson) said, fairly, that we should not be too fearful of them, but those fears are well based. The problem is that if they come to pass, it will be difficult to put the genie back in the bottle, once we have privatised Royal Mail and lost those services in rural areas. In a previous debate, the Secretary of State made the point that the Royal Mail started as a letter service, but was now a package service that also delivered letters, which is very true. That is the key to the future of the Royal Mail service, but it is also why it is crucial that it remains in public ownership.
A reliable universal mail service is essential to businesses in rural areas and to efforts to encourage the growth of such businesses. If we are to re-energise small businesses in the rural economy, they must have access to a full, reliable and, above all, reasonably priced postal service that ensures that they can send and receive packages quickly and efficiently. Ministers have recently taken to justifying the privatisation on the grounds that, as a public service, the postal service has to compete with schools and hospitals for scarce public funds. That is emotive, but completely the wrong way to look at the service. The postal service must be recognised as an important economic driver to the local economy and one of the keys to building local businesses in the internet age.
The Government and local authorities are investing massive sums in bringing improved broadband to rural areas. That presents a huge opportunity for building up the mail system. For example, the Scottish Government have entered into a contract with BT that will ensure that 95% of the population have access to fibre-optic broadband by 2017. Obviously there is a long way to go, particularly in the more rural areas, but we are getting there. That is an important development. Similar moves are being made in other parts of the UK—I recognise that the Government have made money available for that. The extension of fibre-optic broadband will improve the ability of small and medium rural businesses to operate over the internet and give an important boost to the rural economy. However, that will happen only if they have access to a reliable and affordable postal service.
As I have said, it is not only privatisation that poses a threat to that service, particularly the “affordable” element. There is absolutely nothing to prevent Royal Mail or its new private owners from introducing zonal pricing in any service other than the universal service. There is also absolutely nothing to prevent Royal Mail from introducing, for example, a different first-class service—perhaps an inter-city first-class service serving the major urban areas at a lower cost than the universal service—in the face of the competition that will undoubtedly exist. That could lead to a situation in which urban businesses had access to a lower-cost service than rural businesses. Such a move would not breach the obligation under the Act. Indeed, it could be beneficial to large urban areas and larger users as competition developed, but it would, as so often happens, leave rural areas out in the cold with a reduced service. I remind Members that Richard Hooper’s original report made the point that large businesses, rather than small ones, had been the beneficiaries of the previous liberalisation of the postal service. That process could be intensified by the privatisation of the service, which would run against the very ethos of the postal services, which was to ensure that all areas of the country were served equally at the same cost.
Last year, Ofcom decided that price caps would be removed from all Royal Mail products except second-class mail. In my view, the result is that the only truly universal service is now second-class mail. First-class mail could be priced out of the reach of many people. With the price of a first-class stamp already 60p—one of the highest prices in Europe for such a service—how many people and, crucially, small businesses will continue to send first-class mail? There is nothing to prevent Royal Mail from raising the price of the service to such an extent that it ceases to be used.
I have raised the question of zonal pricing with Ofcom, and it has confirmed in a letter to me that it does not have any powers to prevent Royal Mail from introducing a pricing variation related to user location, as the Postal Services Act 2011 limits a regulator’s powers to universal services and access. That is the problem. Ofcom cannot prevent Royal Mail from introducing a price rise now, never mind if it were to fall into the hands of a private operator. Given its previous attitude to price capping, there is no guarantee that Ofcom would not allow unrestricted pricing for the first-class service.
Even if Ofcom decided to use its powers, they would be insufficient to protect the universal service. Under the Postal Services Act 2011, Royal Mail is obliged to continue the universal service provision, and it is the only organisation to fund it. The hon. Member for North Ayrshire and Arran (Katy Clark) spoke at length about the fact that the Communication Workers Union had raised the question of cherry-picking. What will happen if services provided by others start to eat into those provided by Royal Mail and damage the universal service? What powers does Ofcom have to deal with such a situation? Would the Government close down a competitor service? The answer is clearly no; they would not do that.
The Postal Services Act sets out what could be done in such circumstances, and it is worth noting that the decisions would be taken by Ofcom in the first instance. It would make a recommendation and a Minister would then decide whether to accept or reject it. If the service were in danger, Ofcom would have to consider the matter. It could decide to review the minimum requirements of the obligation, which could result in a reduced service that would be disastrous for rural areas. It could also decide on the establishment of a compensation fund. Importantly, however, such a fund would have to be paid for by all users of the services and not by the companies that deliver the mail. That could give rise to serious difficulties. It could also lead to substantial price increases for consumers.
Ofcom could also impose general service conditions on all or some other providers. However, that is highly unlikely to be effective if, as seems likely, the other competitors would be found only in relatively small geographical areas and Royal Mail were the only provider in rural areas. Does anyone really think that a future Government would legislate to ensure that TNT, for example, should set up a nationwide service in place of the service that it provides at present?
Ofcom could allow for the tendering of the universal service, but does anyone seriously believe that that would work, when the very reason for its being considered would be the fact that Royal Mail could not manage it? If such an exercise were to be carried out, what would be the cost? The Communications Workers Union has pointed out that an executive of TNT in the Netherlands has been reported as describing the universal service obligation as
“a kind of Jurassic Park and we should be rid of it”.
We do not yet know what form the sale of Royal Mail will take. It could go out to the public, or it could involve a sale to one of those companies. Either way, experience tells us that when industries are privatised, the chances are that they will fall under the control of one of the multinational companies. Let us look at what happened in our energy industry. The only consumer protection there is the regulator, and does anyone in this Chamber really feel that consumers have been protected by the energy regulators?
There are huge problems, and as I say, once Royal Mail has been sold, it will be potentially too late to go back. At present, however, Royal Mail is making a profit and there is huge potential for growing its services in conjunction with the roll-out of fibre-optic broadband. Instead of selling it off, we should be constantly ensuring that Royal Mail is treated as an integral part of our infrastructure, in the same way as roads for example, and ensuring that it blossoms in public ownership.
I had hoped to say more about the post office network, which is also very important in rural areas, but I am unfortunately running out of time. Post offices play a part in the delivery of mail, because they provide a pick-up and delivery point in many rural areas. No one in the Chamber will be unaware of the torrid time that the post office network has had over the past decade, when over 34% of post offices have closed. Although there is no closure programme at the moment, it does not mean that post offices are not still struggling and, in some cases, closing. Over the last couple of months in my constituency, two of the remaining sub-postmasters have decided to retire, and in the process the post offices have been transferred to other businesses. The service has been reduced to a post office local service, and that means a lesser service for consumers.
Ms Margaret Ritchie (South Down) (SDLP)
I would like to pay tribute to and thank Members, particularly my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), for bringing forward this important debate on the Floor of the House through the Backbench Business Committee.
The mail and postal service plays a key role in the lives of my constituents, and stands at the centre of much that is good in the local community. The local post office and the mail service are central to both the economic and the social life of South Down. Some 55% of post offices are in rural areas and 31% represent the only retail outlet in their area—a situation with which I am very familiar in my constituency, particularly in hard-to-reach areas in the rural communities—a point to which my right hon. Friend the Member for Neath (Mr Hain) has already referred.
The postal service plays a vital role in connecting our society: it is the central hub and is an essential part of the rural infrastructure, especially for the elderly and many vulnerable people who may be excluded from other forms of communication. Further cuts to our postal service and network risk isolating many in our society by creating a two-tier network that separates the connected and the dislocated. Such a development would be bad for our society and for our economy.
To express support of our existing position is not to say that we cannot develop and modernise the service for the 21st century, and we should indeed be looking at ways to reinvigorate this institution as part of the drive to develop and regenerate the rural economy—a theme to which I will return later. As many Members have mentioned today, however, the fear is that the privatisation of the Royal Mail and its impact on the relationship with the Post Office will place a further strain on the Post Office’s ability to survive, especially in rural areas, and that it will not revitalise the service, as some have suggested it will, but leave it to wither on the vine. I am worried that the inevitable market pressures from privatisation will place further strain across the postal services and that the parts that are not as profitable, especially in remote or rural areas, will have to be closed. We should not and cannot let this happen.
Sarah Newton (Truro and Falmouth) (Con)
The hon. Lady is making a powerful point and obviously represents a constituency very much like my own. Does she agree that there will be cases in which remote rural communities need these services so much that, although it will not be possible for them to develop commercially, they will need continued public subsidy? Will she join me in asking the Minister to commit to—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I ask the hon. Lady to sit down? Questions must be brief.
Ms Ritchie
I take the hon. Lady’s point. In remote rural areas, where there is little access to broadband, there must be an alternative in the form of the rural post office, with all its attendant services.
As we have seen with other privatisations, once the horse has bolted and the rationale of market practices has been enforced, it can be very difficult to reverse or even moderate the impacts. Despite assurances to the contrary, the end result is likely to be a reduced and more expensive service, and the fear is that rural services will be the canary in the coal mine.
We have received lukewarm reassurances that the universal service obligation will be retained, but it is feared that once private owners are placed under financial and competitive pressure, they will re-examine it and seek to change the terms of that important social compact, or be forced to contract their service. It would be completely unacceptable at any point for rural customers to have to pay more for that service. I ask the Minister to reassure us today that that will never happen, and that we are not on a slippery slope towards the erosion of the universal service obligation. I should also like to hear from her a more detailed explanation of how the Government and Ofcom will prevent a private operator from ever altering the terms of the agreement.
Let me reiterate that I do not oppose the modernisation of the service. Indeed, the initial plans for modernisation met a degree of approval. It was hoped that more Government functions and business would be returned to the Post Office, and that the plans would return post offices to the centre of local life and diversify the service to meet the needs of all in the community. Over the last 10 months, I have been pleased to be asked by the Post Office to open rebranded branches in my constituency, which have been open for more hours and have offered a broader range of services. It is important for such services to be retained in hard-to-reach rural communities. There is clearly a public demand for more of them to be provided, primarily through local post office branches. In response to a recent ICM poll, 89% of people said that they wanted a face-to-face service, and 73% said that they preferred the post office.
I believe that, following the recent review of banking and financial services, the Government have missed an opportunity to put the Post Office at the centre of a restructured retail banking sector. I believe that there is enormous potential for post offices to offer high-street banking services that would provide income for the Post Office while also bringing customers through the door to use their other services. That would apply particularly in rural areas that are currently experiencing a wave of bank branch closures. In Northern Ireland, Ulster bank, RBS, First Trust—part of Allied Irish Banks—and the Bank of Ireland are closing branches in rural communities.
If high-street banks were compelled, or encouraged, to offer access to a wide range of transaction services in local post office branches, and to make customers aware of that, we could see a revolution in the functioning of our post offices, and a revitalisation of the rural economy. What we need from the Government is an approach that aims to develop and support our postal services, bringing them into line with the 21st century while supporting their invaluable social function, but instead there is the fear that they will sell in haste and repent at leisure.
Lady Hermon
Before the hon. Lady closes her remarks, I am sure that she would like to join me in paying tribute to all those in Royal Mail and the postal services in Northern Ireland who served the entire community, without fear or favour, through the awful years of the troubles. We owe them a sense of loyalty and dedication now, when they feel that their jobs and their services are in jeopardy.
Ms Ritchie
I thank the hon. Lady for her intervention, with which I fully agree. I commend all those—past and present—employed in Royal Mail and postal services throughout Northern Ireland, because through the dark days of the troubles they had to go to hard-to-reach communities, both rural and urban, in very difficult circumstances. They often risked their lives to ensure that people had proper access to a postal service. It is important that we commend them and that this House records that.
The postal service and the post office lie at the heart of rural life and the rural economy. While remaining open to new opportunities, modernisation and reform of these vital services, we must not let the driving logic of privatisation destroy part of the fabric of rural life. It is important to emphasise that the National Federation of SubPostmasters, a representative of which I met recently, has made it clear that in practice it is very much not opposed to modernisation or to getting more services, but it is opposed to any contraction or withdrawal of services. There has certainly not been enough to counteract the fall in income from Government services from £576 million in 2005 to £167 million in 2010. I am happy to commend the motion standing in the name of the hon. Member for North Ayrshire and Arran (Katy Clark). I fully support it, but we must show our determination to retain postal services and Royal Mail.
Susan Elan Jones (Clwyd South) (Lab)
I am delighted to speak in this important debate on the future of postal services in rural areas, and it is a great pleasure to follow the hon. Member for South Down (Ms Ritchie). I congratulate all hon. Members who proposed this excellent motion, especially my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), who gave this debate a lucid and thoughtful opening.
The fact that the motion is supported so widely is hugely important and will, I hope, provide a clarion call to the Government that those who represent rural and semi-rural seats will not stand for anything less than a genuinely universal service as regards Royal Mail and the Post Office. My postbag of postcards, letters and e-mails from people from across my constituency’s 240 square miles bears a clear message: keep the Royal Mail public, with a genuine universal obligation, and protect our post offices. My constituents are absolutely right to say that. Some who have written to me tell me openly that they are supporters of the Countryside Alliance, whereas others will be members of the Communication Workers Union or Unite. The majority are probably not aligned with any of those groups, but everyone speaks with one voice on this issue, which is so critical to all rural and semi-rural communities, such as those in my constituency. At least one commentator has described the campaign to save Royal Mail and the universal service obligation as
“an unholy alliance of left and right”.
People coming together across the normal political divides might be “unholy” in the tawdry little world of dog-whistle politics, but for most of us it is a sign of strength.
I hope that hon. Members will now forgive me a moment of lyricism. Is this situation not a case of an Aesop’s fable being enacted all over again? Is it not the Notting Hill town mice, free-market rodents to every last whisker, scoffing at their little country cousins, saying, “Come on, let’s get rid of the old-fashioned structure. We’ll do something more modern, more sophisticated—more free market. In short, things will be so much better”? We all know what happened in the end: whether because of the couple of dogs in Aesop’s version or the vacuum cleaner in the 1970s one—it is odd what one remembers—the metropolitan order got its come-uppance and the country mouse gladly returned to the security of a system that worked.
I suspect that things are not quite as easy in this case as they were in Aesop’s fable, because if the Government go ahead with their plans for Royal Mail, the security of the old system in rural areas simply will not be in place. If Royal Mail as we know it is destroyed, it will not just wait around some imaginary corner. It was put beautifully in an article in The Daily Telegraph last summer written by Vicki Woods, stating that
“twisting lanes and long driveways may be a step too far for the privatised Royal Mail.”
We still have not heard why the Government intend to privatise such a profitable institution as Royal Mail or why they appear to have ruled out the mutual option of ownership. We still have no guarantees that the cost of sending parcels to different parts of the country will be the same and we have no guarantees, shamefully—because there are no guarantees—that Royal Mail will stay where it belongs, in British hands.
We often speak in this place of the importance of a revival in private sector fortunes for economic growth and we are absolutely right to do so, but in our rural communities that highlights the importance of people being able to work at home from those communities. Whatever line of business they are in, the chances are that that will mean parcels and mail. Imagine the disincentive to those communities if every single delivery ends up costing more—perhaps vastly more—than in an urban area. That would be even more the case if the daily delivery ended. The impact on rural staff and companies—and ultimately on the rural economy—would be immense.
Let me move on to the post office. We cannot forget that in many rural centres post offices can be a hub for the local community. We should invest in that and support it. I want to pay tribute at this point to the post office diversification fund of the Labour Welsh Government, which last year made a grant to Pontfadog post office in the beautiful Ceiriog valley to fund new lighting and signage, a new chiller for fruit and veg, sandwiches, pies and cakes for tourists, a photocopier and a notice board. The post office, like many in the smaller villages, manages to combine being a village centre with being a place of hospitality, a tourist information centre and so much more. We must support such initiatives and commit ourselves to them and those like them in our rural areas.
We must think, too, about how we can support postal services in two other scenarios that are, I think, almost exclusively rural. The first is when there is no longer a full post office but the Post Office is willing to retain a counter. How can we give more support to other retail outlets, where they exist, or to other organisations? We must be more flexible in that regard and urgently need to do more to promote partnership working and to get post office counters running. As long as there is the relevant security, we can and should be very imaginative about where to place those counters.
In the second scenario, the Post Office will want to keep a post office open but no willing party will take on the post of postmaster, which means that we see temporary or, in some cases, long-term closures. We should be open to different patterns of employment so that services never have to close for the lack of one post holder. More must be done to ensure that those post offices stay open. Post Office Ltd should not be let off the hook in this regard: we would not say that it did not matter if a school or health service provider closed for six months.
Postal services—Royal Mail and the Post Office—are undoubtedly vital to our rural communities, so I urge the Government to do more to support them. I urge them to listen to the country mice in this place and reconsider their flawed and unpopular plans to privatise Royal Mail.
Ian Murray (Edinburgh South) (Lab)
I thank the Backbench Business Committee for selecting the debate. I especially thank my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), who has been dogged over many years in speaking against the privatisation of Royal Mail and pointing out its impact on her rural constituency. I hope that hon. Members will forgive me if I do not mention everyone who spoke because time constraints mean that we must rattle through the debate.
With perhaps only a few weeks to go until the Government hammer the final nail in the coffin that will seal the privatisation of Royal Mail, this has been a crucial opportunity to debate the impact of that policy on rural communities throughout the country. Such communities have already been hit hard by the Government. Whether through their astonishing abolition of the Agricultural Wages Board without a debate in the House or their inaction on rising travel and fuel costs, or with the disproportionate effect of the cost of living crisis on rural communities, the Government have been found wanting, and we now have the ideologically driven fire sale of Royal Mail to save the Chancellor’s blushes. It is only a few months since the rural economy index concluded:
“Rising unemployment, shrinking profits and plummeting confidence in countryside businesses has thrown the rural economy to the brink of a further recession”.
There is a fear that the privatisation of Royal Mail and other changes to postal services will accentuate that decline.
We should praise postal workers throughout the United Kingdom for their work. They get important mail and items to families and businesses up and down the country come rain, hail, shine or snow. We should especially thank those workers in the most remote parts of the country, which is why the motion is right to cite the
“vital contribution that Royal Mail makes to rural areas”.
Royal Mail’s profits, which are in excess of £400 million, are a testament not only to the hard work of its staff, but to the partnership of management and staff working with the trade unions to make the Royal Mail service the best that it can be.
The universal service obligation of one price anywhere, six days a week, gives equity to rural areas and supports rural economies. We have only to look at the inequity of pricing for delivering parcels to certain remote areas, which many hon. Members cited, to see the potential for rural economies to be hit hard should the USO principle be undermined.
The social aspect of the post office network in rural areas is critical. Post offices act as a focal point for communities and provide a vital service, especially for older people, as my right hon. Friend the Member for Neath (Mr Hain) said. Of course, they are also important to the small businesses that use our postal services.
There are undoubtedly challenges, given that letter volumes are falling drastically and maintaining the USO is expensive. However, the maintenance of the USO is at the crux of the debate. The Government cannot guarantee either the USO or the inter-business agreement with the Post Office because they have no real control over rival end-to-end operators cherry-picking more profitable services, which in turn makes delivering the USO more expensive. A more expensive USO puts pressure on a privatised Royal Mail to cut costs, and the most expensive parts of its business are its rural operations.
Neither the Minister nor the Royal Mail can tell us what will happen if everything goes wrong. If the USO becomes too expensive to deliver or if the privatised Royal Mail just hands back the keys to the Government, as the private companies did when their contracts failed on the east coast rail line, what will happen? The taxpayer will pick up the tab. The situation is compounded by the fact that the Royal Mail has much higher service standards than rival deliverers. It therefore faces higher standards that are more expensive to deliver, and pressure on its most profitable parts from rival companies operating under lower service standards and employing staff under worse working conditions, as my hon. Friend the Member for North Ayrshire and Arran said, to make their services cheaper still. Combined with that is an ever-more expensive USO, pressure on the inter-business agreement with the Post Office and the fact that the Government have no strategy on how to protect the USO in the long term. Then there is the big question of the EU directive, because will the UK be in the EU? Does the Prime Minister want to repatriate in this area, and will that create further uncertainty about the universal service obligation? This is a recipe for disaster, and the effects will be hardest felt in rural areas.
It would be naive to think that any new owner of a privatised Royal Mail would not aim to maximise shareholder value. That will put pressure on reducing costs and on services that might be considered uneconomic, such as reaching remote areas. Rural businesses might well have to pay more to have their mail delivered, while getting parcels from online retailers could come at a premium for householders. We have heard that a survey by Citizens Advice Scotland found that 84% of people living in the remotest parts of Scotland have been refused delivery by a non-Royal Mail carrier.
The importance of the post office network to rural communities is shown by statistics from the National Federation of SubPostmasters saying that 55% of post offices are in rural areas and that 31% are the only retail outlet in some areas. As the hon. Member for North Cornwall (Dan Rogerson) said, such post offices are often how rural communities access the wider world. The post office network depends on Royal Mail for more than 30% of its income, so we can see why there are considerable concerns that the 10-year inter-business agreement will fall. First, it was included in the Postal Services Act 2011 only after Labour and stakeholder pressure. Secondly, it can be reviewed in five years and, thirdly, it can be altered if there are material adverse effects on either of the two companies. It is a vital link in the sustainability of the post office network.
The Post Office is in a precarious position. A recent survey by the National Federation of SubPostmasters found that operating costs were rising; personal drawings for sub-post masters had fallen by 36% in four years; one in four sub-postmasters took absolutely no salary from their post office income; and most sub-postmasters earned little or no income from financial or Government services—the two areas that Ministers identified as having “real growth potential”. Most importantly for this debate, the Government have completely failed to deliver their pledge to make the post office the “Front Office for Government”. Do hon. Members remember that mantra? That has resulted in the NFSP withdrawing its support and saying that the privatisation of Royal Mail could fundamentally impact on the viability of the post office network, as it has become increasingly dependent on Royal Mail for business.
Then there is the impact on rural areas of the roll-out of the Post Office Local programme. Groups such as Consumer Focus—now Consumer Futures—say that there is a lack of analysis by the Government on how the programme will ultimately work. The Countryside Alliance is concerned that the model could result in many rural communities losing their post office or seeing further cuts in services such as manual cash deposits and withdrawals, manual bill payment services, and on-demand foreign currency. That is particularly worrying, given that the NFSP has shown that 43% of older people in rural areas use the post office to access cash.
Mr Reid
I am pleased that the Labour spokesperson is speaking up for rural post offices, because thousands of post offices were closed under the last Government. We are not going to take lectures from Labour on saving rural sub-post offices, given the thousands that they closed.
Ian Murray
The day I take lectures from a Liberal Democrat in the Chamber is the day I leave the Chamber in utter shame. The key thing that the hon. Gentleman tends to forget is the fact that privatisation of Royal Mail will signal the final nail in the coffin for the post office network. The Government can trumpet mutualisation as much as they want, but the fact that they have kicked it into the long grass until 2016 shows how undeliverable it is. Why on earth are the Government talking about mutualisation for the post office, but are hellbent on privatising Royal Mail? Those two things are just not compatible.
By continuing to pursue a policy that is ideologically driven, quite simply, Ministers and the Government are playing politics with the postage stamp. Let us be quite clear: this has nothing to do with postal services or the impact on the public, but is meant to save the blushes of a discredited Chancellor. Why are the Government not listening to the voices of the coalition of opposition, as mentioned by my hon. Friend the Member for Clwyd South (Susan Elan Jones), including the Countryside Alliance, the National Pensioners Convention, the Scottish Family Business Association, the National Federation of SubPostmasters, the Conservative right-wing think tank, the Bow Group, the cross-party Select Committee on Business, Innovation and Skills, and even the late Baroness Thatcher? A recent survey by the Communication Workers Union showed that 96% of Royal Mail staff were against privatisation on a massive 76% turnout, despite the Government bribe to give them shares. If the Government do not want to listen to all those people, why does the Minister not listen to her colleague, the right hon. Member for Sevenoaks (Michael Fallon), who took responsibility from her to privatise Royal Mail in the recent ministerial reshuffle? He said in a letter to the CWU on 11 February 2009:
“I certainly do not support the...plans for privatisation.”
Why does that Minister not even listen to himself?
The British public, who are against privatisation 2:1, recognise that, and the Liberal Democrat manifesto—remember that document?—recognises it. The weakness of the Government’s case is absolutely clear. I say this quite seriously: Government Members who represent rural constituencies should think carefully about privatisation of Royal Mail, which they support, and how it will affect not just their constituents but the businesses in their constituencies that rely heavily on the post office network. Rural areas, more than most, rely on our much-cherished postal services. The overwhelming case is to keep Royal Mail in public hands and protect postal services for all our communities.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
I congratulate the hon. Members for North Ayrshire and Arran (Katy Clark) and for Angus (Mr Weir) on securing this debate on the future of postal services in rural areas, for which the Backbench Business Committee has found time. The hon. Lady mentioned in her opening remarks that there have been particularly strong representations on the issue from parts of Scotland. It is lovely to return to these issues, as just a few weeks ago we had a good debate in Westminster Hall on the future of postal services, particularly in Scotland. I welcome the opportunity to respond to some of the issues raised this afternoon.
I will try to address as many as possible of the points made during the debate, focusing especially, as has much of the debate, on Royal Mail and the universal service, particularly in the light of the forthcoming privatisation. It is important to scotch the myths that have grown up during some of the speeches in this debate. I will also make sure that my remarks focus on the future of the Post Office because postal services relate not just to the delivery of letters and parcels, but to the wide range of postal services provided through the post office network.
Huw Irranca-Davies
I thank the hon. Lady for giving way so early. In scotching one of those myths, could she deal at the outset with the issue of the Liberal Democrat manifesto, which stated:
“49 per cent of Royal Mail will be sold to create funds for investment. The ownership of the other 51 per cent will be divided between an employee trust and the government.”
Is that an accurate reading of the manifesto, and is that what the Government are proposing?
Jo Swinson
The hon. Gentleman is obviously an avid reader of the Liberal Democrat manifesto, perhaps unlike his hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann)—
Jo Swinson
If the hon. Member for East Kilbride, Strathaven and Lesmahagow will let me finish the sentence first, he may be fortunate and I may be able to give way to him.
Indeed, we recognised in the Liberal Democrat manifesto that Royal Mail would need an injection of private capital. Clearly, in the current plans at least 10% is guaranteed as worker shares. That is right and, importantly, it is set down in the Postal Services Act 2011. Obviously, the shape and format of the present proposals is not a carbon copy of what was in the manifesto. We are three years on from then and we are working within a coalition Government.
Mr McCann
May I remind the Minister that the Liberal Democrat manifesto committed also to full public ownership of the post office network? Can she explain how that sits with selling off the Crown post office network through franchising and with the Government’s plans to sell off most of Royal Mail, whereas the manifesto specified only 49%?
Jo Swinson
It is very important to make the point that the post office network remains in public hands. We need to get it on to a sustainable footing. I should have thought the hon. Gentleman welcomed that. The opportunity to mutualise the post office network ought to be welcomed not just on the Liberal Democrat and Conservative Benches, but on the Labour Benches, as it will ensure that ownership of such an organisation is more widely available to stakeholders within it, including not just sub-postmasters, but customers and others. That mutualisation process is an important part of the future of the Post Office.
The hon. Gentleman mentions the Crown network. In our post office network of almost 12,000 branches, the vast majority of which, as has been outlined eloquently by many speakers in the debate today, are small sub-post offices. About 370 are Crown post offices in the busiest high streets and town centres. For those 373 offices to be losing more than £40 million a year, as they were when this Government came into office, is unsustainable. I hope the hon. Gentleman will recognise, therefore, that getting the Crown network as well as the rest of the post office network on to a sustainable footing is essential to the future success of the Post Office.
Jo Swinson
I am making the point clearly that the Government remain the key shareholder in Post Office Ltd and therefore accept that the Post Office is in public hands. I concede that we are suggesting that when it becomes financially sustainable it would be a positive future if the post office network could be mutualised, which would mean it would not remain in Government hands, but I would have thought that that was something the hon. Gentleman welcomed.
With regard to the motion, I understand that with Back-Bench business we often have good debates on various issues and that votes are not common. I agree with much of the motion, but hope to be able to reassure the House on a couple of points. In relation to the claim that
“the impending privatisation of Royal Mail will place a question mark over its willingness to maintain what may be loss-making services”
and the reference to providing
“more concrete, long-term protections for postal services in rural areas”,
I hope to reassure the House that the Government have long-term, concrete protections in place for postal services, and indeed that the Royal Mail will have to continue to provide the universal service. Many Members have raised that as a concern.
In setting out the background to how we got where we are today, it is important to remember that the Government are implementing a package of key reforms recommended in Richard Hooper’s independent review, which was first commissioned in 2008 by the previous Government. He set out three clear recommendations that needed to be implemented as a package if the Government wanted to secure the future of the universal postal service: that they should tackle Royal Mail’s historic pension deficit; that responsibility for postal regulation should transfer from Postcomm to Ofcom; and that Royal Mail should have access to private capital to support its ongoing modernisation. The previous Government accepted those recommendations in full, but their Bill was subsequently dropped owing to market conditions.
The Postal Services Act 2011, which was passed a little over two years ago, enables the Government to implement the full package of recommendations. As the House will be aware, we have now relieved Royal Mail of its historic pension deficit—I am glad that the hon. Member for North Ayrshire and Arran was able to welcome that move—and established a new regulatory regime under Ofcom, with stronger powers to protect the universal service. The third and final recommendation, to give Royal Mail future access to private capital, is now being progressed through the planned sale of shares in the company. That is a crucial element of the Hooper package. It will be positive for Royal Mail as a business, enabling it to respond to the changing needs and demands of postal users now and in the future. Most important, it will help secure a sustainable universal postal service in the UK.
Many Members have rightly mentioned that the universal postal service is crucial to the UK’s economy and social fabric, particularly in rural communities, and the coalition Government recognise that. That is why the overarching objective of our postal market reforms is to secure the future provision of the universal postal service, the six-days-a-week service at uniform, affordable prices for everyone in the United Kingdom, regardless of whether they live in urban, suburban or rural communities.
Various references have been made to whether that is a sufficient service or a minimum one, so I thought that it would be helpful to state what it actually means and what is set down in the legislation, which will continue to apply in the event of Royal Mail being sold: six-days-a-week delivery to the home or premises of every individual in the UK; six-days-a-week collection from every access point—post boxes and post offices—in the UK; a uniform, affordable tariff across the UK; the provision of a registered items service at uniform tariff; the provision of an insured items service at uniform tariff; free postage for the blind and partially sighted; and a free service of conveying qualifying legislative petitions. That is all set out in legislation, so regardless of ownership Royal Mail will continue to provide that universal service. The ownership change does not change that; only Parliament can change those requirements.
Katy Clark
Does the hon. Lady not accept that what Members have been saying today is that the commercial pressures will be on both Royal Mail and the Government to reduce those universal service obligations if privatisation goes ahead?
Jo Swinson
It is up to Parliament to defend that universal service. That lies in Parliament’s power. We have protections in place through the 2011 Act because the Government recognised that that is an important service. [Interruption.] Members heckle from a sedentary position, but I highlight that it was the coalition Government who enshrined the universal service in legislation, not the previous Government. I think that it is incumbent on all Members of Parliament to ensure that we protect that, because it can be changed only if Members of Parliament decide to do so. I can certainly give an undertaking that I have no desire to do so. Perhaps Opposition Members are worried that they might feel under too much pressure and cave in; that is all I can imagine must be the cause of the concerns they are raising.
Mr Weir
The Minister is ignoring the point that has been made consistently: the universal service might become endangered owing to privatisation and increased competition. She can stand there and say that it is enshrined in legislation, but if Royal Mail can no longer deliver, there is very little that Parliament can do to stop it collapsing; there are only Ofcom’s various processes, which, as I explained in my speech, are unlikely to work.
Jo Swinson
Of course, Ofcom, as the regulator, has a range of tools. The nub of the hon. Gentleman’s point—there is a sensible point that he is making—is that it is vital that Royal Mail can continue to deliver as a successful company, and one of the challenges it currently faces is its lack of ability to invest. The postal service market it changing rapidly—parcel delivery, in particular, is very much a growth area, as other hon. Member have outlined—and we need to ensure that the Post Office has the capacity to react to changing circumstances. That is why it needs to be able to access private capital and why that is a way of protecting the universal service obligation, rather than the contrary.
Time is short and I would like to ensure that I mention post office matters, but on the issue of profitability and Royal Mail, which various hon. Members raised, I will put into context the challenges it faces. Competitors are investing significantly in their postal service markets and in improving their technology to deal with that. For example, Deutsche Post has invested more than €700 million over the past two years alone in its mail facilities and infrastructure and is focusing on another €750 million of investment by 2014. That is the type of investment that Royal Mail, in its market, ought to be looking at and that others in similar markets are looking at. That is why accessing private capital will be so important.
The debate has also covered the post office network. I think it is important to point out clearly that Post Office Ltd is not for sale; as of 2012 it is formally separate from the Royal Mail Group and remains wholly owned by the Government. Issues of Government contracts have been raised. I point out to hon. Members that Post Office Ltd has won 10 of the 10 Government contracts it has bid for since 2010, and it has done so on merit.
The hon. Member for South Down (Ms Ritchie) talked about the important opportunity of high street banking being provided through post offices, and I absolutely agree. It is pleasing that 95% of high street bank accounts can now be accessed through local post offices. That network is very important, particularly in areas where many of the banks have closed their branches. I encourage hon. Members to bring that to the attention of constituents, as they might not be aware of it. Also, the Post Office is currently undertaking a current account pilot in the east of England, so current accounts can be available from the Post Office as a financial services provider across the rest of the country.
Jo Swinson
I will give way, but then I will have to bring my remarks to a close.
Lady Hermon
The Minister is very kind to allow me to intervene when she has only a few minutes left. I must say that, despite the assurances she has given in the Chamber this evening, there will remain a nervousness and anxiety right across Northern Ireland about the Government’s future intentions in relation to both Royal Mail and postal services. Will she kindly give a commitment that a senior member of the Department will come to Northern Ireland, visit rural and urban post offices and meet a representative group of postmasters and politicians?
Jo Swinson
I will certainly take the hon. Lady’s representation on board. I cannot give a commitment on when that can happen, but I thank her for the invitation.
The 2010 spending review allocated a funding package of £1.34 billion to the post office network up to 2015, which is providing significant investment in the shape of network and Crown transformation. The new Post Office Local models are proving very successful, as indeed are the Post Office Main models. More than 1,750 sub-postmasters have signed contracts to convert their branches and nearly 1,000 are open—the 1,000th is expected to open this week. These new offices are reporting high levels of customer satisfaction; many Members will be aware of that because more than 400 have at least one in their constituencies.
I take on board the point made by my hon. Friend the Member for North Cornwall (Dan Rogerson) about local branches. Where sub-postmasters wish to sell a going concern, it will be assessed on a case-by-case basis, and if it is not viable for one of the new models it can be sold under the existing type of contract.
I welcome this debate, which has featured contributions from all parts of the House and from all four nations. Postal services are indeed vital in rural areas, which is why the coalition Government are investing £1.34 billion to improve and modernise the post office network and putting Royal Mail on a sustainable future footing.
Katy Clark
This debate has been a useful occasion for Members in all parts of the House to express to the Government the genuine concerns in all parts of the United Kingdom about the implications should they decide to proceed with the privatisation of Royal Mail over the coming weeks. They have said that it is going to happen in this financial year, and there is therefore a real possibility that we might be revisiting this issue very soon. I hope that the Minister has been listening very carefully to what has been said. She represents a constituency with many rural post offices and will therefore have a strong constituency interest in the issue.
Members in all parts of the House have spoken about the wide range of organisations that have concerns. I hope that the Minister will look at what those organisations are saying, particularly the National Federation of SubPostmasters, which points out that no substantial new work has been provided to the post office service. Until that new work is delivered throughout the country, we should not be proceeding in this direction.
A number of Members have spoken about the importance of the competition regime and the impact that the new providers are having, particularly in London. I ask the Minister to see whether it is possible to ensure that the competition regime is on a level playing field so that all providers are acting in a way that enables Royal Mail to continue to provide a universal service. She has not come forward with long-term, concrete protection today. I hope that she will do so over the coming period before any proposals are brought to this House to announce that the Government are going to proceed with the privatisation.
Question put and agreed to.
Resolved,
That this House recognises the vital contribution that Royal Mail makes to rural areas; notes that the six day a week collection and delivery service to rural and remote areas is invaluable to local life; further notes that the relationship Royal Mail has with the post office network is equally important for the continued survival of post offices; recognises that the impending privatisation of Royal Mail will place a question mark over its willingness to maintain what may be loss-making services; and calls on the Government to provide more concrete, long-term protections for postal services in rural areas, remote areas and islands while ensuring that the postal universal service obligation in its current form endures.