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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Ms Ali.
I congratulate the hon. Member for Dulwich and West Norwood (Helen Hayes) on securing today’s important debate about Royal Mail’s services and the covid-19 pandemic. Clearly, this is not the first time that we have discussed the issues—the ongoing issues—in her constituency. I am sure that we will continue the conversation, and it is important that we do, so I am glad that she has had the chance to air her views in this debate. I hope that Royal Mail continues to respond and to engage constructively with her.
Before discussing the level of service overall, I would like to provide some context, outlining both the importance of and the pressures on postal services in the lead-up to the debate. We have heard today that the postal service has played a critical role in helping to mitigate the impact of coronavirus on individuals, families and businesses across the UK. We absolutely recognise that postal workers have been working incredibly hard to meet demand and deliver the universal service in incredibly difficult circumstances. We all rely on them to keep people connected across the country by delivering the letters and parcels that are so important to everyday life, and supporting the economy in these difficult times.
As the hon. Member for Dulwich and West Norwood is aware, Royal Mail’s contingency plans to mitigate disruption to postal services are well established. They are overseen by Ofcom, the independent regulator, which has been raised, so it is for Ofcom to monitor service levels, although Royal Mail has reassured Government that it has been doing everything it can to maintain service levels during the pandemic. I do look out for and try to support hon. Members’ inquiries with Royal Mail when those are raised, as has been the case today—for example, my hon. Friend the Member for Gedling (Tom Randall) raised the situation there.
Royal Mail has set out that improving service levels is its No. 1 priority at this stage, so although the situation is improving, it is clear that there are still issues that need to be addressed in certain areas. I do expect Ofcom to continue to challenge the business, under its regulatory framework, to ensure that it is delivering the best possible service. It was disappointing to hear otherwise from the hon. Member for Dulwich and West Norwood about the policy of engagement with Ofcom, which she said was missing in her exchanges. That is certainly regrettable to hear.
Overall—looking at the wider picture—customers continue to be satisfied with Royal Mail’s services. Ofcom’s last annual monitoring report, for 2020-21, which was published in December of last year, found that more than eight in 10 residential customers and around eight in 10 SME users are satisfied with Royal Mail. Those results are in line with Ofcom’s findings in its review of user needs published in November 2020. That general satisfaction is despite the challenges of delivering postal services during a pandemic.
The statutory framework recognises that, in an emergency, Royal Mail may not be able to sustain the universal postal service without interruption, suspension or restriction. I hope that hon. Members will agree that it was reasonable for Ofcom to acknowledge in this context that the pandemic was indeed an emergency. Therefore Royal Mail was legitimately able to modify its obligations, including by reducing the frequency of letter deliveries temporarily, for six weeks, in 2020. However, Ofcom’s declared emergency regulatory period ended on 31 August 2021 as Royal Mail implemented its improvement plan. Normal regulatory requirements have since applied, although in monitoring compliance Ofcom needs to take account of any relevant matters beyond Royal Mail’s control that may impact on its performance. Throughout the pandemic, Royal Mail has been transparent about any changes to the services that it provides; that information can be found on the Royal Mail website.
Royal Mail’s quality of service results, published last month, indicated that it had not met its universal service obligation targets for the delivery of both first and second-class mail in the third quarter of the financial year. Royal Mail reported that that was due to high levels of covid-related isolation and to absences being at double the normal pre-pandemic levels at the peak of the omicron variant. That is something that we have heard from any number of sectors, and any number of businesses, beyond postal services. Royal Mail has also reported that hiring temporary staff to help to manage service issues proved very challenging because of the combination of very high competition for temporary staff and high infection rates across the population. Despite those challenges, postmen and women worked exceptionally hard to ensure that the delivery of covid-19 test kits was prioritised. Royal Mail responded to the Government’s call to double the volume of covid test deliveries within days, and Royal Mail next-day delivery for kits exceeded 98%.
Royal Mail accepts and acknowledges that its quality of service has not always been as it would have wished, and has publicly apologised for any resulting delays that customers may have experienced in their local areas. It has reassured me that it continues to work to improve service levels, having spent more than £340 million in the last financial year on overtime, additional temporary staff and sick pay, as well as providing targeted support for the offices most impacted by staff absences. Royal Mail also publishes a daily list of the delivery offices most impacted by service delays. I understand that near the start of the year 77 local delivery offices were listed on the website, and that number had been reduced to one as of last week, indicating the progress that has been made.
I would like to take some time to say something about local service disruptions, particularly in regard to the constituency of the hon. Member for Dulwich and West Norwood. I know from correspondence with her that this is, unfortunately, not a new issue and that she has been in contact with Royal Mail about service issues in the area.
Royal Mail has informed me that the service was disrupted because sickness absence levels in some part of its operation remained higher than normal—East Dulwich delivery office in particular has been experiencing high levels of sickness. Royal Mail has taken measures to tackle the issue, including rotating mail deliveries to addresses so that customers receive mail as frequently as possible.
The hon. Member said she had recently visited the East Dulwich, Herne Hill and West Norwood delivery offices to see the measures first hand. I encourage others to do the same—to go into sorting offices and meet the management, as well as saying thank you to the workers. It is good to see what managers are doing. Hon. Members have mentioned changes of route, which tend to be put together by managers in the sorting office, close to those who walk the beat.
I understand that mail deliveries for the delivery offices that the hon. Member for Dulwich and West Norwood visited have been taking place six days a week, barring occasional unforeseen disruptions, such as Storm Eunice and a spike in absences since February. I am also aware that Royal Mail has introduced operational changes to its network as part of its wider transformational plans. Modernising Royal Mail operations is necessary to maintain sustainable universal postal services and deliver better outcomes for customers.
Navendu Mishra
I thank the Minister for giving way—I have always found him to be polite and helpful in my engagements with him. On the point about customer service and universal connectivity, can I press him on the issue of Crown post offices? The UK seems to be one of the only nations in the world where counter services are dis-integrated from delivery services—it does not even happen in the USA. I am one of the lucky MPs in Greater Manchester to have a Crown post office branch in their constituency. Can the Minister give me some assurance that the Government will not continue to close such branches or downgrade them to retail outlets?
Paul Scully
I cannot give the hon. Member that assurance, because he is referring to Post Office Ltd, which was disentangled from Royal Mail at the time of sale. Post Office Ltd oversees franchised post offices and owns and runs Crown post offices, and it is going through its own modernisation programme. The financial situation of the Post Office has been well rehearsed, including the backdrop of the Horizon situation. Allowing Royal Mail to work through its own modernisation programme disentangled from that scenario is not necessarily a bad thing.
The hon. Member for Dulwich and West Norwood was elected at the same time as me; in those seven years, I have seen a huge difference when I go to the sorting offices each Christmas in the balance between letters and parcels. Royal Mail has had to change all the racks and systems to adapt to the big drift to more and more parcels being delivered and fewer and fewer letters.
Navendu Mishra
I accept the point about the change in letter and parcel volumes. My broader point, as we are here talking about Royal Mail, is that Crown post office branches offer services that other post offices do not. It is about not just letters, but banking services, insurance and so on. Every MP in this room will have people in their constituency who do not have access to broadband or a telephone and who depend on those branches. I will perhaps write to the Minister and he can come back to me on my local Crown branch.
Paul Scully
I do not want to be tempted into debating Crown post offices in this debate, but I would be happy to exchange correspondence with the hon. Member. He raises some important issues about access to cash and banking services. The future of the Post Office is very close to my heart. I want to make sure that we provide something that meets customer demand and is acceptable in this place, and that retains the social value we put on post offices while getting the fine balance right in terms of providing a solid financial footing—we should get that and more in a post office for the future. I will gladly engage with the hon. Member on that issue after the debate.
I am aware, as I said, that Royal Mail has introduced changes to its network. Modernising Royal Mail operations is necessary to maintaining that sustainable universal postal service and delivering those better outcomes for customers. However, in the immediate term, that may have contributed to local service issues while the business adapts to changes. It is always difficult to embrace and work through change, but Royal Mail has assured Government that if for any reason an address does not receive a mail delivery one day it will be a priority the next working day.
Royal Mail is open to engaging with the public, and indeed with all MPs about delivery services in their respective constituencies and across the UK. I urge any hon. Members whose constituents are not happy with the service they receive to take that up with Royal Mail. I have always found it engaging, but I am also here to help expedite things, if that does not work.
Ofcom is aware of continuing reports of delivery delays, and it issued a statement on 19 January expressing its concerns and making it clear to Royal Mail that it must take steps to improve its performance as the worst effects of the pandemic subside. As the regulator, it is ultimately for Ofcom to determine whether Royal Mail is meeting its statutory obligations. Ofcom has the powers to investigate and take enforcement action if Royal Mail fails to achieve its performance targets, without good justification, at the end of each financial year. That includes penalising Royal Mail for failing to meet its targets, as Ofcom did when it imposed a fine of £1.5 million on the business for missing its first-class delivery target for 2018-19.
Ofcom reviewed Royal Mail’s performance against its quality of service targets in 2020-21 and in the light of the impacts of covid-19 throughout that year decided not to open an investigation. However, Ofcom continues to scrutinise performance closely. It is currently preparing to review Royal Mail’s performance for the 2021-22 financial year and, if appropriate, it will not hesitate to act where necessary.
I would add that Ofcom must ensure that postal regulation keeps pace with the changes in the market and remains relevant, fit for purpose and effective. It last reviewed the regulatory framework for post in 2017 and said at the time that it should remain in place until 2022. It is now carrying out a further review of the future regulatory framework, which it aims to complete later this year. As part of that review, Ofcom ran a consultation on its proposals, from 9 December 2021 to 3 March 2022. It is currently considering the responses and expects to issue a statement in the summer.
A couple of quick questions were asked. The Government do not have any plans to renationalise Royal Mail. The sale of Royal Mail shares in 2013 and 2015 added £3.3 billion to public funds. In addition, we heard a lot about dividends, but not about the £2 billion that has been invested in the firm since privatisation, with a further £1.8 billion announced in 2019 for the following five years. Access to private capital, as with any other large, successful business, has enabled the investment necessary to innovate and seize the opportunities presented by new markets.
As I said, I want to ensure that I can help any hon. Member, should they have problems with their deliveries in the short term. I have found Royal Mail to be particularly proactive in engaging with hon. Members, should there be longer-term issues, and it does come back in good time. However, should it not, I am here to help expedite things, as I said.
There have been exceptional challenges in the last two years, and services have been disrupted. However, the postal system has continued to operate, and Royal Mail is now able to resume normal service levels as absence levels move closer to normal and as the business adjusts to operational changes. I want to take this opportunity to once again thank Royal Mail, and all postal workers, for the dedication and commitment shown while providing continued service throughout the pandemic.