Postal Services Bill

Debate between Baroness Kramer and Lord Young of Norwood Green

Tuesday 24th May 2011 Lords Chamber

[Lord Young of Norwood Green]

My Lords, Amendment 2 addresses a concern that, in the pursuit of other no doubt laudable objectives, attention may be diverted from getting the right valuation of Royal Mail and ensuring that the taxpayer is not short-changed. The noble Baroness, Lady Kramer, drawing on considerable professional banking experience, reminded us of her wicked past, although I doubt it was enough for a super-injunction to be called for. She said that it was,

“good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets”.—[Official Report, 14/3/11; col. 103.]

Those are wise words, based on experience.

There is a compelling case to show that in the heyday of privatisation, the 1980s and 1990s, privatised companies were consistently sold at too low a price. The noble Lord, Lord Lea, on the basis of his thorough research, pointed out to the House that it has been estimated that for 1986 alone the average share issue premium on major share issues was 7 per cent. On privatisation issues the average premium on the first day of trading was 77 per cent. One of the reasons for this undervaluation is that it is extremely difficult to place an accurate valuation on a company in which no shares have been traded recently. That would certainly be the case with Royal Mail. It is not uncommon, when a public body has kept records for other purposes, for its inventory not to be perfectly up to date for the purposes of a sale.

Ministers have previously warned that they do not want to publish the valuation of the company for fear of affecting the sale price adversely. In other words, they think they might undervalue the assets, compared with what someone is willing to pay. They have also been unwilling to guarantee that there will be an independent valuation, or to share the valuation prior to the sale with the Public Accounts Committee in another place. They have indicated that there will be an internal confidential valuation and that the accounting officer of the Department for Business, Innovation and Skills will be obliged to ensure value for money overall. That might be reassuring were it not for the fact that similar obligations also applied in the palpable underselling of public corporations in the 1980s and 1990s.

This amendment does not seek the publication of any figure for valuation. It does not even ask for a figure to be shared with the Public Accounts Committee in advance. It simply provides for the Government, at the time of their report to Parliament—already promised in Clause 2—and prior to the sale of Royal Mail, to make clear the criteria for and method of their valuation. That does not mean the valuation itself but at least the criteria and method of valuation. I hope the Minister will be able to give some indication of a willingness to present this or similar information, if not to Parliament as a whole then to the Public Accounts Committee.

Could the Minister also address a question raised by the coalition review of its year in office? It made reference to the timescale for European state aid clearance, which seems to have been extended by six months to May 2012. That conflicts with previous statements that this might be achieved in the winter of this year. I would welcome some reassurance—clarification might be a better word—on that.

We are pleased overall to help improve the safeguards in the Bill; to safeguard the viability of Royal Mail; to strengthen regulation transparency and accountability to Parliament; to strengthen the safeguards to the universal service and the post office network; and to ensure that we get the best possible value for public money in the event of a sale. I beg to move.

[Baroness Kramer]

My Lords, in my defence, although I continue to think that the Government do not have a very good track record in valuing companies that they put forward for sale, I did not think that the Floor of this House would be any more effective in coming to an appropriate valuation either. Therefore, I support the Government in this instance.

Postal Services Bill

Debate between Baroness Kramer and Lord Young of Norwood Green

Monday 14th March 2011 Lords Chamber

[Baroness Kramer]

My Lords, does not the dispute that has just taken place make it clear that this House and the other place are not the appropriate organisations for detailed discussions on how to do a disposal of shares? Obviously there are many different views, but this is not the kind of issue that can be put in the Bill. The financial circumstances of the Royal Mail have to be considered, as have the financial markets and the trade buyers that may be available. There will be a wide range of issues. I agree with those who have criticised past sales.

[Lord Young of Norwood Green]

My Lords—

[Lord Razzall]

We are in Committee, you do not have to interrupt.

[Baroness Kramer]

I am perfectly happy to sit down if that is helpful.

[Lord Young of Norwood Green]

I do not normally intervene; indeed, I am impelled to do so only by the contribution of the noble Lord, Lord Razzall. The noble Baroness, Lady Kramer, compounded the situation by saying that this was not the place to discuss this. I reject that. This is absolutely the right place for us to test the water on this issue. We are entitled to put the argument about tranches; we are entitled to see the Minister’s response. On the point of the noble Lord, Lord Razzall, we have made it clear that we oppose the core of the Bill, which is to achieve 100 per cent privatisation, but we have not adopted a negative attitude in an attempt to undermine every stage. We have endeavoured to engage in constructive debate, and we have a legitimate right to do so on this issue.

[Baroness Kramer]

The noble Lord, Lord Young, and I seem to have discovered a knack of talking past each other. I have no criticism of anyone raising the issues—in fact, I think it is good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets. However, I argue that putting down a set of rules such as 30 per cent, 90 per cent or whatever else does not belong in the Bill. I am not saying that the issue should not be raised or that the matter should not be debated but that one cannot define it in the Bill when it depends so much on market conditions, particular financial circumstances, the specific issues of the time and the deals that can be negotiated. The Bill is the wrong place in which to set down hard and fast and black and white rules on this matter. That does not mean that debate and reporting back on the whole process is not necessary, but I regard those as two different issues. I hope that the noble Lord, Lord Young, is aware of that.

--- Later in debate ---

[Baroness Kramer]

My Lords, I say to the noble Lord, Lord McAvoy, that I remember, not that long ago when we were standing not that far apart on the Floor in the other place, when he whipped his rather unwilling troops in to vote for the closure of 4,000 local post offices. I remind him that his views have taken a rather dramatic turn between that House and this one.

I turn to the issue that seems to be in contention here, which is whether deliveries to the outer parts of the British Isles—such as Orkney and Shetland—are subsidising deliveries to areas such as mine in Richmond or vice versa. Intuitively, I had assumed simply that the more rural the area, the more costly the delivery. I understand that that is not justified by the numbers, and I was going to suggest to the Minister that she might wish to speak to the Post Office because I presume that the appropriate numbers that make that clear could easily be placed in the Library for everyone to look at. That might clarify an issue of fact.

I have relatively little sympathy with Amendment 16A because the devolved Assemblies have many mechanisms for regular conversation with government departments here. They can come to their conclusions and make whatever representations they consider important without us having to encumber the Bill with further administration and burden. As others of us have said, it is important that we proceed in as accelerated a way as possible to make sure that both Royal Mail and the post office network are rescued before more financial damage can be done by the passage of time without a change in regime.

I am concerned that Amendment 16, moved by the noble Lord, Lord Low, might have been obscured in this conversation. That is the important amendment in this group. Whether it is justified or not, many people who are more vulnerable are very concerned by the changes that are coming to Royal Mail and the Post Office. There are many protections in the Bill for people who are more vulnerable and for small businesses, but it is not right to expect people to delve into the details of the Bill and spend time trying to work their way through the Explanatory Notes in order to come to an independent conclusion. It is crucial that the Government and the department are in conversation with more vulnerable groups and small businesses to make it clear that their needs are being recognised and heard, and that a response is available within the context of the Bill. Whether that is done via the mechanism of a formal consultation or in some other way, it is crucial to draw attention to people who are vulnerable.

I remember when local post offices were closed. I have mentioned before the ward of Ham, the most deprived ward in my old constituency. All three branch post offices were closed there. Many older people found themselves deprived of their independence because they had to get a friend to drive them to the post office. They could no longer walk there themselves; they were not capable of getting on to the bus to make the journey. It was an appalling experience for all of them and they still live without a post office. The noble Lord, Lord McAvoy, will be aware of what they went through because this all happened on his watch. That group will be anxious; it will not be certain that the Post Office recognises its needs; and it needs the additional reassurance that the amendment of the noble Lord, Lord Low, in many ways underscores. That is the amendment that we should be debating. The devolved Assemblies have mechanisms of their own which I am sure they are using most successfully.

[Lord Young of Norwood Green]

My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.

We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.

I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.

It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.

Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.

Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.