Postal Services Bill
Lord Christopher Excerpts(13 years, 6 months ago)
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Lord Christopher
My Lords, I rise to move Amendment 8. I did not move Amendment 13 because, frankly, I was confused by the way in which the Order Paper came through, but it seems that the essential issues are the same. References have been made to the value of this company and the lack of knowledge of that value. It is certainly not BT or British Gas. The closest I can come to previous privatisation operations is British Rail, which I think at least one Conservative spokesman in the past has said might have been carried out more felicitously. It is still being heavily subsidised. As to value, the only thing I know for certain is that it is not a Glencore, which is valued at the moment at some £34 billion. There are going to be considerable problems in achieving a proper valuation of this company.
The problem with the Bill is that we do not really know what we are addressing. We do not know what the Government will do—I am not sure that the Government know that for sure. There are three options: the sale; the mutual, on which we are waiting a report from the Co-operative Society; and the prospect of an IPO. My purpose is not to divide on this but to persuade the Minister that there are still some safeguards that need to be put into the Bill. It is not good enough as it is, when we are dealing with post that is so close to the public, to sell it, wash our hands of it and leave it all to a regulator. We are here in this goldfish bowl of the House of Lords, yet outside things are happening that are bound to make people uneasy about what might happen to Royal Mail if it is sold off to A, B or C under whatever terms. I have sought in my amendment to tighten up what due diligence means, to widen it beyond finance and to look much more carefully at exactly how a buyer has conducted itself and its business history.
We all remember Ford, which bought Volvo, Jaguar and Kwik-Fit. At the end of the day, Kwik-Fit was sold to a private equity house, CVC, at the third of the price that Ford paid for it. Stagecoach bought the American company Coach USA for £1.2 billion, which almost made Stagecoach broke. Closer to present times, Southern Cross, which is the largest provider of care homes in the country—it has 31,000 homes—was owned by Blackstone, an American private equity company. It ensured massive expansion on the basis of sales and leaseback. In the valuation of Royal Mail, I understand that most if not all its sites and buildings have already been sold and are back on leaseback. Some 17.5 per cent of the shares of National Express are owned by the hedge fund Elliott. It is now actively seeking changes in the board, which has been interpreted as a move to make sure that National Express comes on the market. We need something that ensures not just the prima facie suitability of an initial buyer but the opportunity, if things are sold off—for example Parcelforce, which seems to be Royal Mail’s one growing asset—for the Government to ensure that whatever happens is right and proper.
I mentioned the Netherlands at Second Reading. Four companies now handle the Netherlands’ mail. The people of that country can expect to receive mail delivered from these four companies. There is the half-orange post, which is owned by TNT. It delivers six days a week. There is the blue post, a company called Sandd—an acronym for the “sort and delivery” postal service. It delivers two days a week. There is the yellow company, Selekt, jointly owned by Deutsche Post and DHL, which delivers twice a week. That company is interesting because it has never made a profit and is now, it hopes, going to be sold. It is run by home workers, who sort and deliver at and from their homes. The legal low limit for pay in the Netherlands is between £8 and £9 an hour, but this company is very careful to ensure that none of its workers reaches that figure and that they are kept on a monthly basis below the rate that is required by the Netherlands Government of £580 a month. They are seeking now to sell it to Sandd.
The fourth company is called half-orange, which is owned by TNT, and it calls once a week. Again, that is interesting, because there we have TNT competing with itself. Why? Because it is using not full-time post staff but casual labour. This is not something that is happening in a third world country. It simply carries the somewhat dogmatic belief that we can privatise and get competition and that it always works best. I do not think we want to risk anything like what has happened in the Netherlands happening in this country. If the Government do not make it clear in the Bill that the likes of this will not be tolerated and that that is provided for in the Bill, I will think there is something seriously wrong with the Bill—and if things go the wrong way, we will know exactly who is responsible for that.
We are seeking to sell the service at a very bad time in economic terms. There is no queue out there of people saying, “Let me buy the Post Office”, so I hope the Minister will think hard about what has been said, not just by me but by others, and will try to ensure that the Government come back at the final Reading with some proposals that comfort us and the British people that this is not being sold off just for fun but is something that we are trying to ensure is properly financed and properly run in Britain.
Lord Young of Norwood Green
My Lords, we welcome the amendment moved by the noble Baroness, Lady Wilcox, and believe that it is a step in the right direction. The question is whether it goes far enough in that direction. We welcome the Government’s acceptance of the kind of information that ought to be made available before Royal Mail is sold. We have already stated that there are still many unanswered questions about the disposal—the timetable, the qualification of the future owner, the nature of the sale, how value for money will be secured, the danger of asset-stripping, safeguards for the universal service, and safeguards for the post office network. Yet the scope that is being given to the Secretary of State to make the sale is still very large indeed, with only a factual report to Parliament.
There is a significant improvement in the scale of information that is being offered, but it is certainly not the whole answer. I listened carefully but I did not quite get the assurance given on the nature of the contract between Royal Mail and the Post Office. I would welcome the Minister, in responding, clarifying the point that she made about next spring, when this contract is likely to be signed, and saying how strong the guarantee is on the 10-year period. Is it still just a hope, and are there still likely to be legal barriers to the 10-year period being a part of the contract?
I want to speak to Amendments 7 and 8. The House will be aware that we have consistently put the case for a long-term agreement between Royal Mail and the Post Office, to run from point of sale. We have proposed a 10-year duration. As my noble friend Lord Whitty said, it is certainly not an academic issue; it is a matter of commercial survival. The Government’s assurances are an improvement but still fall short of the commitment that we seek. I have no doubt that we will continue to return to this issue until we get a satisfactory assurance.
My noble friend Lord Whitty’s amendment provides a useful elaboration of the information that we seek, including the contract length, any contractual break period and the total value of the contract to Post Office Ltd. We urgently support his amendment and urge the House to do so.
Amendment 8 seeks further guarantees, and important ones, on the risk assessment of the proposed disposal of Royal Mail. My noble friend Lord Christopher rightly seeks confirmation that due diligence of the prospective buyer has been undertaken. These are sensible steps to take before such an important transaction, and I thought that his graphic and interesting description of the Netherlands postal system was an important contribution to this debate.
Once again, we support this amendment.
Postal Services Bill
Lord Christopher Excerpts(13 years, 7 months ago)
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Viscount Eccles
You could run Royal Mail on the basis of the universal service only. That is to say, if you were being properly paid by whoever was using it, you could outsource—I use that word advisedly—every form of sorting except probably the very final sort where you sequence the delivery. You could write a PhD thesis on whether a final-delivery universal service provider should have to sort mail. My answer to that question would be no, it should not have to. It would have to collect it, because that is in the universal service, but it could immediately deliver it to somebody else who did all the sorting. That of course is what is happening with the people who have access agreements. In that way, you would reduce quite dramatically the amount of capital you needed and you might also establish a profitable business which would be attractive to the market.
Lord Christopher
My Lords, I had not intended to speak, but some of the comments made require a response. The noble Lord, Lord Flight, put his finger on one point: we have had much discussion about competition for the universal service when it does not exist and, in my own judgment, never will. However, you need regulation, because science moves on and who knows what might happen?
I was interested in the intervention of the noble Viscount, Lord Eccles, because I was going to use as a not-too-strong illustration the supermarkets. It is very interesting that they have not come together to provide a universal delivery service; they all do it on their own. Whether they ever will, I do not know, but I think that people would be very worried if we had the system which the noble Viscount, Lord Eccles, has just suggested, because the delivery of one’s letter in 24 hours would disappear and it would become increasingly difficult to discover who was responsible for it.
I shall move on to something more practical; the low cost of postage in this country, as has been mentioned. A couple of days ago, the Telegraph ran one of its happy headlines about the increase in the price of postage, and now utterly unrealistic correspondence is going on. I should like to put the differences on record. Despite the increase that is about to take place, we are still the second cheapest in Europe and the only country which has a mandatory access service. No other country in Europe has picked that up—not one. The new price of posting a first-class letter in the UK is to be 46p as compared with the following countries, none of which has an access requirement. In Denmark it costs 64p; in Germany 48p; in Belgium 51p; in the Netherlands 38p; in Sweden 58p; in France 50p; in Austria 48p; and in Spain, at the bottom, 30p, which will come as no surprise to anyone who has had experience of its postal service. Whichever company ultimately buys Royal Mail, it will seek to make a profit, so how can we conceivably expect a price structure to exist unless we have some regulation over it? We should be realistic, not only with ourselves but with the country, about the fact that there will continue to be increases in the price of mail in this country.
Lord De Mauley
My Lords, the essence of this large group of amendments concerns the balance between protecting the universal service on the one hand and allowing competition on the other. We agree that the new regulatory regime must strike the right balance between those two objectives. I thank all noble Lords who have contributed informed views from both ends of that spectrum. Satisfying all noble Lords will be something of a challenge.
The Government’s policy for the mail market is clear: competition is beneficial but must not undermine the universal service. Securing the universal service is therefore the overarching objective of the Bill. Clause 28, which gives Ofcom its primary duties for postal services, and Clauses 37 and 38, which relate to the access regime, are fundamentally important to ensuring that that objective is met.
Amendment 24GC seeks to remove subsection (3) of Clause 28, which ensures that, in performing its primary duty, Ofcom must have regard to the need for the provision of the universal postal service to be both financially sustainable and efficient. It is vital that the Bill ensures that Ofcom considers the impact of all that it does in regulating the market on the long-term financial sustainability of the universal service. None of us would want Ofcom to support the development of the market in a way that would undermine the long-term viability of the universal service. Furthermore, it is common ground that Royal Mail needs to modernise and to become ever more efficient. It is therefore also important that the financial sustainability requirement is balanced by a duty to have regard to the need for efficiency. Clause 28(3) is therefore a vital part of the new regulatory framework that we are creating.
The noble Lord, Lord Young, suggested that there will be pressure to remove parts of the universal service that are not efficient. The requirements to have regard to both financial sustainability and efficiency apply to the universal service as a whole; it is both inevitable and in the nature of any universal service that some parts of it will be profitable and will need to cross-subsidise those parts that are not. There is nothing in the approach set out in the Bill that could or would lead to every individual component of the universal service needing to be profitable in itself—although, obviously, Royal Mail would hope that they could be. The Bill seeks to ensure that the universal service as a whole is financially sustainable and that it is delivered efficiently to the requirements and standards set.
Lord Christopher
My Lords, it would be extremely helpful if the noble Baroness could explain at some point the precise purpose of this clause because it can be read in more than one way. If we are talking about Royal Mail or the company that will own it alone, that is one thing. If we are talking additionally about those providing only part of the service, that is another. The logic of the situation is that when Royal Mail is 99.9 per cent efficient, if it is using much the same machinery as those currently doing some of the sorting do—I think 10 or 12 have been mentioned—then it seems it would not be able to make a profit. What is more, the service would not be economical. Economies of scale suggest that you sort this mail in one place, or at least in one system, so I would appreciate some clarification. Where I fully agree with the two speakers on this, the mover and the speaker from the Liberal Benches, is that whatever happens we really do not want to revisit this issue. If I am right, and that competition to some degree in universal providers is a myth, we must be sure that we do not have to subsidise a Post Office and that proper charges can be made.
Lord Young of Norwood Green
My Lords, I can understand why my noble friend tabled his amendment, given his long association which started at the GPO—an association which I shared, although not on the postal but on the telecoms side, so we both have a long-standing and abiding interest. We want Royal Mail to have the ability to be profitable as the universal service provider meeting its universal service obligation. That has been the Government’s aim in removing the burden of the pension and in making it clear in today’s comments that they are in favour of competition, but not to the point that it undermines the Royal Mail’s ability to function. If that “profitable” was to take into account the full costs of providing the universal service obligation, we could see the benefit of that. There are some concerns about what implications there might be when that test is applied, such as on stamp tariffs et cetera, but I will certainly be interested to hear the Minister’s response to this amendment.
Lord Christopher
Lord Christopher
My Lords, I am slightly nonplussed to see two of these amendments grouped together as they are entirely at one, but we will live with that. As the Committee knows from what I have said previously, I am not sure that we are likely to get a buyer for Royal Mail that we shall come to love as much as we love Royal Mail. However, one has only to express some surprise that Cadbury chocolate is now made by an American cheese firm to realise that these difficult things happen.
We seek to achieve that, whatever may happen, the Queen’s head will appear on stamps. I hope that the Government will have no difficulty accepting this strengthening of the Bill. My noble friend Lord Clarke and I are slightly nonplussed because he has a print of the Bill that already includes the word “must”, and I have a print of the Bill that says “may”. I am happy with his print and I hope that the Minister will not contradict it.
I wish that I could speak as briefly on the other amendment that I wish to address, but I do not think I can. The reason for that is quite simple; I was wholly ignorant of the existence of a post office museum on such a scale as the one that exists. Ministers have tended to talk about an archive, and I always think of dungeons and cellars when in fact it is a very substantial museum. It was established as an independent charity and the principal and significant funder is Royal Mail. The museum has post office and Royal Mail records dating from the 17th century and is designated as an outstanding collection, which I do not believe is gained easily. It has statues and an archive that matches any that you might find at Kew, and illustrates the history of the postal system. I shall list some, at any rate, of its artefacts. It has stamps and their artwork; photographs, posters and design; records relating to the birth of mass communication; and technological reform in the Victorian era and the Penny Black stamp. It also has material relating to war and emergencies; material relating to films, broadcasting, censorship and politics; maps; and records of staff, finance and buildings essential to local and family history. Ten other things are also listed.
The museum is of great significance to the history of this country and to some degree the world, because we led the way in postal service. It has 36 full-time staff and 20 regular volunteers. It was part of the London Festival of Stamps in January this year. It accepts visits from schools and staff make visits to schools. There are around 1 million public visits, either on the net or in person. What is at stake is the money that keeps it going. One had better be frank about this; it receives £725,000 a year in cash from Royal Mail for its archive services and nearly £750,000 of items in kind. It has a donation—for which I trust Royal Mail gets tax relief—of £1,280,000 a year. The total is nearly £2,750,000. The amendment proposes that whoever takes on Royal Mail shall take on responsibility for the archive of the history of 400 years which it has inherited.
Lord Clarke of Hampstead
My Lords, obviously I completely support my noble friend. I do not intend to delay the Committee any longer than I have to, except to say that many years ago I went to the then postal museum in Bruce Castle in Tottenham—I hope noble Lords will forgive me for mentioning Tottenham, the day after its problems. It was also the home of Rowland Hill and the City of London Middlesex Regiment. I remember asking the curator of the museum, “Are you a philatelist? Do you collect stamps?”. As a postman, I never collected stamps because they lay all over the floor and you did not want to get involved with what was then called the investigation branch. Miss Flint turned to me and said, “Mr Clarke, stamps are just a bagatelle. I collect the waybills for the livery and the hay for the horses that fell off the stagecoaches between the various cities”. So I was put in my place about postal history.
I am concerned about the memorials to the fallen from two world wars in a number of Post Office buildings. I am concerned that the many works of art should be preserved, and I wholeheartedly agree with my noble friend Lord Christopher that we must provide the wherewithal.
Above all, my reason for speaking is to ask the Minister, who knows that I have this interest, what has happened to the Post Office railway. Do we still own it? I know that it is in mothballs. We used to get mail conveyed under the ground using an efficient post office railway system rather than having trucks rumbling around the streets, filling the air with fumes. I am just curious. Has it been sold already by the Post Office or is it an asset that will be taken into account in the valuation, which I hope will happen before too long?
I fully support the three amendments, and am anxious to know what has happened to that train. Some nasty people put me in one of the carriages when I was 15 years of age and sent me from Mount Pleasant up to Oxford Street, and I had to find my own way back. That was a punishment in those days for cheeky boys. It was a terrifying experience, but I want to know what has happened to the railway.
Baroness Wilcox
I will of course add the comments of the noble Viscount, Lord Eccles, to those that we have already heard in this debate. They will form part of our discussion before we come back at Report.
Lord Christopher
I thank noble Lords who have spoken in support of the amendment, which is very encouraging. I was going to call the noble Lord, Lord Brooke, my noble friend, because, as he said, he has been a friend for about 25 years. One of his remarks reminded me of a true story. I have been thinking about this for some time. The Inland Revenue has—or had; I hope that it still has—a very large and valuable collection of stamps which it seems to me appropriate to put into the museum. Some of them used to be exhibited in three or four large glass cases as you walked into Somerset House. You could view the stamps and they were changed. One day, someone from Stanley Gibbons came in and asked to see the chairman. He said, “Do you know what you have in your glass cases?”. The chairman said, “Well, stamps”. “Yes, he said, but there is £1 million-worth in there”. The stamps were then taken away. As far as I know, they are not being seen by anyone. That seems to me to be a great shame.
I thank the Minister for her remarks. Her early remarks were a bit technical and I will need to take some opinions on them but, in view of the assurances that she has given, I am content to withdraw the amendment.
Lord Stevenson of Balmacara
The amendment introduces an additional objective for the postal administration so that the main aim should be to rescue as a going concern the company that is subject to that order. This means that, instead of staying neutral as to whether the current universal service provider should be allowed to fail and should be replaced by an alternative or whether the company should be saved, the postal administrator would have a primary duty to seek to save the company.
When this issue was raised in the House of Commons Public Bill Committee, Mr Ed Davey said:
“We hope that we never find ourselves in either of those scenarios, and we do not expect that we will. Both procurement determination and the special administration provisions are genuine backstops, only to be used if the future of the universal service is at risk”.—[Official Report, 7/12/10; Commons, Postal Services Bill Committee, col. 602.]
While it is reassuring to read what the Minister said and that backstops will exist, it is essential that the Bill properly reflects this intention.
Transferring all or part of the universal service provider to another company, should it find itself in financial difficulty and subject to a postal administration order, would be hugely disruptive to customers, to service provision, to the company and to its staff. While it may not always be possible to support the company and help it become a going concern, there should surely be a presumption that this is the first and least disruptive course of action to be pursued. If this is not possible, the option to pursue a relevant transfer of course remains.
Royal Mail operates on a huge scale. While the business is modernising successfully, should it find itself in financial difficulty, this would likely be attributable to significant market changes and potentially an unsympathetic regulatory regime which exacerbated the problem rather than supported the company as a universal service provider. Therefore, we propose a further amendment, Amendment 25E, to ensure that the postal administrator takes into account the interests of employees of the company. Should the business go into administration, it is hard to see that passing all or some of the business to an alternative mail operator would be good for the employees. It would clearly, where possible, be preferable to re-establish the business as a going concern, and that is why we make these proposals.
Amendment 26A refers to the regulatory powers exercisable during postal administration. We note that Clause 80 creates a huge power, including in Clause 80(5), which says:
“The Secretary of State may by order amend section 30”.
The regulatory regime—in particular, access pricing—has been one of the most contentious areas of regulation since the introduction of competition into the United Kingdom. Indeed, the updated Hooper review of 2010 recommended the introduction of a new access regime to ensure the right balance between competition and the financial sustainability of the universal service.
It is rare for regulators to be loved and it is clear that Postcomm did not get the balance right. Among the outcomes of its tenure is the fact that Royal Mail’s competitors now have more than 60 per cent of the pre-sorted, “upstream”, bulk mail market, the most profitable business sector of the letters market. So we can certainly see how regulation can go wrong.
Unless the right balance is struck in pricing, there are likely to be further reductions in the universal service, at great cost to the public. The amendment would restrict the Secretary of State's hand so that an order to amend Section 30 may not do so in way which reduced the extent of the minimum requirements of the universal postal service. We hope that the Government will see this is a reasonable provision and support it.
Amendment 25F deals with postal transfer schemes and stems from the report of the Delegated Powers and Regulatory Reform Committee of this House, which invited the House to consider whether the Secretary of State’s approval, so far as it relates to the exercise of power in paragraph 9 of Schedule 11, should be subject to the negative procedure. Schedule 11 contains provisions for transfer schemes to achieve the objective of a postal administration. New paragraph 9(4), proposed by the amendment, would set out the conditions for approval and modification of a postal transfer scheme by the Secretary of State. The Secretary of State has to have regard to the public interest and must consult Ofcom prior to any modification of the scheme, but there is no requirement to consult Parliament. The amendment would therefore strengthen oversight and accountability for the Secretary of State’s approval or modification of postal transfer schemes. As the Bill stands, the Secretary of State has complete discretion to approve or modify a postal transfer order without any reference back to Parliament. The amendment would make such a decision subject to the negative resolution procedure as recommended by the committee. I beg to move.
Lord Christopher
These amendments certainly deserve support. One of the problems with writing the law is that you do not necessarily relate it to what is going on in the global economy. As I have said before, one should not rule out the prospect that whoever buys Royal Mail may get into difficulties and present you with considerable problems.
There are two examples at the moment, one of which is certainly ongoing and the other is, apparently, temporarily resolved. Not many people know that all the fire engines in London are owned by a company called AssetCo, which recently got into significant financial difficulties. I am told that it will be all right on the night but I have never seen anything to give me assurances about that. It certainly begs a question in my mind as to what would have happened if AssetCo had gone into administration or whatever. The other case, which is certainly continuing, concerns Southern Cross, one of the largest care home companies in Britain, with 31,000 residents in 750 homes. As I understand it, it is owned to a substantial degree by a company in the Middle East. I am not sure what would happen if the worst came to the worst in respect of these. It is therefore appropriate for the Government to place within the Bill sufficient provision to ensure not only that the service continues but that the staff are looked after and their future provided for. I can see no reason why these amendments should not be accepted.
Earl Attlee
My Lords, before I address the amendments it may be helpful to the Committee if I say a few words about the policy intention behind Part 4 of the Bill, which introduces a special administration regime. The noble Lord, Lord Christopher, suggested other areas which could, in certain circumstances, cause problems.
These special administration provisions are contingency provisions. We believe that the package of measures set out in the Bill will secure the future of Royal Mail and the universal postal service. The special administration provisions are simply the Government acting prudently and putting in place sufficient contingency plans to ensure that the universal service continues to be provided in the unlikely event that the provider is at risk of entering insolvency proceedings. The noble Lord, Lord Stevenson, referred to the possibility of this arising from an unsympathetic regulatory regime. I remind the noble Lord that the whole object of the Bill and the duty of Ofcom is to secure the universal postal service.
As set out in Clause 67, the overriding objective of a postal administration is to secure the universal postal service that so many of our communities and small businesses rely upon. In order to do this, the administrator and the Secretary of State must have the necessary tools and be able to use them swiftly and decisively to preserve the universal service. It is in this context that we must consider Amendments 25D, 25E and 26A.
Amendments 25D and 25E seek to add additional elements to the objectives of the postal administration. Amendment 26A would restrict the Secretary of State’s power to reduce the regulatory burden on the universal service provider while it was in special administration. Amendment 25D is intended to protect the interests of employees, while Amendment 25E seeks to ensure that the universal service provider is rescued as a going concern. I understand the intention behind the amendments but, as I have said, time will be of the essence in a special administration scenario. To act swiftly and decisively, we must be absolutely clear about the overriding objective, and in this case that must be the continued provision of the universal postal service. To add other objectives would reduce the administrator’s ability to take the action needed to secure the universal postal service—which must be our overriding aim.
Transport: Penzance and Isles of Scilly Ferry Service
Lord Christopher Excerpts(13 years, 8 months ago)
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Earl Attlee
My Lords, we are concentrating on Cornwall’s proposals. Noble Lords should understand that this issue is not just about the ship. There are also proposals for the improvement of the harbours at Penzance and St Mary’s. I understand that St Mary’s harbour has some health and safety issues because mechanical handling equipment gets too close to pedestrians. There is an obvious safety risk that genuinely needs to be addressed. The noble Lord makes very good points.
Lord Christopher
My Lords, I am concerned that the Minister can give no assurances about a date on which this might be concluded. It would be a tragedy if the money already offered were to disappear. Then, I suspect, it would not happen at all, with dire consequences for these islands, which now rely exclusively on tourism. I hope the Minister will let the House know as soon as he can what the Government propose if, as seems pretty certain, the helicopter service—which is not quite but nearly as important as the ship—disappears. Will there be some intervention over the possibility of an alternative site for the heliport at St Erth?
Earl Attlee
My Lords, I cannot comment any further on the heliport but the noble Lord makes extremely good points. I thank him for raising this issue with me orally some time ago. I immediately took it up with the appropriate Ministers.