Postal Services Bill

Debate between Lord Clarke of Hampstead and Baroness Kramer

Wednesday 6th April 2011 Lords Chamber

[Lord Clarke of Hampstead]

I start by declaring my usual interests. From the age of 14, as a telegraph boy, I have been directly associated with the Post Office and am very proud to have that association.

In the past 24 hours, I have given a lot of care to the idea of moving this amendment separately, upsetting some of my friends, who wanted me to leave it in the group. The purpose of taking it out of the group is to focus on one of the most important things that the new Royal Mail will have to face, which was mentioned in the last debate at length. Incidentally, the last debate has given me some comfort because, after 10 years of criticising Postcomm with very little or no support from my own Government and my own friends, I heard an analysis from the noble Viscount, Lord Eccles, who put his finger right on it. It has been a con from the start, and those of us who said so 10 years ago can feel a little bit comforted that after a decade people have come round to realise that what we were saying about cherry-pickers has come true. I welcome the new approach, whoever the owners are of the new Royal Mail.

I will not be too long. Given the timing of this debate and its wide and, I think, unwieldy groupings, I know that there is a desire among noble Lords to get off for the Recess in good time, so I will not go over the history too much, but I will say one or two things. However, some people will find it difficult to understand why, with all this complexity that we have just been dealing with, we are proposing legislation at the fag-end of a term, when people are going off. I find that a little bit trying—but never mind, it has happened.

I would be failing in my responsibilities as a human being and my conscience if I did not stand up and speak about this question of profitability of the new Royal Mail. A number of friends have said that it is not necessary, but what is at issue here is the regulator and the criteria that Ofcom will have to apply to looking at things like tariffs and at what surrounds the making up of a price structure for competitors and for access agreements to work. Of course they are necessary to make sure that we have the universal service. I think every Member who has spoken would agree that it is an important part of the fabric of our society to maintain the principles not only of Rowland Hill but of the 300 years of Post Office service since Queen Anne’s time.

I have every confidence that Ofcom will do a good job, although it would not take much to do better than Postcomm. In fact, this is not a new thought. On 9 February two years ago I wrote to Mr Brown, the chief executive of Postcomm, who had written a nice letter to me asking a couple of things. I told him,

“Postcomm is an organisation that gives me little confidence that its existence was ever necessary. I may be the only person who believes that the transfer of postal regulation to Ofcom is a step in the right direction”.

I welcomed the change then and I welcome it now, providing that Ofcom is given the right tools to do the job that it is going to be charged with. Part of that is dealt with in my amendment, which says that the question of profitability must be in the minds of the people considering these things. It is no good expecting Royal Mail to do the work contained in the universal service obligation if it is not able to price things the right way. The price structure must allow profitability. I spent too long in my job trying to get the Post Office to pay its dues to the pension fund. There was a 12-year holiday, when it did not pay anything into the pension fund—and we wonder why it got into a state in the end—but that is another story.

There was ill conceived regulation at that time. I sat over there and listened to the Statement from a chap from down the other end, Stephen Byers, telling us that this liberalisation and new deal would bring in an era of a tremendous new Post Office for the 21st century. I stood up and said that it was a load of nonsense, because if you do not have something to stop people creaming off the work of Royal Mail, as has happened, you will find yourself in trouble. Yet nobody listened, least of all from my own Government’s side. That followed through to the ill fated 2009 Bill, which has been mentioned, and the product of that ill conceived regulation has been that people in the industry have paid a heavy price. Billions of pounds have been lost because of how Postcomm works.

I said that I would be brief and I will. We will be entering a new era in the long and well respected history of the Post Office. I am not used to begging for things but I beg the Government on this point: not to make another mistake by allowing the anomalous situation whereby an outside body is able to hamstring the business. I have had to come to terms with the idea that the Royal Mail will never be the same once it is privatised. As I said last time we were in Committee, it hurts but it is happening. Nevertheless a new Royal Mail, invigorated by new and competent management, gives us a new chance. That is not to say that Post Office managements were not competent in the past but they were never allowed to do the job because of political interference over decades. The 1960s, 1970s and 1980s were dominated by political interference. Ever since the Post Office became a corporation in 1969, politicians had their fingers on the service being provided.

With that new and competent management, together with the historic agreements that have been mentioned about going forward with modernisation, the staff and people who run Royal Mail deserve to be given fair and just regulation, to quote the noble Lord, Lord Jenkin. It has to be fair and just. I hope that the Government will recognise that the regulator has to be fair. I believe that requiring that the service be “profitable”, instead of “financial sustainable”, will help. I look forward to the Minister telling me that the Government agree that the Royal Mail will be entitled to be profitable.

[Baroness Kramer]

My Lords, I had not expected to speak on this amendment at all. Having looked at the language, I thought that “financially sustainable” looked pretty adequate. Why shift it to “profitable” and set the bar higher? However, listening to the noble Lord, Lord Clarke, I found myself convinced on this so I felt I should get to my feet. It would be a positive for this Bill if we came out knowing that we would not have to revisit the future of Royal Mail, the universal service provider, and that it had been moved on to a basis where it would thrive in future and deliver the services that we all want and that our community and economy need, so that we do not have to keep coming back to patch it. Constant salami slicing is quite often the tradition as we make change. As I look at that, the requirement for profitability has some real appeal because financial sustainability can be achieved in many ways; you could talk about additional subsidy, or whatever else. It seems to me that there is a far more secure future. The noble Lord, Lord Clarke, has convinced me and I hope that he will have some success in convincing the Government.

Postal Services Bill

Debate between Lord Clarke of Hampstead and Baroness Kramer

Wednesday 16th March 2011 Lords Chamber

[Baroness Kramer]

My Lords, I have long been a fan of the equivalent of a post bank—as you know, it was Liberal Democrat policy. All of the arguments were made very strongly about the advantages that a post bank would bring to the financially excluded and those who are looking more for vanilla banking as well as to improving access for small businesses. It is hard to do anything other than come up with a list of absolute positives for a post bank.

Obviously, my colleagues in the other place were very eager to seize the opportunity for a post bank as part of the restructuring of Royal Mail, but then they came across the contract between the Post Office and the Bank of Ireland—although I do not know how much they know about it because obviously the contract will be confidential. However, I notice that the three names down on this amendment are those of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, and—I am sorry if I get their histories slightly wrong—I think it must have been on their watch that the contract with the Bank of Ireland was signed. That contract hidebounds the Post Office and makes it virtually impossible for it to provide the kind of comprehensive service and range of financial services without buying out that contract. Without breaching any confidentiality, perhaps they could tell us how many hundreds of millions of pounds would have to be paid to Bank of Ireland to buy out the contract so that a post bank could be put in place. I do not have access to that information, but perhaps, having been on the watch when that contract was originally put in place, they could give us a sensible estimate of what that amount of money could be. I am rather afraid it is such a large sum that it would have been difficult even in a time of prosperity and exceedingly difficult in a time of deficit. I greatly regret that.

I am glad that we had some discussion—there will be other opportunities—about bringing on board the credit unions. This House will be well aware that the Minister, Ed Davey, and others are committed to financing the technical platform that would make it possible for the post office to be used as the face of the credit unions. Credit unions are far more fragmented than a coherent bank would be, but at least that would open up the opportunity. I will also have a few words later to say about at least providing access to current accounts in the various high street banks. I wonder if they would give us an indication of what they think the cost would be for the Government to buy out that Bank of Ireland contract to make this very attractive proposition possible.

[Lord Clarke of Hampstead]

The noble Lord, Lord Stevenson, said he had “a cunning plan”. Well, I wish it was cunning—it is not original. In fact, it was the Conservative Government of the 1970s that abandoned National Girobank. I was one of those who agitated for many years for the creation of Girobank. By copying the arrangements in the Netherlands, it was possible to introduce a simple banking system that brought cheque books and bank accounts to many thousands of people who never thought they would have a bank account. I mention National Girobank because one day, when I get enough money, I am going to ask a student or someone to do the proper research on what happened to our people’s bank, as it was in those days.

As I said in the debates on the previous Postal Services Bill a couple of years ago, only one paper in this country covered the story of what I considered the give-away of a national asset. Reference has been made to the shock that you get when you find you have got to buy out a contract, but if you had the figures on what happened at Girobank, you would start to worry even more. I know this because when it was announced that it was going to be abolished—and it was really abolished because it was so successful—Co-operative Bank, Unity Trust and a consortium of trade unions got together to try to buy the bank when it was put up for sale. First, they were told, “You need £200 million to buy Girobank”. That was the easy bit, because that was gathered together. Then the rules were changed, and Girobank was to be sold only to an established finance house—which the consortium was not—but the consortium established itself as a finance house. Then they were told, “You cannot buy it unless you have an alternative computer system that will be there if this system goes down”. So the dice were quite loaded from the start. The £200 million that was mentioned at the time of the sale of Girobank actually paled into insignificance, because the actual figure—I am quoting from memory as I have no notes here—was £118 million when it was sold to the Alliance & Leicester. The Alliance & Leicester obviously grabbed it because, at the time, there were thousands of people waiting to open an account with National Girobank. Political dogma said, “This has got to stop. It’s too successful and we’re going to do away with it”.

What has happened since? Alliance & Leicester of course has been swallowed up by Santander. If anybody thinks that the service they are getting from Santander is anything like what they got from National Giro in the beginning, and to some extent with the Alliance & Leicester, they are dreaming, because the rapacious way in which these banks work frightens me.

There is a demand for a people’s bank, so I welcome the comments from the noble Baroness, Lady Kramer. I ought to declare another interest: I am a member of the St Albans District Credit Union. During my years as a councillor in Camden, I saw what happened when people were at the mercy of loan-sharks, when people were threatened on their doorsteps with an extortionate amount of interest week on week. Of course there is a chance to get a link between the growth of credit unions and a people’s bank—or post bank, post office bank or Royal Mail or whatever—but the important thing to is to have a simple banking system, which allows people to have confidence in where they are putting their money. At the back of it all, despite all my criticism of what has gone on in the last few years, I still believe in the brand name of the Post Office. The Post Office has a good reputation and I hope that the Minister and her colleagues will go into one of those dusty offices, pick up the box file that says National Girobank and check what I have said about the way it was virtually given away. Incidentally, the punchline was that, within two years of trading, Alliance & Leicester cleared the amount that it paid for the bank.