Postal Services Bill
Debate between Lord Cotter and Lord Tunnicliffe
Lord Tunnicliffe
My Lords, we welcome the principle contained in this Bill which earmarks some of the shares for employees in the event that Royal Mail is sold. Introducing the Second Reading of the Bill, the Minister said:
“A commitment to employee shares was not a feature of the previous Postal Services Bill but it is an important addition to this legislation. I am pleased that it has support from all sides of the House”.—[Official Report, 16/2/11; col. 776.]
I am advised that during the debate on the 2009 Bill—I say I am advised because, although I sat through the many hours of the debate, it is now but a fading memory—we accepted representations from noble Lords, including the noble Lord, Lord Hunt of Wirral, to make provision for employee shares within the plans contained in that Bill. Of course, under the 2009 Bill, the Royal Mail would have been in public ownership, so when we said we would allow for employee shares, we were able to do so without a specific clause in the Bill at that time. Since we are all in favour of employee shareholdings in Royal Mail in principle, let me now turn to the amendment.
The benefits of employee share schemes have been widely recognised. They can include motivating employees to become more productive, helping to align the employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do all that on their own; they have to be part of a wider approach to good industrial relations. Employee shares will not be welcome if they are felt to be a sop, to come at the expense of pay or to be a substitute for the usual channels of interaction among management, unions and staff.
The government position is that at least 10 per cent of the shares of Royal Mail should be put into an employee share scheme. That is why our amendment proposes that 20 per cent of the company be made available for such a scheme. We know that any privatisation of Royal Mail will inevitably entail a lot of change and upheaval. Its success will rely heavily on the good will of the workforce and on improved industrial relations—and on those relations remaining improved. It would therefore be appropriate to give a greater proportion of the company’s shares to the workforce. Since this Bill is designed to achieve complete privatisation, with the Government having no direct say after the date of transfer, it is important to pin down in legislation how things are going to work. We accept the principle of employee shares, but employees need to know a lot more about exactly how the scheme would work.
First, we would like to clarify things by our suggestion that the proportion should be larger than 10 per cent. I will listen with interest to the proposal from my noble friend Lord Clarke about 25 per cent and to the Minister’s response to that—there may be complexities about 25 per cent that we will have to consider. However, we certainly urge the Government to provide for a 20 per cent share. We need to understand whether employees would really have to wait until the last Crown share is sold before being able to apply for any employee shares. We need to know what mechanism is going to be there to prevent shares going to employees one day and being sold within a year or two. If the purpose were to have employees feeling that they have a stake in the company, what long-term purpose would be served by passing shares swiftly through the hands of employees and back out to private institutions or hedge funds, even if the employees make a casual profit from the transactions?
We need to be clear that shares would be held on an equal basis with equal voting rights for each shareholder and an equal distribution of dividend. Would some shareholders be more equal than others? Will employees be able to act cohesively to influence the strategic direction of the company to some extent, albeit from a minority position? We would like to have greater certainty about eligibility criteria: who would be entitled to shares or share options and what would it mean in practice? Last, but not least, what proportion of costs would be borne by whom?
There is still much we would like to know about the scheme. Over the past 20 years in the industrialised world, there has been a significant increase in the proportion of employees who own shares in their own firms. This has happened in the UK, other European Union countries and the USA. By 2004, one-fifth of British workplaces had share ownership schemes, covering one-third of all private sector employees, encouraged by tax allowances. In evidence to the Public Bill Committee in another place, Carole Leslie, policy director of the Employee Ownership Association, said:
“I am a bit disappointed at 10%, because 10% to me is small, which means that you have to put more effort into giving employees that real voice in the company so that they do feel that it is theirs—they do feel that that ownership, if you like, is real and it is not a token”.—[Official Report, Commons, Postal Services Bill Committee, 09/11/10; col. 71.]
George Thomson, general secretary of the National Federation of SubPostmasters, said to the same committee that,
“if Royal Mail Group is privatised, I think there is a case for the postmen and the staff to own 20% of Royal Mail Group; for that to be mutualised as a concept so you do not sell your shares when you leave the company but leave them behind; and for the CWU to be on the board of the new Royal Mail Group. So I see it not just for Post Office Ltd. I see it as let’s do it right within Royal Mail Group. If it is going to be privatised to bring in private capital, there is a case for making it 20% of the shares, which are not sold on”.—[Official Report, Commons, Postal Services Bill Committee, 09/11/10; col. 29.]
An employee share scheme can take many different forms. We believe that it is best if we look at the possibilities now rather than leave it until the Bill becomes an Act, while there is time to design a scheme that will work best for Royal Mail.
The Bill implies some form of trust. However, it is unclear whether these shares would be held in trust, with a percentage of the dividend being paid out annually to each employee, or whether there would be a pot of shares to be handed out to individual employees as shareholders. If there is an offer of shares to employees of Royal Mail, how will this be made most attractive to employees? Will there be an offering along the lines of two or three for the price of one? Perhaps there should be multiple pots of shares for employee benefits, with one pot in the form of a share incentive programme or save-as-you-earn scheme to take advantage of the tax incentives. A further pot of shares could be set up for training, bursaries and so on, which could be held in trust. These rewards could also be linked to transformational targets.
It goes without saying that any structure proposed for the future Royal Mail must be stable, if it is to be genuinely for the good of its customers and its employees. Any change in the status of the ownership of Royal Mail should provide an ideal opportunity for setting up a scheme. I beg to move.
Lord Cotter
My Lords, in one sense I welcome the amendment. Speaking for these Benches and, I think, for the Government as well, I think there is no harm in the Postal Services Bill emphasising the importance of shared ownership. The issue has already been rehearsed, but I welcome the fact that it is being raised again. However, it is not necessary to say that 20 per cent or 25 per cent share ownership should be required. We on these Benches, and I think the Government as a whole, are determined to ensure that as many shares as possible are distributed.
Another issue that I feel strongly about, which I am glad is being rehearsed again—and on which I am sure the Minister will respond, as she has done previously—is that share ownership and the input of the employees into postal services are very important. I know that the Minister has accepted that already, and we on these Benches also think that it is very important.
There is no harm in having a discussion on these issues, but being specific about more than 10 per cent could be counterproductive. Much as we would hope that share ownership will be quite high, we want to ensure that a purchaser feels able to have a level of control of the company that the purchaser considers sufficient and appropriate. I would urge the Government to provide as many shares as possible for the postal services employees. In that sense I welcome the amendment, but we should not be prescriptive beyond the 10 per cent that we have said already. I look forward to the Minister’s response on the various questions when the time comes.