BA and Ryanair: Customer Refunds

Lord Razzall Excerpts

Tuesday 15th June 2021 Lords Chamber

[Baroness Vere of Norbiton (Con)]

As noble Lords will know, the Government are not taking this legal action themselves. The CMA is a non-ministerial department. It believes it has found some evidence that businesses are failing to comply with the law and it is taking reasonable steps to take appropriate enforcement action. It could be that this does not go to court and that the CMA reaches an appropriate agreement with British Airways and Ryanair, if there has been any wrongdoing. But I agree with my noble friend that we have to do everything that we can to get the travel industry back on its feet. That is our focus: we want British consumers to be able to travel once again and with certainty.

[Lord Razzall (LD)]

My Lords, following the Minister’s last response, while this is important, clearly it is only the tip of the iceberg for the aviation industry and its customers, as she acknowledges. Does she accept that a lengthy continuation of the green/amber/red system will have a devastating impact on the industry and its customers? Will she confirm that, when restrictions are fully lifted, barriers to flights will be removed, thereby removing this issue? Will she also confirm that it is not the Government’s policy, as some fear, to stop people travelling abroad, so as to boost the UK economy?

[Baroness Vere of Norbiton (Con)]

I point out to the noble Lord that the Government are taking a cautious approach to international travel. We realise that circumstances will change in different countries, at different times. The traffic light system in place works as well as it can, in the circumstances; it looks at case rates, positivity, genomic surveillance and the risk from variants of concern. I also make the noble Lord aware that lifting restrictions domestically does not necessarily mean changes to international travel.

Hammersmith Bridge

Lord Razzall Excerpts

Wednesday 9th September 2020 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I reassure the noble Lord that this issue is now in the closely cropped grass so that we can see what is going on, as well as who is doing what and when. At the moment, I am confronted with a library full of engineering reports, at least eight of them, all written by a clutch of probably fairly expensive consultants and commissioned by a plethora of bureaucrats. Somehow we have to bring all this together. I intend to hold an engineer think-in where the engineers will decide on the best solutions for both the short term and the long term. This is not about pushing the issue into the long grass; it is about bringing it into the open and getting the decision-makers to come to a decision.

[Lord Razzall (LD)]

My Lords, I obviously welcome the commitment of the Minister to treat this as a matter of urgency. I will follow on from the questions put by my noble friend Lady Kramer. Does the Minister not accept that, irrespective of the cost, the only organisation that is going to pay for either the temporary or the permanent solution is central government? Hammersmith, Richmond and Transport for London are clearly not in a position to do so. Does she also accept the enormous urgency of the point made by my noble friend, which is that we must have a temporary solution in the form of either a road bridge or a pedestrian and cycle bridge, as well as a temporary solution for river traffic?

[Baroness Vere of Norbiton (Con)]

The noble Lord has outlined the challenge that I face with great detail and correctness. In the short term, we need to look at ferries and whether in due course the bridge might be opened to pedestrians and cyclists after remedial works. It is a complex task but not one that is beyond the wit of man, and I think that we can crack on and do it. He also mentioned funding. Over the past 16 months while the bridge has been closed, Hammersmith and Fulham Council and TfL have both been able to find various sums of money. I accept that they have not said that they can bear the full cost of the restoration at £141 million, but in March this year the Mayor of London said that he had committed £25 million. I am not sure where that money went.

Queen’s Speech

Lord Razzall Excerpts

Thursday 5th June 2014 Lords Chamber

[Lord Razzall (LD)]

My Lords, I think it is common ground on all sides of your Lordships’ House that this was a gracious Speech that was very short, with only 11 Bills promised to add to the three or four being carried over from the previous Session. I listened with interest to the noble Lord, Lord Adonis, but did not quite follow his analogy of this being a Thomas the Tank Engine speech. I was sorry that he did not use the attack used by a number of his friends from another place, which I much preferred. They referred to it as being a zombie speech from a zombie Government. Of course, the people who have put that into the mouths of their spokesmen do not really understand what zombies are: although zombies may well be the living dead, they are also immortal.

I am surprised that the Labour Party has chosen to attack this speech for being very short because the only shorter Queen’s Speech in living memory was in the run-up to the 2010 election. There were even fewer Bills promised by Labour at that stage but of course they also had their problems with the coalition between the Blairites and the Brownites. I welcome a short gracious Speech because, to me, good government is not just about legislation. We can all remember the 21 or so law and order Bills that the Labour Party brought in during the 13 years when it was in power but do we think that any one of those had any effect on the crime statistics? Indeed, I have long come to the conclusion that the purpose of a detailed legislative programme is to keep idle hands busy in the House of Commons.

For my part, rather like the noble Lord, Lord Adonis, I propose not to concentrate on the Bills set out in the gracious Speech but to take a look at the current state of the British economy and perhaps to describe what I see as some of the pitfalls ahead. Notwithstanding the noble Lord’s reservations, there can be no doubt that the UK economy is on the mend. Output is growing at its fastest rate since before the financial crash, unemployment is falling as new jobs are created and inflation is back below the Bank of England target. However, for politicians, like most people in your Lordships’ House, the issues are both political and economic.

First, on the political, for the two coalition parties the challenge is very clear. As a result of the Fixed-term Parliaments Act, we now know the date of the next general election, which will be on the first Thursday of May 2015. To do well in that election, both our parties need to demonstrate that the economic policies of the coalition are working and that a return to a Labour Government would put the economic recovery at risk. The coalition has of course been successful in persuading the electorate that the financial crisis in 2008 was the result of the Labour Government’s profligacy. This is obviously slightly unfair as it ignores the effect of the sub-prime mortgage collapse in the United States, notwithstanding the reservations of the noble Lord, Lord Forsyth. However, the success of the arguments made by the coalition is demonstrated by polling figures that have consistently shown that the Government are better trusted to manage the economy than Labour. Of course, Labour has not been helped by the refusal of the shadow Chancellor, Ed Balls, to show any remorse for Labour’s period of economic stewardship.

The second recent political argument has been over spending plans for the five years after 2015. The legacy inherited by the coalition in 2010 was a double whammy of an unsustainable deficit of government spending over income and a crippling government debt burden. George Osborne and Danny Alexander, the two key Treasury Ministers, have committed their respective parties to further steps to eliminate the deficit and reduce debt after 2015, although naturally there are disagreements to come between the two parties as to how in practice this would be achieved. In the mix of tax increases and spending cuts, the Tories will be more likely to avoid the former whereas the Liberal Democrats will not wish to rely solely on the latter. However, the two parties are united in opposition to Ed Balls’s recent proposals, which appear to concentrate solely on deficit reduction, ignoring the debt burden.

Inevitably, the political positions of the coalition will not succeed unless the economic recovery continues for the next 12 months, and this is where the economic arguments are relevant. Will the coalition parties be able to claim that the economy has recovered on their watch? As the noble Lord, Lord Deighton, and I have indicated, the portents are good. The polls are indicating a surge in the economic confidence of both business and the consumer. Surveys by the employer organisations indicate a significant increase in proposals to invest, and clearly the Government claim some credit for the increase in growth. The noble Lord, Lord Deighton, has rightly described the plans for which he has responsibility in infrastructure spending. I have said before that I have often thought that government policy in this area is rather,

“analogous to a swan, sailing serenely on while declaring that there was no alternative to the austerity programme but underneath the water the legs are paddling furiously to create initiatives to promote economic activity: infrastructure spending, with Crossrail the largest infrastructure scheme in Europe; the regional growth fund; the Green Investment Bank and the business bank; the development of an industrial strategy by the Department for Business, Innovation and Skills, with concentration on key areas of industry; and the stimulation of the housing market by the Help to Buy scheme”. [Official Report, 27/3/14; col. 608.]

The overwhelming factor at the moment, though, has been the return of what Keynes described as “animal spirits”. No one—no economist, and certainly no politician—quite knows why, over the centuries, consumers have suddenly lost confidence in the economy in which they live, thereby triggering a downturn in economic activity. However, there can be no doubt that the process has been now been reversed in the United Kingdom. As the Bank of England has pointed out recently, the tell-tale sign is the fall in the amount of cash held in ISA accounts—I prefer my pronunciation —which was £2.8 billion in April, the largest monthly fall since ISAs were first introduced in 1999. This cash is currently finding its way into property, equities and the high street.

So what are the risks to our economic recovery? First, as a recent CBI survey indicates, there has been a significant change in business attitude. Business now believes that the biggest threat is political risk. As John Cridland, the director-general of the CBI, has said:

“The UK now has more stable economic foundations, and political risks must not jeopardise this”.

The political risks are obvious. First, whatever one’s view about Scottish independence, there can be no doubt that were the vote to be yes, this would have a disruptive effect on the British economy even if it were only in the short term. Secondly, there is a political risk in what seems to be increased competition in anti-business rhetoric coming from all sides of the political argument as we approach the election, of which I suppose the best example has been Labour’s proposal for an energy freeze which, rightly or wrongly, is clearly having an impact on ongoing investment in the energy field.

Then we come to the political risks of Europe. A number of my colleagues and I have for some time been arguing that there is a significant risk to the growth of our economy if multinational companies form the view that we are going to come out of Europe in 2017. The motor car industry is obviously a classic example, and last year for the first time we exported more cars than we imported. Do we really think that investment in the motor car industry will be continued if people really feel that we are going to come out of the European Union?

Whatever views may be on our role in the European Union, there is no doubt that a recession in the eurozone would seriously damage our economic prospects. There seems to be a serious possibility of Europe spinning down the sort of inflationary spiral which affected Japan for 20 or 25 years. I hope the whole House will agree that in this context the intervention this week by the European Commission with a prescription for UK economic policy—the Times called it,

“a breathtakingly obtuse invitation to tax more and spend more … from the architects of the eurozone’s slump to the leaders of Europe’s fastest growing-economy”—

was totally inappropriate. Indeed, one might assume that the officials who wrote that were in the pay of UKIP, in the same way that I always assumed Arthur Scargill was in the pay of Central Office in Millbank.

Let me return the compliment to the European Commission, certainly to the ECB. I very much hope that today Mr Draghi—who may well already have done so but had not by the time this debate started—will cut the key ECB benchmark interest rate and will stop draining cash out of the banking system by sterilising bond purchases through weekly market operations. This would ultimately create €165 billion of extra money in Europe. This would be better than straightforward quantitative easing, which could be challenged in the German Constitutional Court and would in practice drive down German and French borrowing costs the most, which is not where the drive down needs to take place. I hope Mr Draghi takes this advice, if has not already done so.

Groceries Code Adjudicator Bill [HL]

Lord Razzall Excerpts

Tuesday 26th June 2012 Grand Committee

[Lord Borrie]

My Lords, perhaps I may intervene at this point. Most Members of the Committee know that I had a connection with the OFT—the Office of Fair Trading—but retired from it 20 years ago, after many years as its director. I no longer have any position of that kind and therefore do not have anything formally to declare.

However, references to the Office of Fair Trading by the noble Viscount led me to consider whether there was a great deal of point in establishing—for a fairly narrow field of anti-competitive complaints from farmers and others who complain about the power of supermarkets—a specially appointed new body created as a corporate sole, with all the debates, complications and so on that are involved in doing so. The subject of the Bill covers a fairly narrow sphere. It does not deal with all complaints against supermarkets, but only those connected with groceries. It does not even apply to all supermarkets, but only the 10 that are especially designated.

There are surely many reasons for thinking that there may not be an adequacy of work for the groceries adjudicator to justify the appointment of an adjudicator and, as one of the schedules states, a deputy adjudicator and all the paraphernalia of an office—although I admit that it is stated that back-office facilities may be provided by the Office of Fair Trading. If back-office facilities can be provided by the Office of Fair Trading, why are these powers not simply given to the OFT to monitor, to check, to listen to complaints and if necessary push those complaints further to the Competition Commission, and so on?

The points made by the noble Viscount are quite convincing but, as the phrase goes, we are where we are. We have given the Bill a Second Reading. We are now at the Committee stage. We can go backwards, of course, but there would then be an emptiness and nothing immediately to take its place because the Office of Fair Trading does not have all the different powers intended for the adjudicator under the Bill. I therefore return to the point that the Bill in front of us will set up a particular body—the groceries code adjudicator—and we have details in front of us to elaborate, consider and change, as a normal Committee does. In summary, it is not worth while continuing with the fundamental points made by the noble Viscount, although there is a lot of value and a lot of point in what he said. However, that would represent a backward step and we would, in effect, be replacing entirely the contents of the Bill with something else.

[Lord Razzall]

My Lords, perhaps I may respond to the remarks made by the noble Lord, Lord Borrie, by saying that I entirely agree with him. However, given the preliminary comments by noble Lords, one thing ought not to be forgotten—we are not starting here from scratch. This proposal emanated from the previous Government and has been heavily consulted on across all relevant parties. I know that your Lordships tend to take the view that what was in party manifestos does not necessarily bind your Lordships, but all three political parties included the creation of the adjudicator in their manifestos, and we should have that on the record before the debate goes a lot further.

[Lord Curry of Kirkharle]

My Lords, I very much support the Bill. I should like to pick up on a phrase used by the noble Viscount, Lord Eccles. He said that the current code appears to be working. I should declare that I am a farmer in Northumberland and I do not produce milk. I was also responsible for a report in 2002 in which we recommended that the OFT should monitor the recently introduced voluntary code, which later became the GSCOP.

The OFT has been monitoring the code and, as far as it is concerned, it may well be working because it has not identified any serious abuses of power that could not be resolved by negotiation. The problem is that there are many concerns about abuses of power by suppliers that have not been brought to the notice of the OFT. Many companies in the supply chain are fearful of the consequences of drawing attention to what they believe is a trading relationship which may be terminated if they are open and transparent about their concerns. From the OFT’s point of view, the code appears to be working. For many within the supply chain it is not working, which is why this Bill is so necessary.

--- Later in debate ---

[Viscount Eccles]

We did not know how soon Delphi would change its designs because there was a range of power steering pumps. Let me assure the noble Lord that there was no question of storing them. Delphi wanted them to come in and be fitted straight on to the machines. For many years I was a supplier to Marks and Spencer. The schedules changed every two or three days. That is the way of the interaction between suppliers and the retail market, particularly for anything that has a short shelf life. The noble Lord is quite right, if it has a longer shelf life, one can be a little more relaxed.

I do not therefore see that the problems raised by the noble Lord will come at all easily within the purview of the adjudicator. We shall shortly consider the investigations clause, and I am not at all confident, even if they do come within the adjudicator’s purview, that any substantial progress will be made from the point of view of those who want the supplier’s life made easier and the returns made greater. I do not see it working.

My noble friend is quite right to say that the Competition Commission stated that if there was no satisfactory agreement with the supermarkets it would be necessary to introduce an ombudsman. We should note that we are actually proposing to introduce something quite different to an ombudsman, and we should not therefore pray in aid the Competition Commission without any qualification.

I should add that the decision was, I suppose, made in 2007—it takes quite a long time for these decisions to get into a final published report—which is almost five years ago and the circumstances are different. The high street is under tremendous pressure that is much greater than it was when the report was written. The shares on the London Stock Exchange of the four British-based supermarkets on the list are all languishing near the bottom of their 12-month range.

I therefore feel that anything we do to erode the highly successful competitive model of the supermarkets and their suppliers—including, I may say, Nestlé, Kellogg’s, and Unilever and its subsidiaries—is not going to serve the public well. However, at this stage, and I may come back to this matter—

[Lord Razzall]

Before the noble Viscount sits down, is he prepared to address my point that the proposal was in all three political parties’ manifestos? He obviously knows better than all three political parties.

[Viscount Eccles]

Luckily, I am just a vulnerable ancient Conservative Back-Bencher who does not feel in any way committed to the three parties’ manifestos. I should also point out that they were published in 2010 and we are now in 2012, and there is always time for amendment in life. I am just hoping that that still applies. In the mean time, I have much pleasure in withdrawing my amendment.

Directors’ Pay

Lord Razzall Excerpts

Wednesday 20th June 2012 Lords Chamber

[Lord Razzall]

My Lords, I thank the noble Baroness for introducing this important Statement. I have three questions. First, does she accept that the Statement applies almost entirely to companies owned and run with employees in the UK? What is her view on the large number of FTSE 100 companies that have shareholders and employees primarily outside the United Kingdom? The Statement says that there has been a broad national debate about shareholder activism. Has any consultation taken place with companies run from Kazakhstan or the United States that are UK FTSE 100 companies? How does she think these proposals will go down with them?

Secondly, I will touch on the question of exit payments that was raised by the noble Lord, Lord Stevenson. I support and understand the Government’s position that they do not wish shareholders to have the right to veto the individual contracts of people who are taken on for employment, but I am not entirely sure that that should apply to exit payments. Contrasting the Statement in my left hand with the Explanatory Notes in my right, there seems to be a slight confusion. The Statement says that on exit payments, companies will not be able to pay more than shareholders agree. Will the Minister confirm that that is not exactly true? The proposal is that the company will say something like, “We will never pay more than two years’ salary in an exit payment”, or, “We will never pay more than the contractual entitlement of the employee”, or, “We will reward performance but not lack of performance”. Does the Minister agree that the Statement is slightly misleading in suggesting that shareholders have a right to veto exit payments?

The third point is slightly facetious, and the Minister may well have answered it already. As we know, her Secretary of State has been described in the Daily Telegraph by Mr Adrian Beecroft as a crypto-socialist. The criticism that the noble Lord, Lord Stevenson, has made has probably proved that that is not the case. Will the Minister confirm that, as far as she is aware, the business community broadly welcomes these Statements and regard them as coming from a Secretary of State who is significantly pro-business?

[Baroness Wilcox]

In answer to my noble friend’s first question, company law captures only UK companies. However, overseas companies must comply with the listing rules. We will work with the FSA to consider how the listing rules need to change in view of these reforms. I hope that is a helpful answer. In answer to his second question, companies will be able to make exit payments only within the envelope that shareholders have approved and it will be up to the shareholders to agree.

I cannot imagine that my Secretary of State was ever called a crypto-socialist by anybody—was he? I know that business very much welcomes what we are doing at the moment. Shareholders and business welcome it, and it is with them that we have been talking and negotiating to make sure that we can put this into the Bill that is coming up and that we can introduce secondary legislation so that we can get this moving as soon as possible. Everybody seems to agree that things must change.

Employment Tribunals Act 1996 (Tribunal Composition) Order 2012

Lord Razzall Excerpts

Wednesday 28th March 2012 Lords Chamber

An aggressive reduction in employment rights—as many have said, I fear that there are more to come—simply encourages the attitude that labour is a resource that can be easily disposed of and does not merit training investment, and that skills shortages can be addressed simply by paying the prevailing labour market price or operating at a sub-optimal level. Tackling that issue is a bigger challenge to the economic performance of the UK than measures unsupported by evidence that deny 3 million people statutory protection, or hoping that undermining the industrial court will somehow deliver an economic transformation. Getting employers not to take a short-term attitude to labour that such changes will deliver, but to give a commitment to training, is the bigger economic challenge.

[Lord Razzall]

My Lords, we have had an extremely interesting discussion, which was virtually a repetition of our debate in Grand Committee. I remain with the fear I expressed during that debate that this issue has become far too polarised. On the one hand, the proponents of the statutory instrument suggest that it will lead to a significant increase in employment, particularly in the SME sector. On the other hand, after listening to a lot of the remarks on the Labour side, one would think that one was returning to the days of the Tolpuddle martyrs. I worry about this polarisation because this is a relatively modest instrument.

As the noble Lord, Lord Whitty, indicated, I know that a lot of the evidence here is anecdotal. I now see that the noble Lord has extended his saloon-bar anecdotes beyond just Hertfordshire to the whole of the Home Counties. The evidence is not only anecdotal but based on the experience of many noble Lords who sit on boards of directors and are involved with SMEs. The evidence is therefore not entirely anecdotal, but I take the point.

This is a very modest alteration if you look at the number of people who, when the restriction was one year, actually made a claim for unfair dismissal when they were dismissed between year one and year two. There does not seem to be any significant indication that such people will lose their rights as a result of this legislation.

The point I really want to make, which I made in Grand Committee—and I am glad that one or two noble Lords on the Labour side have taken this up—is that we are in the middle of a significant internal argument around the suggestions in certain quarters that virtually all employment protection should be scrapped. This is a very serious matter. Conversely, a number of people, certainly on the coalition side, have been arguing that we need improvements in employment protection, particularly in what are described as family-friendly rights on maternity, paternity and other such issues. I hope that this will appeal to the Labour side of your Lordships’ House. If we are going to get the improvements we want in those family-friendly rights, and if we are to beat off the damaging proposals that seem to be coming from Mr Beecroft and ensure that they are not implemented, passing this modest instrument seems to be a small price to pay.

[Earl Attlee]

My Lords, this is not a time-limited debate, but I suggest that we hear from the noble Lord, Lord Lea of Crondall, and then the Minister.

Company Cars

Lord Razzall Excerpts

Tuesday 10th January 2012 Lords Chamber

[Earl Attlee]

My noble friend makes an extremely important point. Many company car users have to use a company car; there is no alternative. I am also confident that the system of company car taxation is progressive and fair.

[Lord Razzall]

My Lords, does my noble friend agree that, apart from what he said in his last answer about ensuring that large company cars pay the maximum tax feasible, this issue would be better not dealt with by the Government?

[Earl Attlee]

My Lords, I am happy to agree that the Government should not interfere any more than we already do, by the system of company car tax that I have outlined, but I am also confident that bigger and heavier cars pay considerably more in company car tax, not least because an employee who is entitled to a large car will also be paying much higher rates of marginal tax, and company car tax is paid at the marginal rate of tax.

EU: Financial Stability and Economic Growth

Lord Razzall Excerpts

Thursday 3rd November 2011 Lords Chamber

[Lord Razzall]

My Lords, in thanking my noble friend Lord Newby for introducing this important debate, it goes without saying that I agree with everything he said. It probably will not surprise noble Lords that I disagree with almost everything said by the noble Baroness, Lady Noakes.

When the eurozone was established, it was clear that its members could not have the benefits of the euro without the drawbacks of losing domestic control over their currency, which meant ceding fiscal powers to the centre. At that time, rules were established regarding fiscal policies to be followed by members of the eurozone both to qualify for admission and to maintain those rules when they became members. The first thing that happened of course was that for political reasons the numbers were fudged for Greece, Italy, Spain and probably Portugal in order to allow those countries into the eurozone. Even worse, when things got a bit rough in France and Germany, those fiscal rules were scrapped and France and Germany were allowed not to obey the long-established rules. That, inevitably, has led to the situation in which the eurozone finds itself today.

It would be easy to conclude that that is just Europe’s problem and, “Aren’t we lucky to be outside the eurozone?”. Unfortunately, as the noble Baroness, Lady Noakes, touched on, we have a problem as to what the crisis in the eurozone does for our UK banks and financial institutions. She disclosed the fact that she is a non-executive director of the Royal Bank of Scotland. I do not know the details of the RBS’s loan portfolio to eurozone countries but, clearly, were those countries to default, that must have a significant impact on the UK banks which have lent money to those Governments or institutions in those countries. That will have an ongoing effect on the ability of those banks to lend in the UK domestic market.

Perhaps I may introduce your Lordships to the arcane topic of credit default swaps, which is an even greater danger for UK financial institutions. Credit default swaps are a mechanism that has been invented by banks and financial institutions to make money, of course, which basically means that loans to eurozone countries or other countries throughout the world are insured by this mechanism. Credit default swaps involve parties that are not only UK banks but UK pension funds and UK hedge funds, all of which are involved in this market. If the eurozone countries start to default in relation to loans, not only it is UK banks which have to write down the loans that they have made but there are significant losses in the credit default swap market which affects those institutions. Not only the banks will be affected.

What is worse is that, under the new accounting rules that were brought in on the mark-to-market requirements for financial institutions, even if countries have not gone bust but it looks as though the rating of those credit default swaps is worth less than they would be when they were originally taken out, those banks or financial institutions also have to write down the effect of that mark-to-market valuation. That has a very significant effect on the balance sheets of our UK banks and financial institutions, which will have a serious impact on the ability of all those financial institutions to provide the engine for growth that the UK economy needs.

We have no alternative but to continue the engagement with our European friends. It does not mean that we have to rush into the eurozone, although, interestingly, I see that Poland and Lithuania as we speak are very anxious to join. I am not suggesting that, but we absolutely need to engage in Europe. I commend the initiative of the Department for Business, Innovation and Skills, which has put together an informal like-minded group for growth. It consists of 14 states in Europe, half of which are eurozone countries. That group is trying to work together to develop policies for the development of growth in Europe and the United Kingdom. It is now the time to engage in Europe and not to walk away in order to secure policies for growth.

Postal Services Bill

Lord Razzall Excerpts

Wednesday 4th May 2011 Lords Chamber

[Lord Borrie]

My Lords, I apologise for not rising quickly enough for my noble friend on the Front Bench to notice that I wished to speak. I do so now because my noble friend Lord Lea of Crondall made a practical, reasonable and strong case for his amendment. We are not at this stage of the Bill discussing or arguing about whether there should be a sale of Royal Mail. We are discussing the practicalities of such as sale. We were all around in some way or another during the 1980s and 1990s, and there is no doubt that when industries were privatised, they were often sold off under value. That has been well recognised after the event, if it was not adequately recognised as being likely before the event.

The practical purposes of the amendment are to ensure that we have an initial public offering, an IPO, of the shares, and that they will be offered in tranches. My noble friend is not rigidly proposing any particular dates or percentages, but in any amendment he tables he must put forward something that is reasonably clear. If an improvement can be made on that, there is no doubt that he would be willing to accept it. However, he wants, and we all should want, a practical procedure for ensuring that the public does not get an undervalue. There is to be a sale. Let the public have a good return on that sale, and that is what the amendment is all about.

[Lord Razzall]

I stand by the point that I made in Committee: in the current climate, it would be extremely unlikely that there would be an IPO for the Royal Mail.

The noble Lord, Lord Lea of Crondall, demonstrates another reason why that is highly unlikely. The fundamental difference between this and the privatisations to which he and his colleagues referred in the 1980s and 1990s is an ideological belief on behalf of the then Conservative Government that those industries were better held not by the taxpayer but by public shareholders. In those circumstances, there was clearly an interest in creating an aftermarket, so that as many individual shareholders—in the case of BT, it was a huge number of individual shareholders—should have an incentive to buy shares and then make a profit. The reason why that would not apply in this case is that the fundamental reason for the transaction would be to get resources into the Royal Mail. In those circumstances, the Government would not have an interest in creating the sort of aftermarket that the noble Lord, Lord Lea, fears. The significant interest of the Government would be to maximise the financial return for the Royal Mail, because the whole purpose of this is to get investment into Royal Mail, not to provide a windfall for shareholders.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, Amendment 1 would restrict the number of shares that can be sold in an initial public offering—an IPO—to 30 per cent of the value of shares, and imposes a time limit for the sale of one year from the new clause coming into force.

First, the Government believe that Royal Mail needs an injection of private sector capital to meet its needs in a fast-changing postal market. Unlike the previous Government, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. The Government’s objective in disposing of shares in Royal Mail is to secure the future of the company and to secure the best value for the taxpayer. To achieve that, the Government must have flexibility on when to sell shares and how much should be sold.

The noble Lord, Lord Lea, is concerned that previous privatisations have resulted in the taxpayer losing out through undervaluation; the noble Baroness, Lady Turner, spoke in support of his concerns. Noble Lords have a great deal of knowledge of previous privatisations; it is one of the great assets of your Lordships' House. I cannot answer for why they were done as they were, or what were the objectives of those privatisations. I am absolutely clear that our intention will be to secure the best deal for the company and the taxpayer consistent with our objectives. We will ensure that whatever form private sector investment takes in this instance, it will be with those objectives in mind. I thank the noble Lord, Lord Razzall, for his clarifying statement on that.

As I said in Committee, the Bill would allow the sale of a minority of shares in Royal Mail, and a sale by means of an IPO, if either or both were decided to be the best route to achieve our objectives. We do not, however, believe that there should be a time limit on the sale. The Government must have the flexibility to choose the right time to dispose of shares to ensure that we can get the best result for Royal Mail and the taxpayer.

The noble Lords, Lord Lea, Lord Young and Lord Borrie, also asked how Royal Mail will be valued. If I may, I will come back to those issues when we discuss Amendment 3, which directly addresses that point. Arbitrary deadlines in legislation would mean that the process might be rushed through, which is not the best way to conduct what would be a significant commercial transaction. I do not believe, therefore, that Amendment 1 would be in the interests of either Royal Mail or the taxpayer, and I would therefore hope that, following my explanation, the noble Lord will feel able to withdraw his amendment.

--- Later in debate ---

[Lord Whitty]

My Lords, I support the amendment in the names of the noble Lords, Lord Rogan and Lord Laird. The Minister will be well aware of my past engagement with Consumer Focus, the statutory body for postal services, which operates as separate entities in Scotland, Northern Ireland and Wales. It has become apparent, when assessing the needs of domestic consumers of postal services and post offices, and also those of small businesses in using those services, that there are somewhat different considerations relating to the firm commitment to the network and the universal service, particularly in rural areas and in those countries.

In Northern Ireland, there are particular issues relating to the north and the south, to An Post, and to getting mail across the sea. While preserving the universal service, the body of the post office and the body of Royal Mail as parts of our United Kingdom national infrastructure, it is important that we recognise that any dilution of the service or differential treatment of the parts of the United Kingdom would be particularly detrimental to those countries. It is therefore important that the devolved Administrations are fully involved in any changes.

Perhaps I may gently say to the noble Baroness that it has been obvious that her department in Whitehall has not always been the best when consulting devolved Administrations on a whole range of issues, including this one. The department is getting better, but acceptance of at least the principle of the amendment would be appreciated and would help the Government’s approach. It would meet the fears of many businesses and individuals in those countries, particularly in rural areas and small towns.

[Lord Razzall]

My Lords, I was not going to intervene, but because the noble Lord, Lord Low of Dalston, raised the point I made in Committee, we should put on the record that after the noble Baroness looked into this point she wrote to both of us and said that we were actually both right. As the noble Lord indicated, the cost of delivering items of mail in London is more or less the same as the cost in rural areas, and is significantly greater than the cost in other United Kingdom cities. The point that I was trying to make, obviously inelegantly, was that if I was really worried about what would happen I would worry about London. It is not only that the cost of delivery in London is greater, but London is such a huge element in the costs of Royal Mail, which has huge overheads, any third party looking at the overall cost of the Royal Mail—rather than looking at the Orkneys and Shetland—will have to look at the costs in London. It is Hackney that ought to worry, rather than the Orkneys and Shetland. That was the point I was trying to make.

[Lord Low of Dalston]

If it is truth that we are concerned with, as a serious House concerned about its reputation, it is not correct to say that it is more expensive to deliver to Norwood Green and Hampstead than to the Orkneys and Shetland.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, the amendments make the case for employee shares being held as a trust and for employees to have a voice on the board in the light of the employee share scheme being established. We agree that that should be in the Bill because we have heard a lot of Ministers’ warm words for employees, but we need more assurances.

The benefits of employee share schemes, which were rehearsed to some extent in Committee, are widely recognised. They can include motivating employees to become more productive, helping to align 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 that on their own. They have to be part of a wider approach to good industrial relations. Employee shares will not be welcomed if they are felt to be a sop, to be at the expense of pay or a substitute for the usual channels of interaction between management, unions and staff.

However, given the more generalised benefits of such schemes and the very significant efforts made by current employees to implement the modernisation programme within Royal Mail, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. Carole Leslie of the Employee Ownership Association spoke of the benefits of such a scheme in evidence to the Public Bill Committee in another place. She said:

“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding … the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 76.]

If we accept the principle of employee shares, we are still short of detail. The Government have said that there will be a scheme but they have not said exactly what it will be. Having said that, we welcome two important concessions that the Government have made. First, we have pressed for greater detail about the scheme and are therefore pleased that the Government have brought forward an amendment so that, before the disposal of Royal Mail takes place, there will be a report to Parliament setting out the detail of the proposals for an employee share scheme.

Secondly, in Committee we pointed out that the Bill as it stands requires employee shares to be offered only when the last Crown share in Royal Mail has been sold. We argued the case for a trigger that kicks in when the first shares are sold. I think I heard the Minister suggest that that might indeed be acceptable to the Government, in which case we welcome that as well. However, whenever it is, we think that the Government should make some employee shares available when the first disposal is made.

The amendment proposes that shares should be held in trust for the benefit of employees, as we think that that is the right way to settle this matter. We now understand that this would be difficult for some employees to accept, as they would expect to be able to cash in the shares if they were taking them up, but we do not think that that is the right way forward to build in long-term value in the company. We believe that, for example, on leaving employment, shares held by employees should be disposed of only by way of transfer for consideration through the trust. It is obviously fair that employees who leave employment and leave a scheme should be able to capitalise on their shareholding, particularly if there has been capital growth. That is a scheme incentive. However, to maintain the integrity of the scheme as a whole, the disposals should go back into the scheme.

The amendment also calls for representation on the board for the employee share scheme once it is established. I have already made the arguments in favour of generalised employee representation but I think that they acquire additional merit when it is seen that some 15 per cent, we hope—but certainly 10 per cent under the Government’s proposals—of the shares will be available to be held by the employees of Royal Mail. This means that they should as of right have a chance to have a collective voice at the highest level, and we think that that should be stated in the Bill. I beg to move.

[Lord Razzall]

My Lords, having sat through what I would describe as “Lord Mandelson’s Bill” under the previous Government, I am absolutely delighted at the Labour Party’s conversion on the road to Damascus regarding their commitment to employee participation here. The noble Baroness would not be surprised if I indicated that, were the Government minded to go from 10 to 15 per cent, I could not be more delighted. However, whether she can persuade the Treasury of that, I have my doubts.

Postal Services Bill

Lord Razzall Excerpts

Wednesday 4th May 2011 Lords Chamber

[Baroness Wilcox]

My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.

Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.

It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.

[Lord Razzall]

He has crossed the Floor.

[Baroness Wilcox]

However, we believe that obliging the Post Office to report against the access criteria separately for each of England, Wales, Scotland and Northern Ireland would be of limited assistance. The previous Government recognised that too when, following a national consultation in 2007, they rejected suggestions from some that the access criteria should apply at an individual national level. This additional reporting obligation would place a significant additional administrative burden and subsequent cost on the Post Office. For example, 17 postcode districts straddle national borders, such as postal district TD15 around Berwick-upon-Tweed. For this reason, I urge the noble Lord, Lord Whitty, to consider withdrawing Amendment 40, which I think he has already agreed to do, and to reflect on what I have said.

I turn to Amendment 41, which again is in the name of the noble Lord, Lord Whitty. It relates to the services offered over Post Office counters on behalf of a universal service provider—in other words, Royal Mail. I hope that the noble Lord will be reassured by the Government’s Amendment 50, which obliges the network report to contain details of the services offered by the Post Office on behalf of a universal postal service provider. The report must also contain details of the wider postal services that are available, so services that are not regulated under universal service conditions must also be covered.

I also reassure the noble Lord that new Post Office Locals all offer the full range of Royal Mail’s universal service products. Some have voiced a concern that certain Post Office Locals do not offer full universal postal services—for example, through not accepting parcels weighing more than 6 kilograms. However, I reassure noble Lords that the Post Office has, through the current pilot process, now developed the Post Office Local model so that new local outlets will all accept parcels up to the full universal postal service standard of 20 kilograms.

I hope that in the light of those reassurances the noble Lord will feel happy to withdraw his amendment.