Postal Services Bill
Lord Razzall Excerpts(13 years, 8 months ago)
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Lord Young of Norwood Green
My Lords, the purpose of Amendment 14 is to provide for the disposal of shares to take place in tranches or batches rather than all at once. In keeping with our previous amendment, the batches are at 30 per cent and 19 per cent, to maintain Royal Mail in overall public ownership. Of course, the Government may wish to propose different figures, but the same principle would apply.
One of our difficulties with the Bill is in trying to grasp the detail and discover exactly what information is in it—whether there will be an initial public offering or a trade sale at auction. The Government have not set a clear timetable and they have not explained whether there will be a general sale of shares to the public—an IPO—a restricted sale to certain categories of buyer or a trade sale by auction to a single buyer, such as a private equity firm or a postal competitor, which may raise competition issues. They have not been clear about how valuable public assets will be allocated between Post Office Ltd, the pension funds and Royal Mail, thus finding their way into private hands. They have not indicated how the board might be constituted. They have not ruled out dismantling Royal Mail and selling off the most profitable parts, in particular GLS, its successful European parcels service, and Parcelforce. They have not indicated how they will guard against a buyer with short-term horizons seeking to squeeze costs and cherry pick the assets.
Before any sale takes place, this House will want to be assured about the future of the universal service, the exact regulatory regime and the future of the post office network. The Government have not explained any measures to ensure value for money for the taxpayer and—this is the subject that this amendment focuses on—they have not explained whether they would sell the whole company all at once, with the risks that that involves of selling cheaply, or whether they would be prepared to sell in tranches.
There is a huge amount of evidence that, when privatisations have taken place in the past, the value for which the businesses were sold was too low, as my noble friend Lord Lea has demonstrated. This is most clearly evidenced where a general sale of shares has taken place. When the shares are traded, it is easy to see what price they trade at and how this compares with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that the shares should have been sold at a higher price—the taxpayer has lost out and someone has pocketed a pretty penny as a result. With Associated British Ports, which was 35 times oversubscribed, the share price rose 23 per cent in one day. With Amersham International, sold for £71 million, the share price rose 32 per cent on the first day of trading.
As early as 16 May 1984, the Public Accounts Committee in its 17th report expressed concern at stock in public corporations being sold, in the words of the committee, at an,
“immediate substantial premium creating windfall gains for the investor at public expense”.
It recommended considering selling in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a number of cases. For example, in the case of National Power, the share price rose 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. Powergen’s first tranche of shares appreciated by 22 per cent within one day, but the second batch rose only 3 per cent the day after.
Of course, it is difficult to predict what the reaction of investors will be to the disposal of shares. It is undesirable for the shares to be offered, either in an IPO or a trade sale, in one single tranche, which would have the effect of transferring 100 per cent ownership in one go, albeit with 10 per cent or so employee shares, if that is to be the figure. There is a strong case that transfers should therefore be staged. Our amendment proposes this, such that shares representing no more than 30 per cent of the value of the business should be capable of being transferred in the first year following the Act coming into force and no more than a further 19 per cent in the following year.
The Secretary of State has complete discretion over the disposal of all Royal Mail shares. There are a number of issues to consider. The market may be glutted by a complete offering and so reduce the value. Privatisation of Royal Mail separate from the post office network is an innovation, so it will be best to proceed by degrees to ensure that the universal service is not jeopardised. If the value of the shares rises, the taxpayer would be a loser if the initial share sale were a complete sale.
There is a real prospect that Royal Mail may be undervalued or overvalued by the Government. Ministers have yet to put a value on the Royal Mail Group at this time—or, if they have, they are being exceedingly coy about it. Estimates of the value of Royal Mail have varied wildly. Many factors will impact on the value of the business. The prospective regulatory regime, the industrial relations climate, the onerous nature of the obligations placed on Royal Mail—all these factors and others will determine the value of the business and its share price on flotation.
There are, then, strong arguments for the sale to be implemented in tranches. That would allow for a wide variety of approaches to possible amendments. For example, tranches could be subject to various reporting procedures to Parliament to guarantee effective oversight. I stress that in our amendment we have been consistent with our wish that overall ownership of Royal Mail should remain in the public sector. However, the principle of selling by tranches to avoid underpricing would apply to any percentage of sale, including 90 per cent or 100 per cent. I hope that the Minister sees merit in the notion that disposals should be by way of tranches and that she will either accept the amendment or give assurances to the Committee about how the Government intend to proceed.
Lord Razzall
I cannot say how much I respect the views of the noble Lord, Lord Lea of Crondall, and the noble Lord, Lord Young of Norwood Green, but I have to say that from what they have just said they are living in fantasy land. We are faced with a situation where, unless the Royal Mail gets significant investment from a third party, it will be in serious financial difficulties. The idea that there will be an IPO or a sale with tranches is from a fantasy world. If people want to oppose the Bill, they should say so; they should say, “We don’t agree that it should all be sold off”. But, as those of us who deal with the markets every day know, to suggest that in some way we could have 30 per cent here, 30 per cent there and 19 per cent there is a fantasy world.
Lord Razzall
May I finish what I am saying? We are in Committee; the noble Lord does not have to interrupt me. The noble Lords are quite right: in the world under the Labour Government, they successfully sold off all sorts of things in tranches. However, we are not talking about the businesses that they sold off; we are talking about a business that is in serous financial difficulties. The idea that we can go to the market on an IPO and sell only 30 per cent, or sell 30 per cent now and trickle out the rest of the sales, simply will not happen. If noble Lords oppose the Bill and do not want Royal Mail to go into the private sector, they should say so, but they cannot pretend that we can do this in the way that they propose.
Lord Lea of Crondall
My Lords, the noble Lord has sat down. Did I hear him say that a sale through an IPO per se was unlikely? Clearly there is a difference between a sale through an IPO and a sale to an individual but, as my noble friend Lord Young and I have pointed out, it is perfectly straightforward to say that the public interest would have been served in the 1980s if there had been tranches. Presumably, the noble Lord is saying that the financial position of Royal Mail makes tranches impossible. In that case, it is up to him to prove that he would not be making a catastrophic mistake in an IPO about the initial sale price. Is that not correct?
Lord Razzall
It is not for me to respond to this; I am sure that the noble Baroness can do so more eloquently than me. But anybody who thinks, in the Royal Mail’s current circumstances, that there can be an IPO, is living in a total fantasy world. In the world in which we live, and the numbers we have from the Royal Mail—we know what they are—there is no way that suddenly an IPO will be forthcoming. I understand the noble Lord’s point—theoretically there could be an IPO—but we should not clutter the Bill with theoretical amendments. It simply will not happen. There might have been the possibility of an IPO under the noble Lord’s Government if they had got there quickly enough 10 years ago, but it is too late now. The pass has been sold, and this is fantasy.
Lord Lea of Crondall
If the noble Lord will allow me, it was the Hooper report that said that the most likely presumption of going forward was an IPO, and that was very recent.
Lord Lea of Crondall
My Lords, it will not surprise the House that I will in due course withdraw the amendment pro tem, but that in no way assumes that our arguments have been overwhelmed by the firepower of the noble Lord, Lord Razzall, or the Minister.
The Liberal Democrats must have been reading too much Machiavelli recently. I am not surprised at that, given the extraordinary arrangements that they have been making with the Conservative Party, and I am sure that they are being kept awake at night wondering who is going to stab them in the front instead of in the back. As to the idea that the amendment is aimed at killing the Bill, we have experience of killing Bills but this would be a peculiar way of going about it. This is about helping the Government and society to avoid a fiasco by feeling our way on how this disposal will be carried out.
Is the noble Baroness prepared to respond on whether it is her view—along the lines of the view of noble Lord, Lord Razzall, for whom he knows I have the greatest respect—that we are living in fantasy land if we think that this sale can be carried out by way of an IPO. The alternative, presumably, is the Sheikh of Kuwait. It may be that Colonel Gaddafi is no longer the likeliest candidate. The alternative is an IPO. We will all avidly read Hansard tomorrow—which means that we will not—but I do not think I said that Hooper advocated an IPO. I said that the most likely presumption to be made after reading Hooper is that an IPO would be a strong candidate as the means of sale. If that is the case, the amendment is the exemplar and states that if the scenario is an IPO, some of the experiences of the IPOs in the 1980s should be borne in mind.
Lord Razzall
I must intervene before the noble Lord withdraws the amendment. I am a student of Machiavelli and I have always regarded the noble Lord, Lord Lea of Crondall, as the model of The Prince.
Lord Razzall
My Lords, I do not want to intrude in the debate on this amendment, but unfortunately the noble Lords, Lord Touhig and Lord Low of Dalston, were not in their places when I made this point earlier. If we are to preserve the reputation of this House for knowing the facts and having expertise, we really must not say things that are not true. As I said earlier, the issue for the Royal Mail is not about whether it can deliver to rural Wales or rural Scotland. As I said earlier, it is more expensive for the Royal Mail to deliver to Norwood Green or Hampstead than to maintain the service to the Orkneys and Shetland.
If we are to debate this issue, the concern should not be about whether or not the universal service can be maintained to outer Wales or northern Scotland. It is about whether we can maintain it to Hampstead or Norwood Green. If we are to debate this issue, we should not fall into the trap of thinking that this is about how we preserve the service to the outer islands or parts of the UK. All the other issues that noble Lords have raised are worthy of debate, but if we are to be the serious House that knows the facts, we should take that on board.
Lord Touhig
Did the noble Lord suggest that the noble Lord, Lord Low, and I were somehow misleading the Committee by not telling the truth in this matter? I take exception to that. I am sorry that he has this metropolitan view. I know that his party is not that strong in Wales and will probably be wiped out in the coming elections, but there is no need to dismiss Wales as if it is at the other side of the moon.
Lord Razzall
No, I actually said that the noble Lord, instead of making party-political, snide comments, should actually learn the facts. The facts are that the Royal Mail at the moment is seriously under pressure delivering to Norwood Green and Hampstead, not to outer Wales, which is easy for Royal Mail to deliver to. That is the truth and he cannot deny it just because he wants to make Labour party-political points.
Lord McAvoy
I am tempted, especially by the last speaker. I am sure that every Liberal candidate in Scotland will welcome his intervention, but I can assure noble Lords that every Labour candidate will welcome it even more. The noble Lord mentioned the “outer” areas. Such contempt—such arrogance and such an unctuous dismissal of other people's points of view in this House—is against the very nature and style of this House. That is one of the most arrogant, aggressive statements that I have ever heard in my short time in this place.
I support the contents of the amendment of the noble Lord, Lord Low of Dalston. There is so much practical common sense in it that I do not know why—there is no logic or reason—it should not be accepted.
I am especially grateful to my noble friend Lord Touhig for his amendment because of its reference to the “outer” areas of Britain—the intervention by the noble Lord, Lord Razzall, will go down extremely well and will be well quoted. The point is that we have devolution. Let there be no doubt that I speak as a confirmed unionist—I always have been and always will be—who has no truck with the nationalists in Wales or Scotland, particularly Scotland. However, the democratic will of this United Kingdom Parliament set up the institution of the Scottish Parliament. To have devolution and not involve the devolved Administrations and not have lines of communication to them is a failure of the UK Government.
I would also like to restore a bit of balance—this is also relevant to the amendment—given that I have heard the phrase “the previous Government” about 25 times this evening. As my noble friend Lord Stevenson mentioned, the Labour Party manifesto said that all proceeds from any sale of the Post Office and Royal Mail would go straight back into modernisation and assistance. That is the sort of thing that would have helped Scotland. I understand that that was also a Liberal promise, but then again, like so many promises that the Liberals made, it vanished into a haze when they got the shock of being asked to deliver on their promises. We would have done that, but not one person from the Liberal Benches has mentioned that they had that commitment as well. Their whole principle is to surrender for power—or the illusion of power—because they have to be in government for a wee while.
Scotland, Wales and Northern Ireland—I am delighted to see the noble Lord, Lord Empey, here—are different because, unlike most parts of England, they comprise extensive geographical areas that can be sparsely populated. Some of those areas are not particularly well-off economically. However, there is a missed opportunity in the Bill. Previously in Scotland, there were closures of some post offices, which I fully accept were uneconomic—the closures were opposed by local Liberals, who are opportunists par excellence. There is an opportunity in Scotland, and no doubt in Wales and bits of Northern Ireland, where local authorities have a much more involved role locally than some of the big English councils. There is more localism there, and I believe that there is an opportunity to keep post offices going, in light of local circumstances. In Scotland—I am talking particularly about Scotland here, as I know it best, although I know Northern Ireland well, too—local councils could have co-operated with government and all types of bodies, including co-operatives, to ensure that a local service was still provided and not swept away. I declare an interest as a Labour and Co-op Peer. A big opportunity is being lost here. Scotland has a number of outreach services such as temporary vans or mobile post offices, so the whole difficulty facing the universal service in Scotland is different from that facing metropolitan areas in England.
I do not know about Hampstead and Norwood Green, but I know that that universal service is threatened in Scotland because of this Bill. What we have here is an authoritarian Government backed up by—I am astonished to say—an authoritarian Liberal Party that is only interested in getting legislation through. We in Scotland are going to lose out. I think Northern Ireland will lose out. My noble friend Lord Touhig has indicated that Wales will lose from it—there is a big loss there.
However, there will be a price to pay, because there are elections coming. In England, the local council elections will soon put pay to the Liberal votes. In Scotland, we have renewed vigour in our party, as have other parties, because Liberals have been exposed. In Wales, I think that the same will apply for elections to the Welsh Assembly. One thing about the House of Lords and the House of Commons—the Westminster Parliament—is that they provide an angle on British politics. Great things are being discussed here that, come election time, will have terrific resonance outside.
Lord Razzall
My Lords, I normally try to avoid rising before the Minister’s response. Although the noble Lord does not know my name, I think that he is the noble Lord, Lord McAvoy. One of the conventions in this House is that if you are going to be rude to somebody, as he was, you ought to know their name. I am Lord Razzall.
I am terribly sorry that the noble Lord did not know my name. He called me unctuous. Yes, I probably am quite unctuous, because I am quite polite to various people on his Benches. The only point that I was trying to make, which cannot be denied, is that the Royal Mail cost figures demonstrate easy-to-provide services to northern Scotland and rural Wales. That was the only point that I was making. Why that produced a diatribe against the Liberal Democrats I do not know, but I suppose that that is what he has introduced to this House. I am Lord Razzall, by the way, if he wants to name me.
Lord Touhig
The noble Lord suggested that people were not telling the truth. I do not know where he has been this evening—perhaps he has had a very good dinner. However, it is quite improper without any evidence to suggest that either I or the noble Lord, Lord Low—he followed both of us—were not telling the truth.