Lord Rogan
Main Page: Lord Rogan (Ulster Unionist Party - Life peer)
Lord Rogan
“( ) The Secretary of State shall ensure that the current designated universal service provider secures an inter-business agreement with Post Office Limited for a period of not less than 10 years from the date at which the provisions of this Part come generally into force.”
Lord Rogan
My Lords, this amendment is of the utmost importance to the post office network, which has been in steady decline over the years. I welcome the Government's commitment to oppose post office closures, although that is not entirely in their hands. However, if an inter-business agreement between Royal Mail and Post Office Ltd is not enshrined in law, there is a real concern that, over time, Royal Mail will downgrade the value of its contact with the post office network, putting it under even more financial pressure. I am not alone in thinking this, and many noble Lords have raised similar concerns. Indeed, the Minister agreed that the Government hoped to achieve a 10- year agreement prior to disposal on our previous day on Report. With such agreement on the record, I hope that the Government will accept this amendment and see that the concern which is shared across the House is addressed.
The post office network is part of the fabric of British life. In Northern Ireland, as elsewhere, the local post office is so much more than a retail outlet; it is an essential community hub. I fear that, without an inter-business agreement, a privatised Royal Mail will seek new outlets for its services, which can be only a bad thing for our struggling post office network. The amendment in my name and that of the noble Lord, Lord Laird, seeks to guarantee that local post offices are able to continue to plan and operate their business safe in the knowledge that they will continue to receive the revenue streams from Royal Mail that help them survive as small businesses.
We cannot legislate to protect the post office network for an indefinite period. It is probably true that, at some point in the future, the post office network will end up going it alone, which will be regrettable, but, as Royal Mail goes through a major transformation and the post office network’s existence depends upon a very generous taxpayer subsidy, it is surely vital that we do all we can to help it through these tumultuous times.
Post offices provide a vital service to communities around the United Kingdom, especially in rural areas in Scotland, Wales and Northern Ireland. But their existence is fragile. Over the past 20 years, there have been some 9,000 post office closures. An inter-business agreement, enshrined in law for 10 years, provides the stability that the post office network needs to survive. Without an IBA, the future of post offices across the United Kingdom looks bleak and further closures will undoubtedly follow.
Lord Stevenson of Balmacara
My Lords, I rise to speak to Amendment 67A in this group and to give our support to Amendment 63B in the names of the noble Lords, Lord Laird and Lord Rogan. We associate ourselves with the remarks that the noble Lord, Lord Rogan, has just made.
The Bill separates Royal Mail from the post office network, the first time such a separation has happened anywhere in the world. Throughout our debates in your Lordships' House, we have stressed the importance to the country of the post office network, not just as a vehicle for the day-to-day transactions of our citizens and in support of our small businesses—important though those are—but because the post office is at the heart of our communities up and down the country. In an earlier debate, the noble Lord, Lord Empey, described the post office as part of the national infrastructure. It is, indeed, a vital part of the hard wiring of our country and, with its continuing presence and high standards of operation and service, it helps to define who we are in an increasingly globalised world.
The Government have supported the post office network and we pay tribute to this. It must have been hard to secure the funding necessary to honour the increase to £180 million per annum in the previous Government’s social network payment for otherwise unviable post offices, but they have secured the necessary investment within the confines of the spending review and they have specified that Post Office Ltd must have 11,500 outlets in the year 2014-15. That is all very welcome but—there is always a but—it leaves a number of operational and practical questions unanswered, which we fear may bring down what are the clearly genuine good aspirations of the Government for the post office network. Of these, the two areas our amendment probes are what happens after 2014-15 and what is to stop a privatised Royal Mail reducing its use of post offices.
As we have heard, the Post Office is dependent on Royal Mail’s business for its survival. Over one-third of its revenues, £343 million, and one-third of sub-postmasters’ pay, £240 million, is generated selling Royal Mail products and services. The bald fact is that there is nothing in the Bill to require a privatised Royal Mail under new ownership to utilise the current post office network. Andy Burrows of Consumer Focus has said:
“It’s entirely conceivable … that several years down the line you could have a post office network where you cannot undertake mail transactions”.
We already know that post offices, predominantly those in rural areas, are finding it hard to survive. As the National Federation of SubPostmasters has said, many sub-post offices are “hanging by a thread”.
Despite Ministers’ assurances that there will be no government programme of post office closures, post offices are closing. Last week it was revealed that there are now 400 post offices which are, in the parlance, subject to “long-term temporary closure”—up from 150 last year. I am sure that all Members of your Lordships’ House hope that “long-term temporary closure” is not just a euphemism for permanent closure. Whatever the truth of that, the fact is that there are nearly 1,000 sub-post offices up for sale but unsold. We accept that there is always churn, but this is an unusually high number according to the NFSP.
We have argued throughout the passage of the Bill that we simply do not understand why it is impossible for the Government to work with the component parts of the present Royal Mail to broker at least an extension of the current agreement between Post Office Ltd and the soon-to-be separated Royal Mail so that our post office network has a more certain future. They currently have an agreement in place and both managing directors appear to believe that such an agreement is necessary and makes good business sense. The experience from the rest of the world suggests that neither Royal Mail nor Post Office Ltd could survive for long without such an inter-business agreement. It seems logical that any private sector bidder for Royal Mail would appreciate the good sense of having an agreement in place at the time of sale. It would be an asset, not a liability.
The Minister for Postal Services told the other place that,
“we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled”.—[Official Report, Commons, 12/1/11; col. 357.]
So what is the problem? If the Government have the power at the moment to require the Royal Mail and the Post Office to conclude an agreement or to extend the present one, and they believe they have the power as shareholder to ensure that Royal Mail concludes the longest legally permissible contract before separation, why on earth do we not put it in the Bill and be done with it? It would be very sad if, a few years down the track, the post office network collapses because the new owner of Royal Mail does as we fear. It may seem overly melodramatic to say this, but I do not think the country would ever forgive a Government that passed over the opportunity to save our much loved and cherished post offices.
We believe the Government should do it—as do the noble Lords, Lord Rogan and Lord Laird—and so we support the amendment standing in the names of the noble Lords. Our amendment does not ask for the Government to determine the terms of an inter-business agreement—that would be a matter for the two companies —but to ensure that the agreement is of sufficient duration, which we suggest should be 10 years, so that the people who operate and work in our post offices, most of whom invest their own money in the business, know where they stand.
George Thomson of the NFSP told the Public Bill Committee in another place:
“We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI to build a school or hospital, you would get a 21-year contract. I am not asking for a 21-year contract, but, by God, I am asking for a 10-year IBA contract”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 39.]
Those are strong words, but we firmly believe that your Lordships’ House should listen carefully to those on the front line.
Baroness Wilcox
My Lords, I thank very much indeed noble Lords who have spoken before me. I particularly thank my noble friend Lady Kramer for the exposition that she has just given to sum up with. I shall leave as many of those comments aside because they speak well for what I would like to say. I shall address some of the comments from the Opposition and the Cross-Benchers who moved the amendments.
The issue of the inter-business agreement between Royal Mail and Post Office Ltd is one of the issues which has stimulated the most debate throughout the passage of this Bill, both in this House and in another place. The noble Lord, Lord Razzall, summed up in his words the fact that all of us who have taken part in these discussions wish to see the same thing—this body established within the nation’s life to be continued in the best way possible. But we are going to do it in the way that we think will be effective; we have watched the Opposition try to do it in a different way and it was not effective. We are right to want to ensure the best possible future for the Post Office, which, as many noble Lords have pointed out, is a national institution highly valued by communities up and down our country.
Before I turn to the substance of the amendments, I would like to respond to the comments of the noble Lord, Lord Stevenson, on the 400 long-term temporary closures. There are inevitably changes in the total number of post offices from month to month, as some offices close and others are reopened. In fact, there has been a net reduction of only 58 offices in the last nine months—and this is, of course, constantly in flux. The Government have committed to no new programme of post office closures, as noble Lords have kindly noted.
Your Lordships are of course well aware of the fact that Royal Mail’s business is extremely important to the Post Office. This fact has not escaped us in government either, or the two companies themselves, as you have heard many times in our discussions. As your Lordships will by now be well aware, the chief executive and chairman of Royal Mail have pledged to ensure that the longest contract legally permissible will be in place before any sale. Edward Davey, the Minister in another place, and I have committed to both Houses that we will ensure that this pledge is upheld, and your Lordships have approved an amendment to the Bill to ensure that the report on the disposal of shares in Royal Mail will include details of the ongoing relationship between the two companies.
The new contract between Royal Mail and Post Office Ltd is not yet finalised, and, as I have said before, it serves little purpose to focus on the duration of the contract alone. The contract, which we hope to be ready to be signed next spring, will contain far more complex details, such as pricing and service level agreements, volume commitments and exclusivity agreements. The final nature of all of those details will have a bearing on the longest legally permissible duration of the contract. These details should not be presided over by government, but must be agreed by the two companies and their advisers. They are the experts, they know the businesses best, and it is they, not we in Parliament, who should fine-tune the details of this contract.
When this amendment was debated in Committee in this House, the noble Lord, Lord Young, posed various questions regarding what the longest legally permissible contract actually meant. I wrote to him following that exchange and, as I said in that letter, because the contract will focus on many other factors as well as duration, it is difficult to speculate on how long the longest permissible contract would be. We hope that the contract’s duration could be for as long as 10 years, or even more, but this cannot be finalised until all of the detailed negotiations are complete. The Government could not accept any contract between Royal Mail and Post Office Ltd which might be liable to legal challenge. Without a robust long-term contract between them, both companies would suffer commercially precisely the circumstances that noble Lords are seeking to avoid through their amendments. The Government could also not accept a legislative obligation which might lead to that very situation. As I have said repeatedly, the terms of this contract must be negotiated between those who know the businesses best.
In response to the concern expressed by the noble Lord, Lord Whitty, about the impact that a potential bidder for Royal Mail could have on the terms of the inter-business agreement, I would like to reassure noble Lords that any investor will have no input into these terms. As the chair and chief executive of the Royal Mail has stated, the longest legally permissible contract will be put in place before any investment into the Royal Mail. We will of course ensure that that happens. As I have said previously, what the Secretary of State, and indeed the Government, can and will help to do is to ensure that there is a contract in place between the two businesses before separation, and its duration will be for as long as is legally permissible. But most importantly, government must also help to create the conditions in which both businesses will flourish in partnership with one another.
Let me reassure this House that the separation of Post Office Ltd and Royal Mail will not lead to dangers for the post office network. As my noble friend Lord Razzall, emphasised, operationally, these companies are reliant on one another. Post offices carried out over 3 billion transactions for Royal Mail in 2009, and they will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together. The noble Lord, Lord Stevenson, noted that there are no international precedents for splitting a mail provider and retail arm. The Government are not aware of any international comparisons for the Post Office, which has such a vast branch network, offering a broad range of government, financial and mail services in the heart of communities. Separation from Royal Mail will give the Post Office the chance to focus on growing its revenue and getting the most out of its branch network. It will ensure that each organisation is able to focus more effectively on its own challenges and help to secure a sustainable network. The separation of Post Office Ltd from Royal Mail was welcomed during the Public Bill Committee evidence sessions in the other place by the consumer group Consumer Focus, the current regulator Postcomm, and the independent expert Richard Hooper.
It is of course important too that the Post Office continues to offer the very best possible service to Royal Mail, as well as to other current and potential clients. Our £1.34 billion funding package to the Post Office over the spending review period will ensure that the service provided by post offices is modernised and improved, to ensure that people continue to see their local post offices as the natural and convenient place to access Royal Mail products and that the Royal Mail management continues to see the Post Office as its retail partner of choice. This Government have not given Post Office Ltd such a considerable sum of money for nothing. We will do all we can to ensure that Post Office Ltd has a vibrant future, and continues its valued relationship with Royal Mail. As I have said before, it is primarily by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, I believe that is precisely what it will achieve. As such, I would ask the noble Lords to withdraw their amendments.
Lord Rogan
I thank the Minister for her reply. However, I feel that she could have gone further. Therefore, I wish to test the opinion of the House.