Postal Services Bill

Lord Skelmersdale Excerpts

Wednesday 16th March 2011 Lords Chamber

[Lord Young of Norwood Green]

My Lords, Amendment 24B would strengthen reporting requirements on the Post Office to reflect also on the use of the network by the universal service provider and how this may have changed in the preceding year. Once again, Clause 11 requires the Post Office to send a report to the Secretary of State each year about its network of post offices. As I have previously said, the network must give details of the number and location of post offices in England, Wales and Northern Ireland. It must also give details of the postal services, the services provided under arrangements with a government department and other services provided by the Post Office. It must further give details of the accessibility.

I will not repeat what I said on the previous amendment, but the reporting arrangements in Clause 11 are important and wide ranging. However, they can be helpfully strengthened by Amendment 24B to reflect the challenges that the Post Office will face following separation from Royal Mail. It is vital that due consideration is given as to how the universal service provider—currently Royal Mail but following the successful passage of this Bill potentially one or more alternative postal operators—will use the post office network when it ceases to be part of an integrated company.

Many stakeholders have grave concerns regarding the risk to the post office network from the proposals in the Bill to separate Post Office Ltd from Royal Mail. The Post Office is dependent on Royal Mail business for its survival. One-third of its revenue and one-third of sub-postmasters’ pay is generated from selling Royal Mail products and services. If the two businesses are forced to separate, a privatised Royal Mail will be, or could be, likely to look elsewhere for retail outlets to sell its products. There is no guarantee it will use post offices to the same extent.

The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees use of the Post Office as its retail arm. When it comes to be renegotiated a privatised Royal Mail will look to reduce costs, possibly by using other outlets such as supermarkets or high street chains instead of post offices. The Government will not undertake to extend the current five-year IBA to 10 years. It is on those grounds that we believe that Clause 11 needs strengthening as per the amendment. I beg to move.

[Lord Skelmersdale]

I am rather surprised that the noble Lord did not seek to group this amendment with the amendments that have just been discussed because, to a great extent, he is covering the same point, although I noticed that he brought the inter-business agreement into his comments towards the end. On that basis, I rather hope that the Minister will to a great extent repeat the answer that she gave to the last group of amendments and in particular her reference to Clause 11(4), which gives the Secretary of State the power to ask the reporters preparing the Post Office report to produce information on any subject relating to the post office network that he believes is necessary at a particular time. This is likely to vary from year to year. I therefore do not think that it is particularly suitable to put this in primary legislation.

[Baroness Wilcox]

I thank the noble Lord, Lord Young, for moving the amendment and my noble friend for pointing out that it is very similar to the amendments that I spoke to just now. I will see if I can again convince the noble Lord that my response will be a good answer for him to take away and think about.

As we have discussed, the annual report is an important means of achieving transparency around the Post Office network. It is, of course, also right that an annual report on the Post Office network should give details of the postal services that the Post Office provides. That is why we have included this requirement specifically in Clause 11(2)(b). This section requires the annual report to contain details of,

“the postal services … that are provided at … post offices”.

We would expect this to include any postal services that the Post Office provides on behalf of the universal service provider. The income that the Post Office receives from mail and the services that it provides for Royal Mail are, of course, vital and sub-postmasters highly value the footfall generated by mails customers. Indeed, Royal Mail and the Post Office are natural partners and we envisage their relationship continuing for years to come. There is an overwhelming commercial imperative for the two businesses to work together. Indeed, the chief executive of Royal Mail, Moya Greene, commented on the strength of the network and said that it would be “unthinkable” that there would not always be a strong relationship between Royal Mail and the Post Office.

However, we know that the projected decline in letter volumes means that postal services will not be a growth area for the Post Office, despite potential opportunities in parcels. That is why the Post Office is developing new revenue streams, as detailed in our policy statement. We should all be clear that the majority of the Post Office’s income already comes from other sources, in particular financial services, government services and telephony.

The latest Postcomm report on the network of post offices in the UK contains a breakdown of the percentage of Post Office Ltd’s revenue derived from mails, including postal services, as well as financial services, government services and telephony. This information is shown on an annual basis from 2003-04, which allows you to see the change not only since the preceding year but over several years. This information, currently included in the Postcomm report, is exactly the type of information that we would wish to be included when the responsibility for the report transfers to a Post Office company. However, I understand that the continuing relationship between the Post Office and Royal Mail is an important issue for noble Lords and, as such, I would be happy to take this suggestion away to consider. For the time being, therefore, I ask the noble Lord to withdraw the amendment.

--- Later in debate ---

[Lord Young of Norwood Green]

In response to the noble Lord, Lord Skelmersdale, there was no intention on our part to have these amendments dealt with separately. We did not have a request to group them, but I must admit that although they cover different areas, they are associated with one another. I shall keep this contribution brief.

Amendment 24E aims to strengthen reporting requirements for the Post Office to ensure that the level of access to post offices and post office services for both small and medium-sized businesses is monitored. Given the importance of that relationship, which has been recognised by all sides of the Committee, we are focusing on this particular aspect. The amendment seeks to strengthen Clause 11 by recognising that medium-sized businesses as well as small ones are highly dependent on post office services and therefore should be included. Small and medium-sized enterprises account for 99 per cent of all businesses in the UK. They provide 59.8 per cent of private sector employment and 49 per cent of private sector turnover. SMEs are indeed the backbone of the UK economy, and hence it is our view that this amendment would make an important contribution towards strengthening Clause 11. I await with interest the Minister’s response. I beg to move.

[Lord Skelmersdale]

The noble Lord is of course absolutely right. As the director of an SME myself, I sympathise exactly with the words he has just enunciated. It therefore occurs to me to ask my noble friend why Clause 11(3)(c) only refers to small businesses. It seems illogical.

[Lord Young of Norwood Green]

I suspect that the noble Lord is right. I shall need to check it, but I tend to agree with him at the moment. However, I do not want to delay the Committee.

[Baroness Wilcox]

My Lords, I agree with the aim of the noble Lord, Lord Young, that the annual report on the post office network should provide information about the accessibility of the company’s post offices to small and medium-sized businesses. I do not know that I can answer the question put by my noble friend Lord Skelmersdale; I surely will, but not immediately.

[Lord Skelmersdale]

My Lords, does that mean that my noble friend is, for the second time, going to take this away and look at it rather more favourably than some of the other things we have heard over the past couple of days?

[Baroness Wilcox]

Yes.

We know that businesses value the post office network. According to research by the Federation of Small Businesses, almost 20 per cent of small businesses visit the post office every day and nearly half visit twice a week. So I share the concern and I agree with the intention of the amendment. But, as was pointed out by my colleague the Minister for Postal Affairs in the other place, Clause 11 already encompasses what I think noble Lords want it to cover.

First, we should be clear that there is no universally recognised definition of what constitutes a small or medium-sized business. In the United States, the term “small businesses” generally refers to businesses with fewer than 100 employees, while “medium businesses” refers to those with fewer than 500 employees. In the United Kingdom, SME statistics define a small business as one with 10 to 49 employees and a medium business as one with 50 to 250. If we are going to be very technical here, and one can often be very technical when it comes to legislation, it could even be argued that since the UK SME statistics define a “small business” as a business with between 10 and 49 employees and a “micro business” as one with between one and nine employees, both micro businesses and sole traders could be excluded from the definition in Clause 11(3), but that is not the Government’s intention. After all, 95 per cent of SMEs have fewer than 10 employees and we know that post offices play a particularly valuable role for this group.

We therefore intend the term “small business” here to include all businesses with fewer than 250 employees in line with the broader UK statistical definition of an SME. I am quite happy to make that commitment to your Lordships, and of course if the Secretary of State was not satisfied that the Post Office was providing broad enough information to meet this requirement, he could direct the Post Office under the powers of Clause 11(4) to provide any additional information he felt necessary. I do hope that this clarification will reassure the noble Lords, and I would ask the noble Lord, Lord Young, to withdraw his amendment.