Postal Services Bill
Debate between Lord Skelmersdale and Baroness Wilcox
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.
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.
Postal Services Bill
Debate between Lord Skelmersdale and Baroness Wilcox
Baroness Wilcox
My Lords, we have had a great debate across the Committee, which has been provoked by the noble Lord, Lord Clarke, whose credentials are immaculate in this area. I missed hearing him in the debate on Second Reading because he was not able to be here for it, so we have been able to listen to him today, when he has had the opportunity to put his words on the record. It is a great occasion for us to listen to him. I may not agree with everything that he says, but I believe in the absolute sincerity of what he says, given the background from which he comes.
I share the noble Lord’s desire to ensure that the universal postal service is maintained throughout the United Kingdom and I suggest that that is what binds us all together today. Given that we all want to see the universal service maintained, I suggest that we have no time to waste in getting the finances that we need to ensure that that is possible. It is the overriding purpose of the package of measures set out in the Bill. We need to ensure that the universal service is maintained both for the deliverers of that service and, as we heard, for the customers who need to use it. My noble friend Lord Razzall quite rightly referred to Part 3 of the Bill, which we will discuss in detail in future Committee sessions. It confers on Ofcom a primary duty to protect the universal postal service and gives it the powers to deliver that duty. A disposal of shares in Royal Mail may mean a change in ownership from the public to the private sector, but the obligation on Ofcom to ensure the provision of a universal service will remain.
Lord Skelmersdale
My Lords, perhaps I may briefly interrupt my noble friend. Does that mean that the original purchaser of Royal Mail will be bound by the UPS?
Baroness Wilcox
I think that the answer to that question is yes. In fact I am sure that the answer is yes. The universal postal service is protected by Parliament throughout this regulatory framework, not by the Government’s ownership of Royal Mail. I hope that that gives some comfort to my noble friend Lord Skelmersdale and, if he has the stamina to stay with this Bill through all its stages, I hope that by the end he will feel that he has a lot more comfort than obviously is the case now.
As part of its duties, Ofcom will ensure that the minimum requirements of the universal service as set out in the Bill are upheld. As we know, the minimum requirements are above those set out in the European postal services directive in terms of the requirement to deliver letters six days a week and for a uniform tariff and service to apply. Ofcom is required to report annually to the Secretary of State on its activities, which in future will include how it has performed against its primary duty to ensure the provision of the universal service. The Secretary of State is required to lay that report before each House of Parliament. Therefore, I do not believe that Parliament would be served by an additional report on the future of the universal service at the time of sale.
The noble Lord, Lord Brooke of Alverthorpe, asked what will happen if a privatised Royal Mail no longer wants to provide a universal service. Royal Mail is rightly proud of providing a universal postal service and there is no reason to expect that to change, but in the unlikely event that Royal Mail no longer wishes to provide it, the regulator, Ofcom, will have a primary statutory duty to secure the provision of the universal service and has been provided with the regulatory tools to ensure that the service is maintained. In the first instance, Ofcom would do this by imposing regulatory conditions on Royal Mail that would oblige it to deliver a universal service. Ofcom will also have the power to impose penalties on companies found in breach of the regulatory conditions.
The noble Lord was also concerned that foreign owners could run down Royal Mail. Whoever owns the Royal Mail, as the universal service provider, will still be required to provide that universal postal service. The regulatory regime set out in Part 3 will ensure that. Ofcom, the proposed new regulator, has confirmed that it is satisfied that the powers in Part 3 are sufficient to protect the universal service. We will not let nationalist criteria stand in the way of the right deal for Royal Mail and the taxpayer. Investment is a global business nowadays. For example, around a third of the listed shares in Deutsche Post are owned by UK investors.
The noble Lord, Lord Young, was concerned that a future owner of Royal Mail might lobby Ofcom to reduce the minimum requirements of the universal service. As he will be aware from Clause 33, there can be no such change without an affirmative resolution both in this House and in the other place. This Government have been clear that they have no intention of supporting any such resolution. As we will discuss in later sessions, Clause 33 is a vital new safeguard for Parliament.
Modernisation of Royal Mail is also not directly related to ownership. The company has to modernise whether it is in the public sector or in private ownership. Modernisation does not end with the current transformation plan. If Royal Mail is to succeed and provide our universal service, ongoing modernisation will need to be an integral part of its DNA, so while the current modernisation plan is fully funded, it is clear that Royal Mail will need to go further and faster. Royal Mail therefore requires ongoing capital investment over a long period. Despite the good progress that is being made on the current transformation plans—and here I praise the management and the CWU on that progress—Royal Mail needs upfront cash, which it simply cannot generate for itself at the moment. It needs access to flexible capital, which, given the EU state aid requirements, the Government cannot provide.
Postal Services Bill
Debate between Lord Skelmersdale and Baroness Wilcox
Lord Skelmersdale
My Lords, I would not put it quite as rudely or as crudely as the noble Lord opposite has just done. However, I did suggest in my few words that the draftsmen ought to look at combining Clause 1(1) with Clause 4 and then putting that at the very beginning of the Bill. I noted that my noble friend did not respond to the suggestion, but as I said, I do not expect her to do so now. I am sure she has many more important things to do, such as responding to the amendment moved by the noble Lord, Lord Young of Norwood Green, which I am sure she will do in her usual adequate fashion. All I am asking for is future discussions, and from what my noble friend has just said, I am sure that she would find that acceptable.
Baroness Wilcox
I thank my noble friend and of course I will be happy to speak to him afterwards, at any time that is convenient to him. I should now turn to the amendment tabled by the noble Lord, Lord Young, otherwise we may be here for much longer than we anticipated.
I believe that Clause 1 exposes the real difference between the previous Government’s approach as set out in their 2009 Bill to the fundamental problems facing Royal Mail, and the approach that this Government are taking to secure the company’s future. Setting aside the ownership issue for a moment, I think it is clear to everyone that the powers in the Bill to tackle the pension deficit and regulation are either the same as or very similar to those provided in the 2009 Bill. This is perhaps not surprising as we have based our Bill on the same evidence, that of the Hooper report, as the previous Government. However, we have not simply produced a cut-and-paste Bill. As we will discuss during this Committee stage, we have included new regulatory measures to safeguard the universal postal service and introduced fresh ideas on employee ownership and the potential of a mutual ownership structure for the post office network.
All sides of the House agreed with the analysis contained in Richard Hooper’s 2008 report. We all agreed that the current framework was untenable and that urgent action needed to be taken if we were to secure the universal postal service for the benefit of all postal service users, both business and social.
Richard Hooper’s recent update showed that the situation is now much worse than it was in 2008. In fact, he described the Royal Mail’s current position as being “even more precarious”. The noble Lord, Lord Young, asked about the effect on the value of Royal Mail of prolonged uncertainty. I would say to him that it was the failure of the previous Government’s Bill that has caused prolonged uncertainty for Royal Mail and all other postal operators. That is what is putting the universal postal service at risk.
The Bill addresses those problems and creates a framework that will help to secure the future of Royal Mail and maintain the universal postal service. Part 1 sets out provisions relating to the restructuring of the Royal Mail group of companies. The Government committed in the coalition agreement to injecting private sector capital into Royal Mail, including opportunities for employee ownership. We also said that we would retain Post Office Ltd in public ownership, on which the noble Lord, Lord Young, raised a number of points. We will have plenty of opportunity to discuss the Post Office when we debate those clauses dealing specifically with it.
I turn to Amendment 1. The disposal of shares in Royal Mail will be a commercial transaction. The Government’s objective is to ensure that the transaction represents value for money for the taxpayer and secures the future of Royal Mail. In doing so, our overriding objective is to secure the future of the universal postal service. I cannot understand, therefore, why the noble Lords have brought forward this amendment, the substance of which was fully debated in the other place.
By setting a deadline for a disposal, all the commercial advantage would be given to the buyer if we were selling the business by auction. The buyer would know that the Government were up against a deadline, giving him the whip hand in any negotiation, and all sorts of demands could be made as the deadline approached. The amendment would not therefore allow the Government to ensure that they could get value for money from a sale and secure the best future owners for Royal Mail; in our view, it would do the opposite. When I was on the opposition Benches, I was very keen on sunset clauses in legislation and I am not opposed to them now—in fact, in most cases I encourage them—but the proposal set out in this amendment is simply not appropriate to the circumstances.
A failing of the previous Government’s policy on Royal Mail was that it tried to do too much at the same time by running the legislative and the sale processes in parallel. We have decided to take a staged approach; our first priority is passing the Postal Services Bill to allow the framework for action. The Government will then bring into force the new regulatory regime. Only then will we start the process to introduce private sector investment, including the employee share scheme and the pension solution.
The noble Lord, Lord Young, asked what the Government would do if they could not sell Royal Mail before the end of the current modernisation plan. Through this Bill, the Government are taking the preparatory steps necessary to enable Royal Mail to attract the private capital that it needs. As noble Lords will appreciate, the timing will depend on when we can best secure our twin objectives of the best outcome for Royal Mail and the best outcome for the taxpayer. The Government are focused on ensuring that Royal Mail can attract private investment, not on putting new obstacles in its way.
An integral aspect of the Bill is that it allows flexibility, because that is what any sensible commercial shareholder would retain for themselves. Such flexibility enables the Government to decide when to conduct a disposal of shares and how to do it, either through a trade sale or a flotation. I agree with my noble friend Lord Hunt, who said, as did the noble Lord, Lord Jones, that we want no artificial deadlines. Although I do not agree with everything that the noble Lord, Lord Hoyle, said, I do agree that we want the right price and the right company, and for that we must wait our time until the right moment. I thank my noble friends Lady Kramer and Lord Eccles for their support.
I say to the noble Lord, Lord Christopher, that I hope we will be flexible, get a really good deal for the taxpayer and make sure, as always, that we support the universal service. The proposal in the amendment is, I fear, impractical and would risk the future of the very universal postal service that we are all trying to save. I therefore ask the noble Lord, Lord Young, to withdraw his amendment.