Postal Services Bill

Lord Tunnicliffe Excerpts

Wednesday 16th February 2011 Lords Chamber

[Lord Tunnicliffe]

My Lords, I thank the noble Baroness, Lady Wilcox, for introducing the Bill and explaining the Government's position. I will grasp the first note of optimism from her acknowledgement that the Bill will leave the House improved—which can only mean that she will lend a ready ear to appropriate changes. I, too, look forward to today's debate, and in particular to the maiden speeches of the noble Lords, Lord Empey and Lord Dobbs.

My researchers tell me that the Royal Mail was first made available to the public on 31 July 1635 by King Charles I. That certainly indicates a long heritage, but whether it was an entirely happy start only historians will tell us. Since then, it has delivered the post to homes and businesses across the United Kingdom, and has been run as an essential public service in the public interest. Today's Bill would change all that. It would lead to the total sale of the Royal Mail postal service and its separation from the nation's post office network.

We all recognise that the competitive environment for postal operators has changed dramatically. The impact of technological changes such as e-mail, mobile phones and all the other modern ways of communicating continues to be felt. The worldwide postal market is expected to decline by 25 to 40 per cent over the next five years. Of course, action needs to be taken.

There are a number of elements in this Bill that we broadly support, including the principle of employee share ownership, dealing with the historic pension fund deficit and the transfer of regulation to Ofcom. We also agree that the possible mutualisation of the post office network deserves positive examination. However, the central question that the House must ask today and in the coming weeks is whether the Government have made their case convincingly that the way forward proposed by the Bill is the best one available. Secondly, if Royal Mail is privatised, have they made sufficient safeguards for the public interest, in particular in relation to the universal postal service and the future of the post office network?

We believe that abandoning the commitment to keep Royal Mail as a publicly-owned organisation is wrong. Among other things, it would pose a threat to the universal service obligation and to the future viability of the network of post offices throughout the country.

It used to be said that Royal Mail could not change without an injection of private investment and management. However, an important agreement was reached in March 2010 between the Communication Workers Union and Royal Mail, supporting the £2 billion modernisation plan. Both the CWU and management should take credit for the start that has been made. Sir Richard Hooper acknowledged that corporate experience has been injected, not least through the appointment of a new CEO, previously the head of Canada Post, who seems to have attracted universal praise.

The Government propose rightly to relieve the company of the historic pension fund deficit, worth £280 million per year in annual payments. There is also general agreement that the access prices set for bulk mail sorters have placed Royal Mail at a disadvantage. The company estimates that the value of this is about £160 million per annum. Investment funds are in place to complete the modernisation programme. In these circumstances, the Government should explain the anticipated capital requirement and why a 100 per cent sale is necessary to achieve it.

Alternative measures to raise capital have been proposed by my party in the past, while other mechanisms have been proposed from elsewhere. There has been no explanation of how best value will be secured for the taxpayer. Will the Government publish an independent valuation? What do they intend to do with the sale proceeds? They have not made clear the timing of the changes. In what way do they intend to discharge their obligation for transparency and accountability to Parliament over the nature of the sale and therefore the type of Royal Mail organisation that will emerge?

The Government have made it clear that they are not interested in who the purchaser is, and have no objection to a sale to a foreign owner. Is there anyone to whom they would not sell? Will privatisation be by a general sale of shares, or by sale to another postal company or to a private equity group?

I turn to the universal service obligation. As the noble Baroness said, Clause 30 sets out the terms of the universal postal obligation. It includes letter and packet delivery, letter and packet collection, affordable and uniform tariffs, registered items, insured items, services to the blind and partially sighted, and legislative petitions and addresses—so far, so good. The Bill proceeds to provide for changes to the level of the USO. Ministers have said they intend to maintain the USO. I do not question their good intention, but why does the Bill not only permit but require Ofcom to review the level of the obligation after only 18 months? The Bill also provides, in certain circumstances, for more than one universal service provider. Ministers may protest they do not intend this, but why does their Bill provide for it? The regulatory framework encompassing the universal service obligation is a very important issue. We will need to consider carefully in Committee whether the regulatory framework designed for a publicly owned company remains as well designed for a privatised Royal Mail.

The Bill breaks the umbilical link between Royal Mail and the network of local post offices, prized by residents of communities up and down the country. It does so in a way that threatens the future of thousands of local post offices. I have no need to emphasise to Members of this House the social value of the nation's post offices. Local post offices are at the centre of many communities. Many thousands of pensioners still collect their pension from their local post office. A nearby post office is vital for many people with mobility problems or some form of disability. In many rural areas and poorer urban districts, the local post office is vital.

The postal service is also vital to British business, because 84 per cent of small businesses use Royal Mail to dispatch parcels or express items. The local post office is the usual point of access for them. Again, Ministers protest that they wish to maintain the current network of post offices. They have continued the previous Government’s social network subsidy to maintain a network of 11,500 post offices in four years’ time. For that, we commend them and thank them. However, there is no guarantee that after that point a privatised Royal Mail will have to use the current post office network to its full extent. As Consumer Focus says,

“following privatisation of Royal Mail, subsequent contracts would require a competitive tender process with no guarantee that [Post Office Ltd] would retain this contract”.

We would like to hear from the Government what guarantees can be given about the future of local post offices, not just in the next four years but in the medium and longer term. What are they doing to build up the government business that is done through the Post Office? Why was the case for a post bank rejected? The National Federation of Sub-Postmasters has supported the principle of the Bill but it has stated that,

“ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy”.

Part 4 of the Bill sets out the provisions for taxpayers to step in through administration if a privatised Royal Mail becomes insolvent. That should put paid to the idea that, once Royal Mail is privatised, the taxpayer will no longer need to worry about or bear any expense for failure. It seems that we are to privatise profit but perhaps nationalise risk.

This is a very serious Bill. It must be considered seriously and in detail in the weeks ahead. Whatever the good intentions of Ministers and the leadership of Royal Mail—and I do not doubt their good intentions—there is no guarantee that the same people will be in place when the crucial decisions are made. We cannot simply rely on good intentions. If the Bill is flawed, as we believe it is, sufficient protection will not exist.

So far, the Government have declined the invitation to secure a 10-year inter-business agreement, which would underpin the link between Royal Mail and the post office network. They have rejected calls to strengthen the commitment to the post office network or the universal service obligation. The Government have still not made the fundamental case for the full-scale privatisation that they have proposed; nor have they addressed the concerns that exist. Like the Minister, I look forward to the Committee stage, when we will probe and scrutinise the Bill most carefully.