Consumers: Low-Cost Flight Information

Lord Young of Norwood Green Excerpts

Monday 27th February 2012 Lords Chamber

[Lord Young of Norwood Green]

My Lords, I thank my noble friend Lord Mitchell for giving us the opportunity to debate this interesting issue. I must admit to feeling a bit inhibited about contributing to the debate as I do not have a property near Perugia—which is a matter of deep regret, as it is somewhere I have visited—but I will, nevertheless, do my best. It is an important issue and so we are grateful not only to my noble friend Lord Mitchell but to Which? for bringing the super-complaint to the Office of Fair Trading.

The complaint isolates some of the key issues and I will quote from it. It states:

“Which? considers that the following features individually, or in combination, significantly harm the interests of consumers: The practice of advertising incomplete or partial prices, by, at least, omitting surcharges for payment method from advertised prices, which, due to behavioural biases, means consumers are unable to effectively and efficiently shop around and make like-for-like comparisons”.

Bearing in mind that we are talking about trying to book online, that is a very valid point. The complaint refers to:

“The lack of reasonably or practicably available alternatives to avoid or mitigate surcharges for payment method”.

Again, all speakers in this debate have demonstrated that that is the situation. The complaint also mentions:

“The conduct or practice of retailers that impose a surcharge for payment method, hidden or not, that exceeds a reasonable estimate of the costs for processing consumers’ payments”.

That has been amply demonstrated. The complaint states:

“These features lead to widespread detriment, including: Price comparisons being much harder so weaken the competitive process between retailers … Consumers making poor choices between competing passenger travel services and between other alternative goods and services from which they may choose … Consumers spending more time and money searching the market than should be the case … Consumers often being misled over actual prices and being frustrated at being asked to ‘pay for paying’ … Paying for goods or services is not, in Which?’s view, an additional or optional feature of a product but a necessary pre-requisite intrinsic to the conclusion of a contract. Even when the retailer offers a number of alternative payment methods, that retailer retains a monopoly on the setting of the prices that the customer will pay for different payment methods”.

That has also been demonstrated during this debate. It does not matter which way you turn, you will be surcharged whether you use a debit or credit card. We know that if you use a debit card, the transfer is almost instant. Which? in its super-complaint demonstrated beyond any doubt that such practices were detrimental to the interests of consumers and that there certainly was not a reasonable marketplace.

Which? went on to state:

“If any additional charges are to be introduced during the transaction, for payment method or other mandatory services, these should reflect only the reasonable additional costs incurred by the retailer as a result of the specific choice of payment method”.

Again, we have heard that the charges do not reflect the additional costs but seem to be an opportunity to bump up the total cost of the booking. If consumers were fully aware, they would be able to,

“switch away from retailers that did not follow this practice,”

of revealing the true costs. Which? continued:

“However, under real world market dynamics in a number of markets (including travel markets) this does not occur, and long term consumer detriment results”.

I refer to the comments of noble Lords. My noble friend Lord Mitchell talked about the iniquities of budget airlines although I have to say that it is not necessarily only budget airlines that use such practices. We have had further reports that airlines such as Lufthansa and Swissair have decided to charge for using credit and debit cards. It is not just the budget airlines, although I know that we have focused on airlines that are, in theory, low cost. The noble Lord, Lord Black of Brentwood, brought that to our attention.

The noble Lord, Lord Alderdice, gave an analysis of how the low costs were achieved. He might also have mentioned low pay and conditions of staff, although I did not hear him say that. It is another intrinsic factor in achieving these prices. Like the noble Lord, I was hopeful when the Government, in a letter to the chief executive of the Office of Fair Trading, seemed to be optimistic. They referred to the consumer rights directive that is supposed to be a pan-European solution and stated:

“It requires that traders limit payment surcharges to the costs incurred by the trader in respect of a given means of payment. The Government will therefore consult, early in 2012, on draft legislation to bring forward the provision of the Consumer Rights Directive relating to above-cost surcharges in advance of the transposition deadline of June 2014”.

We seem to have slipped a bit from that seemingly admirable move on the part of the Government. I would therefore welcome the Minister’s response on why it does not look like consumers will see much benefit or progress before 2014.

I have dealt with what I consider to be the key issues, given that noble Lords have already set out the detail of the major problems in relation to online booking for low-cost airlines. I await the Minister’s response.

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[Earl Attlee]

My Lords, I think it is probably better if I concentrate on answering as much as I can and, if necessary, write to my noble friend.

Aviation is fundamentally an international business. The Government do not intend to introduce tighter restrictions on airline pricing policies in isolation. The European Commission has undertaken a fitness check on the fare transparency requirements, during which it has taken evidence from airlines, the travel industry, enforcement bodies and consumer groups. Its findings have yet to emerge but we understand that the evidence suggests that the rules are not enforced consistently across Europe.

In conclusion, we take this matter seriously. I am grateful to the noble Lord, Lord Mitchell, for posing his Question this evening.

[Lord Young of Norwood Green]

I do think that the noble Earl should clarify the situation because now I am confused. I thought that he had given us a more helpful answer when he said that the consultation on the payment surcharges provision would take place during 2012 and that the new rules would be introduced in 2012. However, the last comment that he made in response to the noble Lord, Lord Alderdice, left us somewhat confused. Will the Minister clarify whether the rules are likely to be introduced in advance of the European directive in 2014? What timetable are the Government working to?

[Earl Attlee]

The intention is that the Government will see the effect of these new regulations as early as possible. My speech was carefully crafted but if I have missed anything out I shall of course write to noble Lords to clarify any details as necessary.

Cyclists: Accidents

Lord Young of Norwood Green Excerpts

Wednesday 8th February 2012 Lords Chamber

[Earl Attlee]

My Lords, the noble Lord makes an important point about the need for the department to approve traffic signs. It is important that the traffic signs are consistent right across the United Kingdom to avoid a plethora of different designs of traffic signal, which would be very confusing to motorists.

[Lord Young of Norwood Green]

My Lords, does the Minister agree that, without trying to lay blame on cyclists or lorry drivers, we want to promote safer cycling and a greater awareness among lorry drivers? I venture to suggest that the problem is not just in London, although I cycle practically every day so I am aware of it. For the Minister’s benefit, I can say that the Paris experiment is about allowing cyclists to go through red lights where the situation is safe, so that will be interesting. Finally, could he give us any information on the number of accidents where wearing a cycle helmet would have improved the chances of a fatality not occurring?

[Earl Attlee]

My Lords, the Government encourage the use of cycle helmets but we think it undesirable, as did the previous Administration, to make them compulsory because this could have the unintended effect of reducing cycling despite its undoubted health benefits. On the question of turning left, my noble friend Lord Spicer has an Oral Question about left turns coming up shortly. As part of my research on that, I have just had a working lunch with the chief examiner of the Institute of Advanced Motorists.

Cycling: Accidents

Lord Young of Norwood Green Excerpts

Thursday 8th December 2011 Lords Chamber

[Earl Attlee]

My Lords, the Question is essentially about cycling, and in respect of offences, I have already said that education is more important than enforcement, especially with youngsters. Frankly, it is not realistic to issue a fixed penalty notice to a 10 year-old.

[Lord Young of Norwood Green]

My Lords, as someone who cycles into the House every day, I cannot help feeling that I could paraphrase George Orwell by saying that this sounds like, “Four wheels good, two wheels bad”. I experience many irresponsible motorists on my journeys. There are motorists who think it is okay to overtake on a humpbacked bridge and those who think it is okay to go on the wrong side of a traffic island to overtake, not to mention the motorist who kindly almost ran me over on a roundabout earlier this week. Does the Minister agree that we should be encouraging more people to cycle, given that we want a low-carbon economy, and that we should also be encouraging responsible cycling and driving?

[Earl Attlee]

My Lords, I absolutely agree with every word the noble Lord has said. I encourage all noble Lords and motorists to regularly read the Highway Code because the contents do change.

Postal Services Bill

Lord Young of Norwood Green Excerpts

Wednesday 4th May 2011 Lords Chamber

[Baroness Turner of Camden]

My Lords, I rise to support my noble friend’s amendment. As he rightly says, the new clause that he is presenting to the House would set a restriction on the sale of shares in an initial public offering to 30 per cent of the value of an RM company within the first year of the clause coming into force. The text of the Bill places no constraints at all on what the Secretary of State may do. It is true that he has to report to Parliament, but that is after the decision has been taken. No constraints at all are placed on what he may or may not do. That is unfortunate because we are talking about what is after all a major public institution, and it is very important to ensure that it is not underpriced. It is important to avoid a scandal whereby a valuable part of our national infrastructure is underpriced. My noble friend has set this out in detail. The new clause would be an important addition to the Bill. We need to ensure that some constraints are put on what the Secretary of State may do when, and if, the Bill eventually becomes law.

[Lord Young of Norwood Green]

My Lords, I support the amendment in the name of my noble friend Lord Lea of Crondall. It provides for the disposal of shares to take place in tranches or batches, rather than all at once. The Government have not set a clear timetable for the sale, 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 postal competitor, which may raise competition issues. The Government have not explained whether they would sell the whole company at once, with all the risks of selling cheaply, or whether they would be prepared to sell in tranches.

There is a huge amount of evidence, of which we have heard some details from my noble friend Lord Lea, that when privatisations have taken place, the value for which the businesses were sold was too low. That has been most clearly demonstrated when a general sale of shares has taken place and the shares traded. It is easy to see what price they traded at and how that compared with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that shares should have been sold at a higher price. The taxpayer has lost out and someone has made a successful profit as a result.

A number of examples were given by my noble friend Lord Lea. I should also mention other sales. The sale of Associated British Ports was 35 times oversubscribed and the share price rose by 23 per cent on the first day of trading. Amersham International sold for £71 million and 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”.

That is what we should be concerned about. The report recommended considering sales 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 by 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. There was a similar situation during the sale of Powergen, whose shares rose by only 3 per cent in the second-tranche offer.

The amendment proposes that shares representing no more than 30 per cent of the value of the business can be transferred in the first year after the Act comes into force. I hope that the Minister can give us a reasonable assurance that serious consideration will be given to the danger of a sale that does not take place in tranches, and that the Government will be prepared to address this issue. I look forward to her response.

[Lord Borrie]

My Lords, I apologise for not rising quickly enough for my noble friend on the Front Bench to notice that I wished to speak. I do so now because my noble friend Lord Lea of Crondall made a practical, reasonable and strong case for his amendment. We are not at this stage of the Bill discussing or arguing about whether there should be a sale of Royal Mail. We are discussing the practicalities of such as sale. We were all around in some way or another during the 1980s and 1990s, and there is no doubt that when industries were privatised, they were often sold off under value. That has been well recognised after the event, if it was not adequately recognised as being likely before the event.

The practical purposes of the amendment are to ensure that we have an initial public offering, an IPO, of the shares, and that they will be offered in tranches. My noble friend is not rigidly proposing any particular dates or percentages, but in any amendment he tables he must put forward something that is reasonably clear. If an improvement can be made on that, there is no doubt that he would be willing to accept it. However, he wants, and we all should want, a practical procedure for ensuring that the public does not get an undervalue. There is to be a sale. Let the public have a good return on that sale, and that is what the amendment is all about.

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Moved by

[Lord Young of Norwood Green]

2: Before Clause 2, insert the following new Clause—
“Royal Mail companies to be publicly owned
(1) Each Royal Mail company must at all times be publicly owned.
(2) Accordingly—
(a) any issue or transfer of shares in a company will have no effect if it would cause a Royal Mail company to cease to be publicly owned, and(b) any issue or transfer of share rights to a person will have no effect if the acquisition by the person of the shares to which the share rights relate would cause a Royal Mail company to cease to be publicly owned.”

[Lord Young of Norwood Green]

My Lords, in rising to move this amendment I cannot help reflecting that last Friday the vast majority of the nation was enthralled by the marriage of Prince William to Kate Middleton, now the Duke and Duchess of Cambridge. Even those who have doubts about royalty as an institution could not help but wish the young couple well. One of the ways in which the nation celebrated the wedding was through a series of special stamps featuring the royal couple during their engagement, and now I understand that stamps are to be issued featuring the wedding itself. What a fitting way to celebrate this royal occasion, through commemorative stamps issued by Royal Mail—and I stress Royal Mail. It is royal because it was founded by the monarch more than 350 years ago; opened to the public during the reign of Charles I, it has operated as a public service ever since. The Bill before us marks a momentous and historic change—it is an iconic Bill.

In Clause 1 the Government have made it clear that they propose to sell off 100 per cent of Royal Mail, albeit with up to 10 per cent of shares held by employees. The Royal Mail Group has an annual revenue of some £9 billion. Royal Mail itself has an annual turnover of some £6.5 billion and employs more than 155,000 staff. That is impressive. However, this privatisation represents something more: the sale of one of the nation’s oldest and most cherished enterprises.

The Royal Mail is a great public institution that has a fine history in the development of the culture, social cohesion and economic strength of this nation, and that still today provides a vital public service. We should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country's development as the railway or the electricity grid. It was an early information superhighway—a social network, in fact, ahead of its time.

As for the modern day, Richard Hooper described Royal Mail and the service it provides as,

“part of our economic and social glue”

that binds communities together. I think that he was absolutely right. Many Members of this House have praised the work of Royal Mail and the social value of the country’s 11,900 local post offices, but let us also remember that despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, Royal Mail still delivers some 70 million letters a day to the 28 million homes and businesses of the United Kingdom. The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard. I am sure that the whole House appreciates that regardless of whether they support the move.

Referring to the Postal Services Bill in 2009, the noble Lord, Lord Hunt, said that all those on the Front Benches were in favour of it. Indeed they were. However, I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned, which meant that it must be in overall public ownership.

The Postal Services Act 2000, still in force today, permits joint ventures between Royal Mail and private companies. Though the 2009 Bill envisaged a minority private-sector partner, majority ownership would remain within the public sector. Neither the 2000 Act nor the 2009 Bill permitted 100 per cent privatisation, which the Bill before us today proposes. The amendment that we have tabled reinserts the original intent of the 2009 Bill that each Royal Mail company should remain in overall public ownership, with the majority of the company in public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time, and indeed the Liberal Democrats, supported that proposition. At the time, there was broad consensus that Royal Mail should remain in overall public ownership, with the possibility of a joint venture or a minority private sector partner but, I repeat, not 100 per cent privatisation of Royal Mail.

We might find a clue in the 2010 general election manifestos of the two parties that came together to form the coalition Government. If you searched in the Conservative or Liberal Democrat manifestos of 2010 for the privatisation proposals in the Postal Services Bill, you would search in vain. Even the coalition agreement speaks cryptically of introducing private capital into Royal Mail, but does not say that that would mean 100 per cent privatisation. There was no Green Paper or White Paper to pave the way for this Bill, but our debates on Royal Mail have been usefully informed by two reports produced by Richard Hooper’s panel in May and December 2008 and by him, sitting alone this time, being asked by the current Government to review his work in 2010.

We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year, Royal Mail experienced a drop of 7 per cent in letter volume. Other operators taking advantage of liberalisation and of what are now regarded as generous terms for access to Royal Mail networks have been taking over upstream business faster than expected. Royal Mail’s competitors have already won more than 60 per cent of the upstream, pre-sorted bulk-mail market and deliver their customers’ mail into the Royal Mail system for final delivery. The pace of technological change continues apace through e-mail, web-based advertising, text messaging, mobile phones and all the other means we have of communicating with each other. Other developed countries are facing the same issues. The worldwide postal market is expected to decline by 25 per cent to 40 per cent over the next five years. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have been recounted.

There was therefore a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper’s report entitled Modernise or Decline recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in the structure of Royal Mail: the injection of private capital and the involvement of private sector management. However, he rejected full privatisation, declaring:

“This option would only be appropriate and feasible if modernisation had been completed”.

He concluded:

“In short, we believe that partnership is the only approach which can deliver Royal Mail’s … universal service”.

At that time, there was a wide degree of consensus in this House about the nature of the action that needed to be taken. Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations. There was agreement that regulatory oversight should be by Ofcom dealing with the wider world of communications rather than by a body restricted to the postal sector only. There was consensus that access pricing needed to be addressed, which is still a live issue.

Richard Hooper's 2010 report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change, given the changes that had already taken place. It states that:

“The specific need for corporate experience is reduced today”.

He praised the progress that had been made by Royal Mail’s management and by the CWU in adopting a ground-breaking modernisation agreement, which is proceeding and has done significantly well.

The chief executive of Royal Mail, Moya Greene, giving evidence to the Public Bill Committee in another place on 9 November, said:

“I look at what Royal Mail has been able to do in just two short years, when they finally got access to capital, and it has been amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs”—

hand-held personal digital assistants to help with tracking and tracing postal items—

“for all of our letter carriers. We have been able to introduce 10 new world-class mail sites. I invite you all to come and visit them—they are now being recognised internationally as some of the best mail processing centres in the world”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 8.]

Hooper maintained his stance on those issues, but he came up with a different recommendation on the future of Royal Mail in proposing a 100 per cent sale. There are a number of elements in this Bill that we would broadly support, including employee share ownership. The possible mutualisation of the post office network deserves positive examination. We agree with the recommendation of Sir Richard Hooper, this Government and others that the historic pension fund deficit must be dealt with. We agree that regulation should move to Ofcom, but we fundamentally disagree with the 100 per cent privatisation of Royal Mail.

Although Richard Hooper recommended the 100 per cent sale of Royal Mail in his 2010 report, he seemed less sure in giving oral evidence recently. On 11 November 2010 he said:

“The important point I want to make is that private sector capital is needed in this business—it is needed urgently, it was needed two years ago and it is needed now. Whether it is a minority or majority shareholding, I would prefer to leave that to the political process”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 108.]

We probably endorse that view, but it is an interesting shift from that previous rather firm statement.

The debate over whether to privatise Royal Mail is about what kind of postal service the public want. We all want a strong, universal, six-deliveries-a-week, one-price-goes-anywhere service and a network of post offices at the heart of our communities. The universal postal service is a public service of vital infrastructure that supports the entire UK economy. Though the postal market might be changing, it remains central to businesses in the UK.

A survey by the Federation of Small Businesses conducted by ICM found that 84 per cent of small businesses use Royal Mail to despatch parcels and express items; 88 per cent of small businesses send post every day; and 59 per cent deliver goods and services by mail. Clearly it is a vital part of our business community. If we are to deliver on growth in those local communities and encourage small businesses and entrepreneurial activity, the Post Office will be at the heart of that success. There are many similarities between the Bill that we proposed in 2009 and the Bill before us today, but there are also glaring differences. Moving from overall public ownership to 100 per cent privatisation of Royal Mail makes a massive difference. All that has been cast aside by the Government.

Our Bill was a proposal for partnership. This Bill is a proposal for privatisation. We were in favour of employee shares, but in a different context. It is interesting that the majority of incumbent postal operators in western economies remain publicly owned. The United States, Canada, Australia, France, Italy, Spain, Switzerland, Ireland, Finland, Israel, Japan and Norway have all retained fully publicly owned postal services, so this is a big and fundamental change. Some would say that it is a bit of a leap in the dark.

Richard Hooper’s underlying point, which I do not fundamentally contest, is that additional access to capital is necessary, and that capital might well need to be private capital. However, that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government members need to justify and validate that stance.

Royal Mail already has a substantial modernisation programme that is worth some £2 billion. It has reached an agreement with the workforce to implement modernisation, which everyone giving evidence to the Bill Committee in another place confirmed was an important landmark agreement and, as I have said, is making substantial and significant progress. Royal Mail’s modernisation programme is fully funded and expects to make normal profit levels by the end of the programme in 2012-13. Furthermore, it will benefit from the Government’s proposed action on pensions and hopefully from changes to regulation, which will provide a more substantial buffer during the current difficult economic climate.

We also need to look at the consequences of 100 per cent privatisation. It is at the heart of our concerns about the future of the universal postal service and the future of the nation’s post office network. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business that is burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of the universal service. Noble Lords might recall that Pieter Kunz, the managing director of TNT, said that the universal service obligation was,

“a kind of Jurassic Park and we should get rid of it”.

Clause 30 sets out the terms of the universal postal service obligation, which include the requirement to collect and deliver mail six days a week at one price anywhere in the country. The USO has other elements, including packet delivery, letter and packet collection, affordable and uniform tariffs, registered and insured items, legislative petitions and addresses. It also includes, as we agreed during the course of the last Bill, services for the blind and partially sighted. We know from the contributions of the noble Lord, Lord Low, how much they are valued, but this Bill, particularly in Clause 33, proceeds to provide for changes to the level of the universal service. Later we will look at the ways in which this Bill might deliberately or inadvertently open the door to the diminution of the universal service.

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[Baroness Wilcox]

My Lords, Amendment 2 seeks to keep the Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009. As I said earlier in response to Amendment 1, the difference between the position of this Government and the previous Government is that we do not believe it is necessary for the Government to retain overall ownership of Royal Mail. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the universal postal service, and that is what we are committed to doing.

The noble Lord, Lord Young, questioned the Government’s mandate for the Bill. The Liberal Democrat manifesto was explicit about the need for private sector investment and employee shares. The coalition agreement was explicit that:

“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.

The Bill does exactly what we said we would do. There are several reasons why we should not seek to retain Royal Mail in public ownership. I covered these at length in Committee but, to summarise: first, the Government cannot provide capital fast enough and any funding we provide has to be cleared by the EU under state aid rules. My noble friend Lord Jenkin of Roding spoke most eloquently from his past experience in support of that. Secondly, limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company.

The noble Lord, Lord Young, asked about the provision to amend the minimum requirements of the USO in Clause 33. Again, I will come to those issues when we discuss his Amendments 65 and 66. I ask the noble Lord to withdraw his amendment.

[Lord Young of Norwood Green]

My Lords, I listened carefully to what the noble Lord, Lord Jenkin, said. I remember that occasion well, given my interests at the time and the continuing interest which I declared on a previous occasion. As I said, we do not seek to oppose the injection of private capital. Interestingly, there was almost unanimous support for the 2009 Bill, which applied the same formula that I applied to the House today. I hear the points made by the Minister on private sector investment but it is not quite true that it said “100 per cent privatisation” in either the coalition agreement or Liberal Democrat manifesto; I noticed that those were not the words that she used. I stick by my original assertion that this is new territory. It is an important and fundamental decision and one on which we should test the opinion of the House.

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Moved by

[Lord Young of Norwood Green]

3: Clause 2, page 1, line 15, at end insert—
“( ) Before making a decision referred to in subsection (1), the Secretary of State shall lay before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, and shall make available to the Public Accounts Committee of the House of Commons an independent overall valuation of the business.”

[Lord Young of Norwood Green]

My Lords, before I get on to this amendment, one problem with quoting when you have the author of the report in the Room is the danger of being corrected. I feel that I owe an apology to Richard Hooper, who said to me that he studiously avoided mentioning 100 per cent privatisation in his more recent report, for which error I humbly apologise. I wanted to put the record straight—before I see him in court.

The ability of Governments to value a utility accurately at the point of its privatisation is mixed. The first two large privatisations of the 1980s, British Gas and British Telecom, saw the share values of those businesses rise quickly following privatisation. That was of course the objective then; privatisation had to achieve legitimacy and the Government of the time was about creating a shareholder democracy. However, our economic needs now dictate that the Government cannot be so generous towards shareholders if privatisation goes ahead in the form of a share sale. They should set a share price for Royal Mail that properly reflects its valuation. As the noble Lord, Lord Lea, said in Committee—he reiterated this view in today's debate—the public have on many occasions not got a particularly good deal out of privatisations.

Ministers have been coy about the value of Royal Mail. Estimates have ranged from £700 million to £7 billion but the managers and employees who stand to gain 10 per cent of the value of the business will be particularly keen to know whether the upper or lower ends of the estimates are correct. They will want to know that the Government have undertaken a forensic and accurate valuation of the business prior to putting it up for sale. In Committee, my noble friend Lord Stevenson made a strong case for Parliament to receive a report on the valuation of Royal Mail. We believe that it is wrong to ask Parliament to give approval for the disposal of Royal Mail while denying it the powers to scrutinise the effectiveness with which the Executive go about their tasks in this regard.

Amendment 3 seeks an independent valuation of Royal Mail to be made available to the Public Accounts Committee prior to any sale of the business. Such a valuation can be received and scrutinised by that committee in full commercial confidence. The PAC and other committees regularly receive restricted or confidential briefing. Parliament has a long tradition of receiving evidence in confidence. If necessary, the PAC could call the Minister to give evidence in camera but any parliamentary body tasked with ensuring good governance in this area would want to be reassured that an effective valuation of the business has taken place. That would include an assessment of its assets and liabilities, along with the proposed regulatory regime and how that would impact on its future prospects.

The coalition Government make a strong case for transparency in government. We are able to access limitless information about government and local government spending. Freedom of information laws and parliamentary questions and debates are all there to oil the wheels of our democracy. As another great historic public institution sadly shrugs off the blanket of public ownership, it is only right that the people who once owned it are allowed to know how the Government have come to their conclusions of the value of that business.

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[Baroness Wilcox]

My Lords, Amendments 3 and 13 seek to place additional reporting requirements on the Secretary of State, while Amendment 5 would introduce additional parliamentary procedures before there can be a disposal of shares in a Royal Mail company.

Amendment 3 would require the Secretary of State to report to Parliament how the value will be assessed, and to make available to the Public Accounts Committee of the other place an independent valuation of the business. As we debated in Committee, there are incredible sensitivities about revealing the estimated value of Royal Mail shares prior to a commercial negotiation. We would be giving the whip hand to the potential investor. This does not make commercial sense and would greatly reduce the potential for getting the best value for the taxpayer from any future transaction. The Government will work with their advisers to consider the potential value of Royal Mail so that they can properly assess bids from buyers. Before a sale, the accounting officer for the Department for Business would need to scrutinise any future transaction to ensure that it represented value for money for the taxpayer.

I reiterate what I said in Committee: we would expect that, after a sale had completed, both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is completely in line with the reporting requirements for previous sales of government assets.

Amendment 5 would require that the Secretary of State made an Oral Statement and that an order was laid that was subject to the affirmative resolution procedure before there could be a relevant disposal of shares in a Royal Mail company. As I said in Committee, further parliamentary procedures should not be required before there can be a disposal of shares in Royal Mail. The disposal of shares, as set out in the Bill, has been debated fully in both the other place and this House. The Opposition’s Postal Services Bill of 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As they said at the time, such a requirement would cause uncertainty for potential investors. That uncertainty is the same whether we are selling a majority or a minority stake. I said in Committee that I fully agreed that an Oral Statement might be appropriate for the first sale of shares. We will discuss with the House authorities the appropriate format for such reports at the relevant times.

I turn to the last amendment in this group, Amendment 13. The purpose of Clause 2 is to ensure that Parliament has transparency about the way in which shares or share rights in Royal Mail that reduce the proportion owned by the Crown are disposed of. The amendment would require reporting on any subsequent disposal of shares by the original purchaser. I do not consider that such a reporting requirement is appropriate. I know of no precedent for this type of “open-ended” reporting in any previous privatisation. The Companies Act requires that a private company has to disclose a full list of its shareholders on incorporation and then with the first annual return to Companies House following incorporation. It then has to provide such a list every third annual return after a full list has been provided. Information on ownership of Royal Mail will, therefore, continue to be publicly available.

As with discussions we had in Committee on other aspects of the Bill, I see no reason to impose more onerous reporting requirements on a privately owned Royal Mail than those that are currently imposed on privately owned companies. Clause 2 does, of course, continue to apply to any disposals of shares by the Secretary of State himself after the initial sale. The crucial issue, however, is not ownership but securing the future of Royal Mail, and in doing so securing the future of the universal postal service. Regardless of who owns the company, it would still be the universal postal service provider in the United Kingdom. It will still need to comply with any conditions issued by Ofcom in the universal postal service order to be made under Clause 29 of the Bill. The purchaser would, therefore, be fully aware of the obligations that the company it is purchasing must deliver.

The initial conditions in the universal postal service order will follow those currently set out in the licence issued to Royal Mail by Postcomm. Condition 12(5) of that licence requires Royal Mail to notify the regulator if there is any change of control in the company. It will be for Ofcom to decide whether to impose similar conditions in the future as part of delivering its overall duty to secure the future of the universal service. With these reassurances, I ask the noble Lord to withdraw the amendment.

[Lord Young of Norwood Green]

My Lords, I have listened carefully to what the Minister said and I welcome her assurance regarding the Oral Statement. That represents some progress, but we still feel that she has not fully addressed our concerns about the presale valuation and the ability to report to the Public Accounts Committee in confidence. We will reflect on the situation, but in the light of what has been said I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

--- Later in debate ---

[Lord Christopher]

My Lords, I rise to move Amendment 8. I did not move Amendment 13 because, frankly, I was confused by the way in which the Order Paper came through, but it seems that the essential issues are the same. References have been made to the value of this company and the lack of knowledge of that value. It is certainly not BT or British Gas. The closest I can come to previous privatisation operations is British Rail, which I think at least one Conservative spokesman in the past has said might have been carried out more felicitously. It is still being heavily subsidised. As to value, the only thing I know for certain is that it is not a Glencore, which is valued at the moment at some £34 billion. There are going to be considerable problems in achieving a proper valuation of this company.

The problem with the Bill is that we do not really know what we are addressing. We do not know what the Government will do—I am not sure that the Government know that for sure. There are three options: the sale; the mutual, on which we are waiting a report from the Co-operative Society; and the prospect of an IPO. My purpose is not to divide on this but to persuade the Minister that there are still some safeguards that need to be put into the Bill. It is not good enough as it is, when we are dealing with post that is so close to the public, to sell it, wash our hands of it and leave it all to a regulator. We are here in this goldfish bowl of the House of Lords, yet outside things are happening that are bound to make people uneasy about what might happen to Royal Mail if it is sold off to A, B or C under whatever terms. I have sought in my amendment to tighten up what due diligence means, to widen it beyond finance and to look much more carefully at exactly how a buyer has conducted itself and its business history.

We all remember Ford, which bought Volvo, Jaguar and Kwik-Fit. At the end of the day, Kwik-Fit was sold to a private equity house, CVC, at the third of the price that Ford paid for it. Stagecoach bought the American company Coach USA for £1.2 billion, which almost made Stagecoach broke. Closer to present times, Southern Cross, which is the largest provider of care homes in the country—it has 31,000 homes—was owned by Blackstone, an American private equity company. It ensured massive expansion on the basis of sales and leaseback. In the valuation of Royal Mail, I understand that most if not all its sites and buildings have already been sold and are back on leaseback. Some 17.5 per cent of the shares of National Express are owned by the hedge fund Elliott. It is now actively seeking changes in the board, which has been interpreted as a move to make sure that National Express comes on the market. We need something that ensures not just the prima facie suitability of an initial buyer but the opportunity, if things are sold off—for example Parcelforce, which seems to be Royal Mail’s one growing asset—for the Government to ensure that whatever happens is right and proper.

I mentioned the Netherlands at Second Reading. Four companies now handle the Netherlands’ mail. The people of that country can expect to receive mail delivered from these four companies. There is the half-orange post, which is owned by TNT. It delivers six days a week. There is the blue post, a company called Sandd—an acronym for the “sort and delivery” postal service. It delivers two days a week. There is the yellow company, Selekt, jointly owned by Deutsche Post and DHL, which delivers twice a week. That company is interesting because it has never made a profit and is now, it hopes, going to be sold. It is run by home workers, who sort and deliver at and from their homes. The legal low limit for pay in the Netherlands is between £8 and £9 an hour, but this company is very careful to ensure that none of its workers reaches that figure and that they are kept on a monthly basis below the rate that is required by the Netherlands Government of £580 a month. They are seeking now to sell it to Sandd.

The fourth company is called half-orange, which is owned by TNT, and it calls once a week. Again, that is interesting, because there we have TNT competing with itself. Why? Because it is using not full-time post staff but casual labour. This is not something that is happening in a third world country. It simply carries the somewhat dogmatic belief that we can privatise and get competition and that it always works best. I do not think we want to risk anything like what has happened in the Netherlands happening in this country. If the Government do not make it clear in the Bill that the likes of this will not be tolerated and that that is provided for in the Bill, I will think there is something seriously wrong with the Bill—and if things go the wrong way, we will know exactly who is responsible for that.

We are seeking to sell the service at a very bad time in economic terms. There is no queue out there of people saying, “Let me buy the Post Office”, so I hope the Minister will think hard about what has been said, not just by me but by others, and will try to ensure that the Government come back at the final Reading with some proposals that comfort us and the British people that this is not being sold off just for fun but is something that we are trying to ensure is properly financed and properly run in Britain.

[Lord Young of Norwood Green]

My Lords, we welcome the amendment moved by the noble Baroness, Lady Wilcox, and believe that it is a step in the right direction. The question is whether it goes far enough in that direction. We welcome the Government’s acceptance of the kind of information that ought to be made available before Royal Mail is sold. We have already stated that there are still many unanswered questions about the disposal—the timetable, the qualification of the future owner, the nature of the sale, how value for money will be secured, the danger of asset-stripping, safeguards for the universal service, and safeguards for the post office network. Yet the scope that is being given to the Secretary of State to make the sale is still very large indeed, with only a factual report to Parliament.

There is a significant improvement in the scale of information that is being offered, but it is certainly not the whole answer. I listened carefully but I did not quite get the assurance given on the nature of the contract between Royal Mail and the Post Office. I would welcome the Minister, in responding, clarifying the point that she made about next spring, when this contract is likely to be signed, and saying how strong the guarantee is on the 10-year period. Is it still just a hope, and are there still likely to be legal barriers to the 10-year period being a part of the contract?

I want to speak to Amendments 7 and 8. The House will be aware that we have consistently put the case for a long-term agreement between Royal Mail and the Post Office, to run from point of sale. We have proposed a 10-year duration. As my noble friend Lord Whitty said, it is certainly not an academic issue; it is a matter of commercial survival. The Government’s assurances are an improvement but still fall short of the commitment that we seek. I have no doubt that we will continue to return to this issue until we get a satisfactory assurance.

My noble friend Lord Whitty’s amendment provides a useful elaboration of the information that we seek, including the contract length, any contractual break period and the total value of the contract to Post Office Ltd. We urgently support his amendment and urge the House to do so.

Amendment 8 seeks further guarantees, and important ones, on the risk assessment of the proposed disposal of Royal Mail. My noble friend Lord Christopher rightly seeks confirmation that due diligence of the prospective buyer has been undertaken. These are sensible steps to take before such an important transaction, and I thought that his graphic and interesting description of the Netherlands postal system was an important contribution to this debate.

Once again, we support this amendment.

[Baroness Wilcox]

My Lords, I rise to respond to the noble Lords, Lord Whitty, Lord Christopher and Lord Young, on my amendment and the other two amendments. In response to the concerns expressed by the noble Lord, Lord Whitty, about the details to be provided in the Clause 2 report, I reiterate some of the sentiments I mentioned earlier. The information that we propose to include in the report includes much of the information that the noble Lord seeks in his Amendment 7. I would hope that the contract’s duration would be for the 10 years that many noble Lords are seeking, but the longest legally permissible duration will depend on other factors, such as volume commitments, which must be commercially negotiated between the companies. Finally, we must not require in Clause 2 the disclosure of information that might inadvertently damage the commercial interests of either business. That would damage the commercial sustainability of the post office network, which I am sure is not the noble Lord’s intention.

The noble Lord, Lord Christopher, raised a number of important points about how the postal service is provided in the Netherlands. I believe that these are consequences of the regulatory framework in the Netherlands, not of the ownership of its postal companies, but we will come to those matters when we debate Part 3 of the Bill, and I hope I will be able to provide him with further reassurance then.

The noble Lord, Lord Young, asked me to clarify what I said about the timing of a new contract between Royal Mail and the Post Office. As I said, negotiations are under way, and we expect a new contract to be ready to be signed by next spring. I hope that with those reassurances the noble Lord feels that he can withdraw his amendment.

--- Later in debate ---

[Lord Clarke of Hampstead]

My Lords, first, I thank sincerely the Minister and her team for producing Amendment 54. I am touched by how this has been done, which satisfies to a great extent concerns that have been in my mind ever since privatisation was first mentioned—I think that was in 1970-something. Amendment 55 may appear to be going over the top a bit but any report dealing with sold-off public assets should have some reference in the accounting procedure to the donations received in cash or in kind by the museum, so that people can keep track of what has come in and what is going out.

Before I sit down, I should say that I have slipped up, as I should have mentioned in an earlier discussion the wonderful GPO film unit, which is another one that seems to have slipped off the edge. Anybody who wants to see how the GPO prepared for the Second World War—for maintaining its services during that period—should go to the archives, where the DVDs are on sale. They really are worth watching. Again, I thank the Minister for her courtesy.

[Lord Young of Norwood Green]

My Lords, I also support Amendment 9 in the name of my noble friend Lord Kennedy. It asks that the report should include information about how the name of Royal Mail is to be protected and used by the universal postal service provider. I listened with interest to the noble Lord, Lord Jenkin, when he mentioned the value of the brand. We should remind ourselves that it was not that many years ago that the dreaded Consignia reared its head. Nobody understood why such an appalling name was chosen. It received no public understanding or acclaim, but no doubt the consultancy did quite well out of it. There is a bit of previous in this respect, which is why my noble friend Lord Kennedy was absolutely right to draw this aspect to our attention.

I will deal also with Amendment 54. As others have said, the House will agree that we owe a debt to my noble friends Lord Clarke and Lord Christopher, who deserve enormous credit for persuading the Government to bring forward this amendment, which will require the Post Office to tell us in an annual report how these collections are being looked after. I also pay tribute to the enthusiasm of the noble Lord, Lord Boswell, in his support for this. He made the point about ensuring that the collection is on public display and adequately resourced. While we welcome the amendment, producing a report is not the same as making sure that the heritage is taken care of. However, it will certainly concentrate minds and provide a degree of transparency that was not in the original Bill. Again, I congratulate my noble friends Lord Christopher and Lord Clarke, and the Government for listening to their case, which we welcome.

We also support Amendment 55, which would improve the government amendment by requiring that the report include details of donations, both in money and in kind, from Royal Mail to the British postal museum and the Royal Mail archive. I hope that the Government feel able to take another positive step in this direction by supporting the amendment.

[Baroness Wilcox]

My Lords, I will respond to the amendment of the noble Lord, Lord Kennedy, and then move on to Amendment 54 and also respond to Amendment 55 at the same time.

I said in Committee that I fully appreciate the sentiment behind the amendment of the noble Lord, Lord Kennedy, and understand why he seeks reassurance that the Royal Mail name will be preserved. However, the name of the company that delivers the universal postal service should be a commercial decision for that company and its shareholders. As the noble Lord, Lord Kennedy, said in Committee, Royal Mail is a great brand name. My noble friends Lord Jenkin of Roding and Lord Boswell have agreed. The commercial reality is that any owner will see this name as an asset. It is instantly recognisable in the United Kingdom in relation to the provision of the universal postal service. As a brand it is up there with Coca-Cola and McDonald’s—brands and goods that your Lordships might not necessarily purchase but will no doubt recognise.

I have heard what has been said about companies doing daft things. I agree that this can happen, but it is very rare for any company completely to abandon its leading brand. For example, there has been much discussion of the decision by the Post Office corporation in 2001 to change its name to Consignia once its operations were transferred to a public limited company. With hindsight, all involved—Parliament and the general public—saw this as a poor decision. However, even in this situation the brand name Royal Mail was not abandoned, nor was Parcelforce or the Post Office. These brand names continued to be used in all customer-facing operations, regardless of the name of the top company. A similar example is Centrica’s continued use of the brand name British Gas. To all intents and purposes, the public-facing side of the business in the United Kingdom is British Gas. This can be seen in its advertisements in newspapers and on television. I have listened carefully to the points raised in the debate today but I am not persuaded that it is necessary to include in primary legislation a requirement for a company to be called a particular name after a privatisation. This would not be good use of the legislative process.

Postal Services Bill

Lord Young of Norwood Green Excerpts

Wednesday 4th May 2011 Lords Chamber

Moved by

[Lord Young of Norwood Green]

37: After Clause 10, insert the following new Clause—
“Closure of post offices
(1) Where any company or any other person proposes to close a post office, it shall at the earliest opportunity begin consulting representatives of the employees affected and community and other groups with an interest in the proposed closure, including consulting on that company or person’s plans for alternative provision of services provided by the post office.
(2) No decision to close may be made within the period of six weeks from the start of the consultation required by subsection (1).
(3) No decision to close a post office in a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1).
(4) No decision to close a post office in a rural or a deprived urban area or an outreach service shall be taken within 16 weeks of the start of the consultation required by subsection (1).”

[Lord Young of Norwood Green]

My Lords, as you are all very aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas, not only through access to postal services but as a shop front for government services, a means of benefit collection and, often, as the only source of cash withdrawal in an area. This amendment aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen stakeholders’ opportunity for input into the consultation process. It also provides for a longer consultation process on potential closures in rural and urban deprived areas.

Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced. At Second Reading, the noble Lord, Lord Dobbs, proposed a 16-week consultation period for rural post offices due to close to give time to find an alternative. Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is in large part due to two major closure programmes: the urban reinvention programme from 2003 to 2005 and the network change programme from 2007 to 2009. Approximately 11 per cent of the post office network is in urban deprived areas. Consumer Focus clearly states:

“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.

The 2003-04 urban reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so-far unplanned decline in network size that arose from sub-postmasters’ decisions to close their businesses. At the time of the programme there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile, or unless there were exceptional circumstances to justify the closure.

The Post Office’s code of practice for network change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was in large part because of the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.

Post offices are still closing every week. More than 150 closed on a long-term temporary basis in 2010 alone. There is no guarantee that these will reopen; many are likely to stay closed indefinitely, as Consumer Focus has said. Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches. According to the National Federation of Sub-Postmasters, 900 post offices—an unusually high number—are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated by some offices. The Post Office is struggling to find alternative premises and service providers. It is vital that adequate measures are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 37, which puts current practice into law, allows extra time for rural post office closures and ensures consultation ahead of any closure, planned or unplanned. It also provides additional protection for rural and urban deprived post offices. I beg to move.

[The Deputy Speaker]

I have to inform your Lordships that there is a misprint in proposed new subsection (3) in the Marshalled List. It should read:

“No decision to close a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1)”.

--- Later in debate ---

[Baroness Wilcox]

My Lords, Amendment 37 seeks to impose consultation requirements on companies or people that propose to close a post office. As we well know, 97 per cent of post offices are privately owned and operated businesses. As I said in Committee, neither Government nor Post Office Ltd can ensure that there is always time to carry out a consultation before an office closes. A sub-postmaster may retire or move away or the premises may be damaged by fire or flooding. It cannot be appropriate to impose a consultation requirement on a retiring sub-postmaster before he can shut his store, as this amendment would do.

My noble friend Lord Jenkin of Roding spoke warmly of the Government’s commitment to ensure that there will be no further programme of post office closures and that the network of at least 11,500 post offices will be maintained. I confirm that commitment. Therefore, if a post office is to close, there is a strong likelihood that this will have been driven by a choice of the sub-postmaster rather than by Post Office Ltd. In the unfortunate event of a post office closure, other than in very exceptional circumstances, Post Office Ltd will seek to maintain services. If a permanent closure without any replacement is proposed, the Post Office must undertake a local public consultation for a six-week period, in line with its code of practice. In addition, Post Office Ltd will contact local councillors and parish councillors about service changes.

It is worth stressing that the code of practice has been agreed with Consumer Focus. I mentioned in Committee that the code of practice has recently been amended to introduce a telephone helpline providing information on temporary breaks in service and on new notification requirements.

The noble Lord, Lord Young, mentioned that at Second Reading and the noble Lord, Lord Dobbs, in his maiden speech, called for a 16-week consultation. He spoke eloquently about the problems faced by rural communities as a result of the previous Government’s closure programmes. However, this Government have committed that there will be no programme of post office closures and a network of at least 11,500 post offices will be maintained. As I said, if a post office is to close, there is a strong likelihood that this will be driven by the choice of a sub-postmaster rather than by Post Office Ltd.

In considering the appropriate duration of local consultations, it is important to strike a balance between giving communities sufficient opportunity to express their views and allowing the Post Office to get on with providing the services on which those communities so rely. A 16-week period—that is four months—as Amendment 37 envisages in some cases, seems to be disproportionately long. That is especially so when we recall that we are talking predominantly about individual small businesses operated by sub-postmasters. Furthermore, the six-week period currently required by the code of practice was introduced, following a national consultation, as part of the previous Government’s closure programme.

I therefore hope that the noble Lord will be reassured by the arrangements already in place and will consent to withdraw the amendment.

[Lord Young of Norwood Green]

I thank the Minister for her contribution. It goes some way towards providing reassurances and we will reflect on what she said, after carefully reading it in Hansard. In those circumstances, I beg leave to withdraw the amendment.

Amendment 37 withdrawn.

--- Later in debate ---

[Lord Whitty]

My Lords, I shall speak also to the earlier amendments that were previously grouped with this amendment, and the amendment to which my noble friend has just spoken. They deal with the criteria for access to the post office network. I very much welcome the noble Baroness’s reiteration of the commitment to maintain a level of post office network and her comments on the criteria in relation to what the Post Office rather bizarrely calls “business as usual” closures, whereby a sub-postmaster gives up or the post office has to close for another reason. The criteria there are much tighter.

I am a veteran of the last stage of the previous closure programme, which was in many ways unsatisfactory and ended in anomalies. I am familiar with the territory in Vauxhall to which the noble Lord, Lord Jenkin, referred, and the effect of what happened on the other side of the river. That experience has been repeated in rural areas and in deprived suburbs up and down the country. The determination to maintain a minimum network is very welcome.

The jury is still out on the move to Post Office Local. There are significant advantages, particularly in relation to opening hours and the flexibility that that provides. Consumer Focus has heard varying reports on the first batch of Post Office Locals, and that the range of services they provide is differentiated. For example, the USO for the parcel service refers to a 20 kilogram parcel service being available in all post offices, but a lot of locals were not doing that until about this time last year, when the Post Office advised them to do so. It is still not the case that all Post Office Locals, or some other post offices, are providing that service. I am not saying that there should be an absolutely rigid range of services available under Post Office Local, but we need to know that what will happen as a result of normal retirements and closures, new post offices opening, post offices opening in host premises will provide something like the previous minimum access criteria.

The new access criteria will be a matter for the Secretary of State and for Ofcom, but the amendments would require that there be a reporting mechanism which indicates not only how good the access is, in terms of mileage in rural and urban areas, to the nearest post office but what range of services is available. In other words, there would be a matrix that would indicate the services available as well as the number of outlets. In order to be able to monitor over time the effectiveness of post office services and the accessibility to them for communities who have, over the past two rounds of closures, seen some diminution in the number of outlets and now some diminution in the range of services, we need reporting criteria roughly along the lines that I propose here, which are the criteria which were broadly agreed at the end of the last round of closures.

I shall not press the amendments tonight, but the Government and the regulator will need a clear reporting process which covers not only the number of outlets but the range of services provided. As others have said, that range of services needs to include some enhanced commitment across Whitehall and local government to provide a wider range of government services—and digital access to them—than currently exists. Unfortunately, over the past 15 years, we have seen a diminution of government business going through post offices. Some of that has been due to technological and behavioural change; some of it has simply been due to false economies. Post offices have missed out there. The post offices should in most communities be the front office of government. In rural communities and more deprived outer suburbs, they are the point at which the community has access to the range of state services. We need to retain that, we need to build on it and we need to know under laid-down reporting criteria how well we are doing.

Although I welcome much of what the Government are committed to in enhancing the number of services that go through post offices as well as preserving the number of post offices in the network, we need to be able to monitor that. That is what my two amendments are about, and I will be interested to hear the noble Baroness’s comments. I will not press the amendment tonight, but we may need to return to it. I beg to move.

[Lord Young of Norwood Green]

I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.

I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister’s response.

[Baroness Wilcox]

My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.

Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.

It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.

--- Later in debate ---

[Lord Lea of Crondall]

My Lords, Clause 11 provides for the annual report on the post office network. The amendment seeks to include information in the report on,

“any major change in contractual terms affecting sub-postmasters as a result of the change to the ‘Post Office Local’ model”.

The document produced by the Department for Business, Innovation and Skills in November 2010, Securing the Post Office Network in the Digital Age, claimed success for the local pilots in the Post Office Local model. Under pilot schemes, Post Office Local branches have offered longer opening hours of up to six hours per day. Services have been restricted to core services, with what are described as more complex and time-consuming transactions being channelled through main post offices. Post Office Ltd reports that Post Office Locals are being trialled in around 60 locations across the UK. Many operate a small counter located within the premises of another business such as a supermarket. Some have replaced sub-post offices that have closed and some have been set up as new branches. The physical layout of the counter-based model has been replaced by more open-plan arrangements alongside the retail till.

The BIS report says that over the next four years, 2,000 small sub-post offices will convert to the local model, either on-site or in neighbouring premises, with what is described as a major rollout in 2014 following further piloting. It is unclear whether the rollout will be to reach the figure of 2,000 Post Office Locals—or essentials, as they are called—or whether this marks an intention to roll out beyond 2,000. It could be a precursor to a much wider application of the model.

The paper proposes two key strands of the network. The Government have asked POL by 2014 to have about 4,000 main post offices in towns and city centres and to convert about 2,000 sub-post offices to the local model. The 4,000 main post offices and 2,000 new locals will leave more than 5,500 branches in the current network untouched. However, the BIS paper states that, under POL's commercial strategy, the Post Office Local model will become the mainstay of the smaller post offices over time. This will mean a fundamental change to the current network.

Consumer Focus, which represents post office customers, has said that the conversion of 2,000 sub-post offices into Post Office Locals will be a major change. For millions of people, it will mean a shift from what they know and trust. The problems that people have experienced with pilot Post Office Locals—some of which are known as essentials—include benefit capping, where branches limit the amount of money that people who are collecting benefits such as pensions can withdraw in a single day. This is to prevent the branch running out of money. Other examples of problems which people have experienced with Post Office Essentials include not being able to access counters if in a wheelchair, staff with inadequate knowledge of services and a lack of privacy when carrying out transactions.

A more recent investigation by Consumer Focus, in March 2011, concluded:

“While consumers are likely to welcome the convenience and extended opening hours provided by PO Locals, without clear improvements to the in-branch experience, some consumers will be likely to perceive the shift in provision negatively … In particular, our research has found worrying evidence of examples of cash and benefit withdrawals being capped; temporary breaks in service because there are not always trained staff on hand to serve at the counter; and the inconsistent provision of parcel services, which in many instances seems to vary from one PO Local to the next”.

Just over half of customers—53 per cent—have had to use an alternative post office because their Post Office Local did not offer the product or service they wanted. Some 43 per cent of customers say that the privacy available is poor, especially for banking or financial transactions. Finally, 61 per cent of customers said that their overall experience was good, but a large percentage —38 per cent—said that it was average or poor.

The Post Office Local model clearly has the potential to impact on the terms under which sub-postmasters operate sub-post offices, and the terms and working arrangements of the staff working in them are also significant, not least the significantly increased opening hours. Those issues therefore deserve a word or two.

The changed physical working arrangements in the open-plan post offices envisaged by the pilot carry implications for the terms, safety and well-being of staff members which need to be taken fully into consideration. Some postmasters have expressed concern that they will see a major shift in their contractual terms away from secure payments to income based largely on commission. That is not just a rumour; I think it has been confirmed by the Post Office. While existing sub-postmasters may have their current income protected for a limited time, this would not last. At the same time the range of services on offer under the pilot is restricted to core services, meaning that customers needing to access a more time-consuming or complex transaction will need to go to the main post office. The report does not envisage restrictions being imposed on which services may be regarded as core by a local post office, and which may be dispensed with. Over time this would mean a high percentage of the population having to travel further to access the full range of post office services. I think that I am touching here on some of the points made by my noble friend Lord Whitty.

The problem is likely to be particularly acute in rural areas, where the distance to a main post office is likely to be greater. Although commercial terms between Post Office Ltd and individual sub-postmasters is confidential, it is reported that sub-postmasters converting to the essentials model are seeing a worsening in the terms of their contract and a larger reliance on commission on sales. I shall not cite the many examples from the local newspapers and so on, but Ministers could reassure sub-postmasters by stating that they will not be compelled to move to the Post Office Local model.

The sub-postmasters’ fears are summarised in a survey which was commissioned by the Communication Workers Union and reported in today's newspapers. It says that up to 9,300 post offices could close as a result of the Government’s sell-off. This prediction is worrying for people living in villages whose post office is the only shop that provides a vital service, particularly for those without cars. Perhaps I may read one or two bits of information from this survey; I do not think that anyone doubts the quality of the very well known company which was invited to undertake this research.

More than 90 per cent of sub-postmasters told researchers that they are very unlikely or unlikely to survive without Royal Mail business if it dries up. This clearly overlaps with all the other questions about the interservices agreement and the universal service obligation. Billy Hayes, the general secretary of the CWU, has said that it clearly demonstrates the fears of sub-postmasters about the fate of the network, which faces a greater threat than anyone previously dared believe.

John Denham, the shadow Business Secretary, has said that postal services policy is now in utter disarray. I am sure that the Minister has a brief prepared to read out on all this, and I look forward to hearing it. Then we will have to consider where this question rests before we come to Third Reading.

[Lord Young of Norwood Green]

My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.

On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.

I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.

[Baroness Wilcox]

My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office’s interest to introduce a model of contract that is not viable for sub-postmasters.

The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.

In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government’s £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.

I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.

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[Lord Kennedy of Southwark]

My Lords, the link-up with the Post Office is one of the most exciting innovations for the credit union movement and my amendment places a requirement on the Government to report back on the progress to achieving this until such time as it has been delivered. Getting people on the lowest incomes into the habit of saving and giving them access through the Post Office network to affordable credit is something that we can all support. Would this not be the big society in action?

What we do have is some of our poorest and most vulnerable people who are unable to get affordable credit. They are either put into the hands of illegal loan sharks or into the payday loan shops with their exorbitant interest rates. The Government need to take action, and take action quickly. The noble Baroness is fully aware that I have pursued this issue with questions to her and other Ministers, as well as in debates such as this one. It is something that I feel very strongly about. It is an area for which I think there is considerable support around the House in all political groups and on the Cross Benches, but it does require the Government to take action to move it forward.

I look forward to the noble Earl’s response. If he is not able to accept the amendment, can I refer him to page 11 of the House of Lords’ Proceedings covering the Questions for Short Debate and my Motion on a similar subject? Any help he can give me with the Government Whips’ Office in getting that Motion brought forward for debate will be much appreciated. We could then spend a little bit longer discussing these important issues and the progress being made by the Government on them. I beg to move.

[Lord Young of Norwood Green]

My Lords, I rise briefly to support the amendment. Each week something like 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the Post Office card account. It has been calculated that those aged under 65 who hold such an account are 28 times more likely to be unbanked. These same people, those in receipt of state benefits and tax credits, are the most likely to use high-cost credit. That is evidence of the justification of the point being made by my noble friend Lord Kennedy about the valuable contribution that credit unions can make. The Post Office product range is such that it will not make personal loans of less than £2,000, yet evidence shows that sums of between £300 and £600 are the primary amounts sought by those using high-cost credit.

In short, the Post Office has the facilities and credit unions have the ability. Would it not be good if we could bring these two groups together to serve the public?

[Earl Attlee]

My Lords, since he arrived in your Lordships’ House the noble Lord, Lord Kennedy, has spoken passionately about the role of credit unions, and with good reason. We all know about the activities of loan sharks. As my noble friend the Minister said in Committee, the Government place a high importance on access to affordable credit and believe that the use of credit unions should be encouraged as a means of saving and obtaining access to short-term loans.

Co-operation between Post Office Ltd and credit unions is already very strong and we support an even closer link-up between the Post Office and credit unions. We have demonstrated clear progress against this aim. The noble Lord’s amendment seeks details on that progress and I hope that I can give him some reassurance today. The Department for Work and Pensions recently announced a significant package of support for the credit union sector, including funding set aside for a shared credit union banking platform, which will be subject to a feasibility study, in which the Post Office will participate fully.

The Post Office also continues to develop individual services and assistance to facilitate close working with credit unions, including a new pay-out service which allows people to collect their credit union loans at their local post office branch, and guidance to facilitate local arrangements between post offices and credit unions where both parties wish to participate. These developments build upon existing arrangements whereby many credit union current account holders can access their accounts at post offices through arrangements with the Co-operative Bank. Post Office Ltd expects that around 170,000 credit union transactions will be carried out in post office branches in this way in the coming year. Facilities are also available at post offices whereby credit unions issue customers with a payment card, which they can use to pay off the loans they have received via the electronic bill payment facilities that are available at every post office. More than 60 credit unions have established this facility.

The noble Lord, Lord Kennedy, referred to the possibility of a debate. As he will understand, I can give no assurances on that because it is a matter for the usual channels.

As my noble friend the Minister said in Committee, we recognise the worthy intention behind the amendment and I hope the noble Lord will be reassured by the good work that is already under way in these areas. We will continue to encourage co-operation between the credit unions and Post Office Ltd and to support the Post Office in its provision of wider financial services. However, placing this reporting requirement—and, indeed, others tabled by noble Lords—in legislation would simply increase bureaucracy, and the greater the reporting requirement imposed on the Post Office the greater the cost and, therefore, the impact on its competitiveness.

With the reassurance that I have given today, I hope the noble Lord will withdraw his amendment.

Postal Services Bill

Lord Young of Norwood Green Excerpts

Wednesday 6th April 2011 Lords Chamber

In view of the debate in the other place, perhaps I may anticipate the Minister and say that I do not believe that the amendment is problematic or would cause additional confusion. The Royal Mail pension plan is under an obligation to provide information to members and will no doubt continue to do so. As some members will have some of their accrued pension rights in the new scheme and some of their accruing rights in the Royal Mail pension plan, they will no doubt be receiving benefit statements from two sources for some time to come even if they are contained in one envelope. However, the Royal Mail pension plan has no obligation to provide information about the new public scheme—that falls to the Secretary of State—and its trustees may well not have all the required information before the transfer takes effect. There are some 400,000 members of the Royal Mail pension plan and many of them are current employees. They are going to be extremely anxious about the detail of the provision in respect of their individual pension entitlements. They are anxious and they should be informed before the transfer takes place. That is what Amendment 24EB seeks to achieve. I beg to move.

[Lord Young of Norwood Green]

I will speak to Amendments 24EC, 24ED, 24FA and 24GA, which stand in my name, and also to Amendment 24EB.

As my noble friend Lady Drake pointed out, there is, at the point of transfer to the new scheme, no clarity in the Government’s proposals regarding a number of issues that are of great importance to members of the Royal Mail pension plan. To begin with, there is the simple issue of who will be the immediate point of contact for scheme members who have a query or concern. The Secretary of State could, at least initially after the transfer, insist on continuity by having the new scheme administered from the current Royal Mail pension centre in Chesterfield. This would guarantee that the concerns of Royal Mail pension plan members are dealt with by staff who are familiar with those members and their problems. Chesterfield would also be seen as a familiar location, with familiar access points via telephone, email and postal address. Such a simple move would go some way to minimising concern during a difficult period of change for postal workers and retired members.

Equally, there is the question of the future governance of the scheme at the point of transfer. The current trustees of the scheme will end their trusteeship. That means that union members and pensioners will lose their current nominated and elected trustees. Whatever the Government’s intentions on these matters for the future, the fact is that at the point of transfer there will be a loss of representation of Royal Mail pension plan members in the functioning of the scheme. Immediately prior to the transfer, existing trustees will not be in a position to provide the assurances and information that are necessary, and which are outlined in this amendment.

In the other place, the Minister sought to give some reassurances on these questions. The honourable Ed Davey said:

“Because we want to continue the high standard of service and support to which members of the pension plan are accustomed, we want to work with the trustees on ensuring that administration is in place. No final decision has been made on how the new governance scheme will be administered, but it is likely that the Government will look—at least initially—to contract the administration of the new scheme to the existing Royal Mail pension plan administrators in Chesterfield. We are speaking with the trustees about that”.

We welcome that statement, and would welcome some reinforcement of it. That was said on 25 November, but what is the position now? Have the Government considered further the issue of contracting the administration of the new scheme to Chesterfield?

On the issue of the new scheme’s governance, the Minister said:

“We understand the importance of pension scheme members having input into running their scheme; that is absolutely common ground between us. We will therefore consider establishing a governance group with member representation for the new public sector pension scheme for current beneficiaries. When considering this, we will take account of the views of stakeholders and practices in other large public sector pension schemes. For example, the NHS pension scheme and the principal civil service pension scheme”.

He went on to talk about the governance group and it being,

“critical that the public sector pension scheme works with the Royal Mail pension plan, in terms of administration, governance and communication”.

He ended his contribution saying:

“We are absolutely committed to that”.—[Official Report, Commons, Postal Services Bill Committee, 25/11/10; cols. 431-32.]

Again, what progress has been made on this question?

If nearly four months later there is no greater clarity then, far from reassuring Royal Mail pension plan members, the Government will be responsible for having caused them greater concern. The intention of the amendment, as my noble friend Lady Drake said, is not to undermine but to seek clarity by obliging the Secretary of State to address Royal Mail pension plan members directly at the point of their greatest concern—that is, before the changes take place. In the absence of any further clarity from the Government, this amendment is surely profoundly important.

In relation to Amendment 24ED, as we noted in a previous amendment, under Clause 17 the Secretary of State has to make an order for the division of assets because of the separation of the pension schemes. There is no intent to prevent this process through this amendment, but there is concern that the trustees are losing control of hard-earned assets. There has to be a will to co-operate closely with the scheme representatives to ensure that there is a smooth transition in separating the schemes. The Bill gives great discretionary power to the Secretary of State; such power would not normally exist with the private employer in a pension scheme, so in order to demonstrate that there will be some checks on this power, we need a clearer picture of the future governance of the scheme. At this point in time, the Government have not had to make plain any detail about the future governance of the new scheme. Are the Government in a position to elaborate on their current thinking on this issue?

On Amendment 24GA, in Clause 24 there is no obligation on the Secretary of State to consult directly with representatives of the unions in Royal Mail. Although elected from and by union members, the members’ trustees are bound by law to act outside the formal democracy and accountability of trade unions. It has to be said that the practice of the Government is better than the formulation in the Bill. Meetings are taking place between the ministerial team and BIS and the elected officials of the union to discuss the future of the pensions plan. That is necessary and sensible. But nothing in this relationship is guaranteed on the face of the Bill. It is not beyond the bounds of possibility that matters between the Government and the unions may take a turn for the worse before the implementation of the new scheme. One hopes that this will not occur, but banking on hope is not a good guide for legislators or those affected by legislation.

I believe that the Government should accept this amendment, because it recognises that the real interests of postal employees have different representative forms. The best practice of this Government is to act on this fact. Now let the Government guarantee this in legislation.

[Lord De Mauley]

My Lords, before I start I should repeat my declaration of an interest in that my wife jointly owns and runs a business which is essentially a web-based mail order company and as such uses Royal Mail for delivery of its product.

Before I turn to the detail of the amendments, it may help if I provide a brief overview of the provisions in Part 2 of the Bill and the intentions behind them. These provisions will allow the Government to take over the historic deficit in the Royal Mail pension plan. As noble Lords are very well aware, the deficit in the Royal Mail pension plan is huge and volatile. As at 31 March 2010, it amounted to £8.4 billion, and the total liabilities in the plan amounted to £34.4 billion. So this pension burden is completely out of proportion to the size of the business. The provisions set out in Part 2 will allow this pension burden to be addressed as part of a package of measures to secure the future of the universal postal service. We propose that responsibility for the deficit will be removed from the business by the transfer of the historic liabilities to a new public pension scheme. Responsibility for ongoing pension accruals and salary-related liabilities will be left with the Royal Mail. Indeed, I think I can say that there is very little difference between this approach and that of the last Government.

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Tabled by

[Lord Young of Norwood Green]

24EC: Clause 17, page 10, line 9, at end insert—
“( ) Before making an order under this section, the Secretary of State must consult the trustees of the RMPP.”

[Lord Young of Norwood Green]

I, too, welcome the clarification. We will study the words closely. I concur with the points made by my noble friend Lady Drake. We reserve the right to return to these issues on Report, given their importance.

Amendment 24EC not moved.

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Moved by

[Lord Young of Norwood Green]

24GC: Clause 28, page 15, line 14, leave out subsection (3)

[Lord Young of Norwood Green]

My Lords, this important amendment seeks to reassert that the universal service should be maintained as a benefit to the whole country even though this may involve some cost. The amendment aims to remove the new criteria that Clause 28(3) seeks to introduce. These criteria direct Ofcom to have regard to the universal service being financially sustainable and efficient. The criteria are new; they did not apply to Postcomm.

These seem to be perfectly reasonable provisions. Who would not want financial sustainability or efficiency? However, the universal postal service is the object of our discussion, and the stark facts are that some elements of it cost more than the revenue they yield, and some parts are underutilised on a regular basis. That is why it is vital to draw attention to the new provision in the Bill.

It is generally accepted that the universal service is a good and necessary thing and that its delivery by Royal Mail has been well handled. That is significant. There is no body of evidence to suggest that Royal Mail's provision of the universal service lacks something. However, the Government have implied that it lacks something by suggesting new criteria. Let us look at these. In future, the universal service must be financially sustainable. Let us then suggest that the six-day delivery model may involve a degree of loss on at least one day a week—or, if not loss, then a lower rate of return on one or more days. Anyone who has some familiarity with the pattern of deliveries across the working week will endorse such a view. Therefore, would this not mean, on a strict interpretation, that the six-day service is not financially sustainable?

Let us consider the term “efficient”. Is it efficient to maintain delivery vehicles and stock that may not be fully utilised but which guarantee a universal service to remote areas? From a commercial point of view, if these vehicles are utilised less than the other vehicles in the network on average, that is definitely inefficient. If that is the case, would it not be an argument for extending the number of exceptions to the USO on the basis that remote areas require an inefficient use of scarce resources?

Ofcom will be forced to move in this direction once the new owners of a privatised Royal Mail demonstrate that part of the USO can never be financially sustainable or efficient. In the debate in the other place, when questioned on this issue the Minister for Postal Services was forced into hypothetical speculation about how Ofcom would use these new criteria to do something that Postcomm does not—I repeat: does not—do at present.

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[Viscount Eccles]

In the interests of time, it may be better for the noble Lord to wait until I explain what it is about.

[Lord Young of Norwood Green]

On reflection, I am happy to do that and shall conclude my comments at this point.

[Lord Jenkin of Roding]

My Lords, the noble Lord, Lord Young of Norwood Green, has said that this is a very large group of amendments. I considered whether it might be possible to disaggregate some of them and came to the conclusion that, as they all broadly address the same subject—access to the network—it is sensible for them all to be discussed together.

The amendments in the name of the noble Lord and his noble friends seek to make access more difficult, and those in my name and the names of my noble friends Lady Wheatcroft and Lord Skelmersdale take a different line. Before I speak to individual amendments, I thought it might be helpful to say something about what we are aiming at. I do not think it is all that different from what the noble Lord, Lord Young, has described to us, although I think the balance is different.

We want to provide a fair balance between protecting the universal service obligation and promoting competition in the postal sector. Therefore, our overall purpose is to try to find a way in which one can do that. I raised this point at Second Reading and since then my noble friends and I have had the opportunity to hold a number of meetings. We have met the chairman of Royal Mail, Ms Moya Greene, who is a very formidable and able lady—an excellent appointment. We have also had meetings with some of the major companies that entered the postal market under the existing legislation, which was introduced by the previous Government.

Turning first to what one learnt from the chairman, it is clear that Royal Mail is still facing an uphill struggle to become profitable, despite the prospective relief from the overhang of the huge pension liability, which we have just been discussing, and despite what seems to be a very welcome improvement in relations with the trade unions. Access to private capital for Royal Mail is seen as absolutely essential if it is to become profitable. That is why it fully supports the provisions in the Bill to remove the existing statutory restrictions on ownership. New capital will help not only to speed up the modernisation of the business, which all are agreed is very necessary, but to secure new sources of business, which it must have if it is to become profitable.

Ms Greene also pointed out to us—I quote her words, which I hope is not embarrassing—that there needs to be “a dramatically different regulatory approach”. I am not sure that we have that yet in this Bill. Ms Greene has described regulation by Postcomm as “intrusive, extensive interference with no freedom to Royal Mail to price their products or to introduce new products”. Moreover, she put the cost of dealing with regulatory impact at no less than £53 million a year. I find that an almost incredible figure, but she says that that is what it costs. We must return to this issue perhaps at a later stage. One has to ask why the competitors should not pay part of the cost of regulation. They are covered by it and they appeal to it, so why should not part of that cost be borne by them? That is the view from the chairman of Royal Mail, and I find it quite compelling.

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[Lord Young of Norwood Green]

My Lords, I shall comment on some of the other amendments and points that have been made in this debate, which the noble Baroness, Lady Kramer, was right to say has been rather wide-ranging and complex. Perhaps such a large group of amendments has both benefits and disbenefits.

I was interested in the assessment of the noble Lord, Lord Jenkin, of the cost of regulation and his points about regulators paying. He said that we should create a level playing field. That seems a difficult objective to achieve, given that, as the noble Baroness, Lady Wheatcroft, candidly observed, competitors can cherry pick. We have seen that under the current regulations they go where it is easiest to operate, which is usually in city areas. We do not see them clustering around the rural areas, because, as we know from the correspondence that was helpfully sent to us by the noble Baroness, Lady Wilcox, the cost of doing so is prohibitive, and there are special circumstances in London which increase their costs—for example, wages.

Our amendments would ensure that Ofcom protects the universal service obligation and the universal service provider. We want to make sure that Royal Mail can fairly account for all the costs—I stress, all the costs—of providing that universal service. The noble Lord, Lord Jenkin, provided an interesting figure for the cost of regulation in his proposal that the competitors should pick up some of it. It is an interesting approach.

We are opposed to Amendment 24Q in the name of the noble Lord and the noble Baroness, Lady Wheatcroft, because the imposition of an access condition here is premised on market power. In reality, that applies only to Royal Mail. By excluding the notion of efficiency as a criterion for access, the amendment would exclude the need for Royal Mail to secure its network while providing access. If it is inefficient for Royal Mail, the terms of access are unfair. The amendment would allow Ofcom, in theory at least, to endorse inefficient and therefore unfair access to Royal Mail.

I said at the outset that I was interested in Amendment 24H in the name of the noble Viscount, Lord Eccles, and moved by him with a focus on the costing approach. If it is the intention of the amendment, as I think it is, to ensure that Ofcom has an obligation to allow the universal service provider to cover the proper costs of the universal service, it would be welcome. If, however, the minimum standards for the universal service obligation have to be subject to a set of costing systems, we could be worried about whether it would undermine the force of the obligation to maintain the universal service standards as they are.

It seems that we are all united in trying to ensure that we preserve the universal service and the universal service provider. Where there is an important difference of opinion is how competition should be introduced. We have tried to ensure in our amendments that Ofcom takes into account the true and total cost of providing that universal service.

Amendment 24PB, spoken to by the noble Baroness, Lady Wheatcroft, and my noble friends Lady Dean and Lord Brooke, is an important probing amendment. We will listen intently to what the Minister says on this subject.

[Lord Flight]

My Lords, we have had an extremely important discussion of the Bill today. The real logic of what I believe the noble Lord, Lord Jenkin, the noble Baroness, Lady Wheatcroft, and in particular the noble Viscount, Lord Eccles, have drawn to our attention is that there is no need to regulate the monopoly issue—the Competition Commission can do that. There is not a real monopoly when you look at it; you are just cluttering up the business with an unnecessary cost. The issue is whether a regulator is needed to regulate the universal service. I can see some argument for that being the case, although, in principle, if provision of the universal service is written into the legislation and, as it were, into the charter, whether regulation is needed to make sure that it is delivered, or whether it can be done by another method, is a question. However, in terms of the competition aspect, I simply do not see any realistic case for the need for regulators to monitor it.

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[Lord De Mauley]

My Lords, I am most grateful to my noble friend for his clarification. I hope that I can reassure him that under the current regime, under the Postal Services Act 2000, any operators providing services within the scope of the universal service that have significant turnover are obliged to contribute to the costs. That will be the case under this Bill as well.

The debate that we have heard today, for which I thank noble Lords on all sides for their helpful and knowledgeable contributions, demonstrates that a case can be made to move the access regime in either direction. However, I strongly believe that the provisions in the Bill set the right framework for access—one that supports competition but not at the expense of the universal service. I am of the firm view that Clauses 37 and 48 strike the right balance and, when combined with other powers in the Bill, give Ofcom the tools to ensure a better and more effective access regime. I hope, therefore, that after this rather lengthy explanation, the noble Lord will feel able to withdraw his amendment.

[Lord Young of Norwood Green]

As a matter of historical accuracy, I did not play a prominent part in dealing with the previous Bill. That was done by my noble friends Lord Mandelson and Lord Tunnicliffe, although I was part of the Government.

[Lord De Mauley]

I withdraw my remarks.

[Lord Young of Norwood Green]

I felt that the Minister’s comments were helpful. He has agreed to take away some issues, which would be useful. He stressed the importance of ensuring that competition does not undermine the universal service provision or the role of the universal service provider. It is important to hear those remarks and to have them put on the record. I also welcome the response that he made to the amendment spoken to by my noble friend Lord Brooke. Reserving the right to look carefully at the record and at any further correspondence from the Minister, as well as amendments that may come on Report, I beg leave to withdraw the amendment.

Amendment 24GC withdrawn.

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[Lord Christopher]

My Lords, it would be extremely helpful if the noble Baroness could explain at some point the precise purpose of this clause because it can be read in more than one way. If we are talking about Royal Mail or the company that will own it alone, that is one thing. If we are talking additionally about those providing only part of the service, that is another. The logic of the situation is that when Royal Mail is 99.9 per cent efficient, if it is using much the same machinery as those currently doing some of the sorting do—I think 10 or 12 have been mentioned—then it seems it would not be able to make a profit. What is more, the service would not be economical. Economies of scale suggest that you sort this mail in one place, or at least in one system, so I would appreciate some clarification. Where I fully agree with the two speakers on this, the mover and the speaker from the Liberal Benches, is that whatever happens we really do not want to revisit this issue. If I am right, and that competition to some degree in universal providers is a myth, we must be sure that we do not have to subsidise a Post Office and that proper charges can be made.

[Lord Young of Norwood Green]

My Lords, I can understand why my noble friend tabled his amendment, given his long association which started at the GPO—an association which I shared, although not on the postal but on the telecoms side, so we both have a long-standing and abiding interest. We want Royal Mail to have the ability to be profitable as the universal service provider meeting its universal service obligation. That has been the Government’s aim in removing the burden of the pension and in making it clear in today’s comments that they are in favour of competition, but not to the point that it undermines the Royal Mail’s ability to function. If that “profitable” was to take into account the full costs of providing the universal service obligation, we could see the benefit of that. There are some concerns about what implications there might be when that test is applied, such as on stamp tariffs et cetera, but I will certainly be interested to hear the Minister’s response to this amendment.

[Lord De Mauley]

My Lords, Amendment 24GD, moved by the noble Lord, Lord Clarke of Hampstead, seeks to delete “financially sustainable” from Clause 28(3), and replace those words with “profitable”. If I may say so, he makes an important point, as do my noble friend Lady Kramer and the noble Lords, Lord Christopher and Lord Young. There was a long discussion in Committee in the other place over whether financially sustainable meant “profitable”. The Minister for Postal Affairs put it on the parliamentary record, and I would like to do the same today, that this Government absolutely seek for Royal Mail to be a profitable company. Part of the problem and the threat to the universal postal service is that, under the way in which the previous Government managed the postal services sector, Royal Mail has not been making profits and has been a drain on the taxpayer, so at the heart of this concept is the belief that to be sustainable the universal service must make a return for its provider. The only alternative, after all, is perpetual taxpayer subsidy, which is not a realistic, acceptable solution.

Importantly, in addition, “financially sustainable” is a broader concept than simply “profitable”. A company can be profitable in the short term but not necessarily financially sustainable; equally, it can make losses in the short term but have a sustainable future. As I have said, it will be for Ofcom to determine what needs to be taken into consideration when having regard to financial sustainability: the ability to earn a rate of return on investment; profitability; the setting of prices; long-term market volumes, and so on.

As I said in response to the previous group of amendments, the arguments that have already been made on Clause 28 and Ofcom’s duties, both in your Lordships’ House and the other place, have persuaded me to revisit Ofcom’s regulatory duties. The protection of the universal service is of paramount importance and we understand that we must get this absolutely right. That is the very reason why we are taking action and why we brought the Bill forward.

The noble Lord, Lord Clarke, in particular has unrivalled experience of the postal sector and I am always grateful for his contributions to our debates. He made some excellent and important points and I will reflect on them further when considering this issue. Given my commitment to look again at the issue and to bring forward proposals on Report, I hope that the noble Lord will feel able to withdraw Amendment 24GD.

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[Lord Skelmersdale]

My Lords, I readily understand why the noble Lord, Lord Laird, seeks to protect local post offices, not only in Northern Ireland but in the other far flung parts of the United Kingdom. The trouble is that, with this amendment, he has cast the agreement between Royal Mail and Post Office Ltd in what I would call a leaden block. Not only is 15 years very long term but it means that, when Royal Mail is sold, there will be absolutely no opportunity within that 15 years to change the agreement, which might well be to the benefit of both sides. In the initial sale, the pre-nup agreement, as the noble Lord, Lord Stevenson, has just called it, will come as part of that particular package, but, as I have said, over a period of perhaps very few years, it may be to the mutual interest of both sides of the equation to come to renew the agreement. As far as I can see it, the amendment of the noble Lord, Lord Laird, prevents that happening.

[Lord Young of Norwood Green]

Amendment 24PA, standing in my name, would ensure the continuation of the current inter-business agreement between Royal Mail and Post Office Ltd. The agreement should be in force before any disposal of an interest in a Royal Mail company and should include the definition of the relationship between that Royal Mail company and Post Office Ltd after the disposal.

Amendment 24P, in the name of the noble Lords, Lord Laird and Lord Rogan, seeks an inter-business agreement of 15 years’ duration, while that in the name of the noble Lord, Lord Bradshaw, seeks one of 10 years’ duration. We share the view that that would be a reasonable period, although Amendment 24PA makes the point at a different clause in the Bill. At this stage, I am sure that if Ministers could accept the principle then we could between us find the best place in the Bill to insert it.

The noble Lord, Lord Skelmersdale, made a point about setting things in tablets of stone. I should have thought that there ought to be the capacity to review some of the detail of an inter-business agreement. The important thing is to establish it.

The Post Office is dependent on Royal Mail's business for a significant part of its survival strategy. More than one-third of its revenue, some £343 million, and one-third of sub-postmasters' pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are to be forced to separate, our concern is that a privatised Royal Mail might look elsewhere for a better bargain and for other 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 could look to reduce costs by using other outlets such as supermarkets or high-street chains instead of post offices. To date, the Government have not agreed to undertake to extend the current, five-year IBA to 10 years.

Without an extended IBA, there is no guarantee that Royal Mail will continue to use the Post Office. In evidence to the Postal Services Bill Committee, the Minister, Ed Davey, stated:

“No previous Government have thought to put it on any different footing”.

But then no other Government have needed to intervene on the inter-business agreement because no other Government have separated the Post Office from Royal Mail. The Minister tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. He further said in evidence to the committee:

“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.

The stated aims of the current management of Royal Mail, while welcome, are insufficient reassurance. The relationship between the two companies is one of imbalance. The Post Office cannot survive without Royal Mail, yet Royal Mail could succeed without the Post Office. Ed Davey went on to argue in his evidence to the committee:

“If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge”. —[Official Report, Commons, Postal Services Bill Committee, 11/11/10; cols. 121-23.]

However, he has provided no evidence to support this position. Given the importance of retaining the relationship between the two businesses and the risk of leaving its maintenance to the discretion of Royal Mail, the Government should instead require a 10-year IBA as part of the Bill and ensure that this meets the requirements of EU competition law. To do so could only strengthen the position of the Post Office. As I understand it from a recent discussion with the Post Office, it is indeed seeking to establish a legally binding agreement with Royal Mail.

Consumer Focus has warned of the risk to the Post Office of the lack of a long-term IBA. It has argued that the number of post offices could fall by 37 per cent, from its current level of 11,900 to a minimum number consistent with the Government’s access criteria, 7,500. The National Federation of Sub-Postmasters believes that a minimum 10-year IBA is essential and that, in order to avoid further post office closures, the existing levels of Royal Mail work at post offices must be maintained, with a minimum 10-year IBA between the two companies.

Post offices—predominantly those in rural areas—are still struggling to survive; they are finding it hard. Only 4,000 of the UK’s 11,905 post offices are economically viable and, despite assurances from the Government, which we welcome, that there will be no further programme of post office closures, branches are still closing every week. More than 150 post offices have closed on a long-term temporary basis this year alone, with no absolute guarantee that they will reopen. So there is genuine concern here. The 900 post offices that are currently up for sale, an issued referred to George Thomson, the General-Secretary of the National Federation of Sub-Postmasters, is an unusually high number. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated in sub-post offices and the Post Office is struggling to find alternative premises and service providers.

The post office network can ill afford to lose any more work. That is why it was unfortunate, to put it mildly—it is my attempt at irony—that the Post Office’s contract to award 400,000 green giros a week has recently been lost. This provided 400,000 transactions a week, a significant of level of footfall supporting the network and around £70 million in revenue over five years to Post Office Ltd. It strikes an unfortunate note given the recent statements by the Government that they are determined to ensure that post offices will be the front office for a number of government services. I would welcome the Minister’s comments on that decision.

As I have said, the Government have rejected a number of opportunities to make that commitment firm in this important legislation. They have declined to accept a statutory commitment, as exists in countries such as Germany and the Netherlands, to a figure of 11,500 offices; they have rejected embedding into the Bill the access criteria stating how close your nearest post office will be; and they have even rejected empowering Ofcom to adjust the statutory commitment over time. We do not doubt the Government’s good intentions but it will take more than that to require a privatised Royal Mail to use the post office network to the same extent as now.

European competition law is trailed as a possible obstacle to an inter-business agreement. The Minister for Postal Services told the Public Bill Committee in another place:

“I am unaware of any statutory precedent for requiring particular commercial terms between two independent businesses”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 360.]

However, there is no precedent for separating the Royal Mail from the post office network. The National Federation of Sub-Postmasters has said that there is nowhere in the world where this has happened. It is the role of new legislation to create precedents. It is because of the precedent of totally separating the Post Office from a privatised Royal Mail that we seek to underpin the relationship with the post office network.

We hope that the Government will reconsider this vital business agreement, which will ensure not only an enduring relationship but the future of the Post Office. I am conscious of the time and I shall cut short my contribution. I look forward to the Minister’s response.

[Baroness Wilcox]

In these amendments, noble Lords express a concern that has been debated at length in the other place and in other fora—namely, that taking Post Office Ltd out of the Royal Mail group of companies will put at risk the commercial relationship between Royal Mail and Post Office Ltd, and therefore the post office network. The amendment also seeks to provide for any situation where the universal service provider may no longer be Royal Mail alone. I share the noble Lords’ laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd but the approach taken in the amendment—legislating for a contract of a certain length—is not the way to achieve our shared objective.

In the evidence given by various stakeholders to the Public Bill Committee in the other place, strong backing was given for the separation of Royal Mail and Post Office Ltd. 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. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together.

In her evidence to the Public Committee in the other place, Moya Greene, the chief executive of Royal Mail, called the post office network,

“the best and strongest network in the country, by any yardstick”.

She also said that it would be “unthinkable” for there not always to be a very strong relationship between the Post Office and Royal Mail. To underline this point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence to the same committee that, before any transaction took place, a continued long-term commercial contract will be put in place between the two businesses for the longest duration that is legally permissible. On Report in the other place, the Minister for Postal Affairs pledged to the House that the Government will ensure that this commitment is upheld. I repeat that pledge to your Lordships today.

I also remind your Lordships of my commitment to consider the amendment to Clause 2 proposed by the noble Lord, Lord Whitty. His amendment would have ensured that information regarding the relationship between the two companies is included in the report laid before Parliament when a decision has been taken to dispose of shares in a Royal Mail company. I hope to bring forward a government amendment on Report to address those concerns which I believe will also provide greater comfort to the noble Lords bringing forward these amendments today. However, I would like to explain why I cannot accept these particular amendments.

In these amendments, the noble Lords, Lord Laird and Lord Rogan, seek to place the agreement between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 15 years. The noble Lord, Lord Young, and his colleagues on the Front Bench also specify that the Secretary of State should ensure that an agreement of at least 10 years is in place. As was discussed in the other place, legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. These negotiations are best left to the businesses themselves, which know far better than we in this House their customers, the markets they serve and the services they require of one another. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volume, service levels and duration. Focusing on the duration of the contract would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us in Parliament. What the Secretary of State and indeed the Government can and will do is to ensure that there is a contract in place between the two businesses before separation. Most importantly, government can of course help to create the conditions in which both businesses can flourish in partnership with one another. One thing is certain: a struggling Royal Mail will lead to problems for the Post Office. This Bill introduces the ability to bring in much-needed private capital for Royal Mail to invest in its transformation so that it can offer the very best service.

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[Noble Lords]

Hear, hear.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her response. I have a couple of comments to make. She talked about a long-term contract that is legally permissible. I would welcome some elaboration on what the Government envisage. We constantly talk about this long-term contract that is legally permissible, but somehow we seem to be short on finding out what is the longest contract that is legally permissible. That creates a feeling of uncertainty. If she does not envisage that this is the appropriate place for that contract, in the legislation, can she make it clear that the Government will ensure that there is a contract in place before separation?

Although we welcome the £1.3 billion funding package, the other concern that I addressed in my contribution, to which she did not respond, was that the funding package is good but that it also requires commitment in business coming from the Government. As I pointed out, in the first test that we saw on this, on the green giro cheques, the Post Office did not get the contract. In our view, and in that of a number of people, that was a significant contract. Before I make up my mind, I would welcome a response on what is legally permissible with a long-term contract, or an explanation of what the Government are doing to get that answer if the noble Baroness does not have it, and on the commitment to ensuring that government business will go to the Post Office.

[Baroness Wilcox]

We have gone on record in the other place and I have repeated it here today. I have no doubt that the noble Lord will read it but I will write to him to clarify further, as best I may. I understand about the business. In fact, the contract was not that big but the Post Office had to bid for it. We are very encouraging of all government departments to bear in mind the work they may be doing themselves but which the Post Office could do better for them. We are encouraging all departments to look again and think carefully about what work they can start to bring forward that could be better done by the Post Office.

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[Lord Boswell of Aynho]

My Lords, I am delighted to follow my noble and good friend, Lord Brooke of Sutton Mandeville, whose speeches I always enjoy. The House has enjoyed one this afternoon. We owe an equal debt of gratitude to the noble Lords, Lord Christopher and Lord Clarke, on the opposition Benches, for initiating this debate. I share with them the spirit of these amendments, and a belief in the importance of the subject. I should perhaps make clear to noble Lords that in another capacity and in another place I was involved in the establishment of the All-Party Parliamentary Group on Archives, of which in due course I became the founder chairman, and of which I am still an officer. We brought it into being because we thought that archives were a part of our heritage that was unsung, understated and always vulnerable to financial pressures, and that it needed a closer focus. I think that we were right to do that.

The group sits alongside the All-Party Parliamentary Arts and Heritage Group. As my noble friend pointed out, some of us were privileged to attend the British Postal Museum and Archive for an intensely interesting morning. Not only was it intrinsically interesting, but it showed the wider importance of archives, for example by showing the relationships involved in the formulation of new stamp designs and the exchanges before they were approved and came into circulation.

I will add at this point there are always two tests. One is the importance of business archives generally. In the capacity that I mentioned, I attended a meeting in this House at which the Business Archives Council launched a new guide for businesses. It was very well attended and addressed by the Governor of the Bank of England. It showed the importance of business archives. In the wider context of heritage, we are conscious that, for example, Minton and Wedgwood are under severe pressure at the moment, and it is important that we do not slip this catch in the course of the Postal Services Bill.

My second point is more generic. Wherever one transfers an activity or asset, or any combination, to private contractors or undertakers, it is particularly incumbent on us to make sure that our heritage is preserved. As I mentioned to the House, the British Postal Museum and Archive is a major resource. It represents the distillation of many years of postal and official history. I am privileged to know its director and the chair of its organising committee, who is both a neighbour and a personal friend. We should take time—I am sure that the Minister's good will is there—to see that we get this right.

I say to the House—I need not do so at length—that there are complexities in this. Many of them are set out in the amendments that noble Lords have brought forward. I look forward to the Minister's take on this and to hearing about the ways in which she might consider taking this forward. For a start, there is an archive and an associated obligation to what was once a department of state. Like any other archive, it has a relationship with the National Archives; that should be understood. It is a continuing act of state and an obligation that we should maintain.

Then there is the postal museum. By their nature, the assets are somewhat less intensely valued, although they may have a very high intrinsic and visual interest. The assets are not quite the same as those of the archive, and that is why it is called the British Postal Museum and Archive. That leads me to suggest that there may be different solutions in different cases. As I understand the Bill—this is also my first entry into the Committee stage—there is reasonable provision, at least within the clause to which the amendment is attached, for looking at the public record function and seeing that that is satisfied. That of course applies particularly to existing records, which is I think step one of the process. Then there is the question of what happens when people discharge public duties in the future and whether securing the continuing acquisition of relevant archives will be adequately tied down by the Bill.

There is also the question of proper resources. I remember from our visit that the museum is under some pressure with regard to its existing resources, and the noble Lord has already explained the financing. Nothing is easy in the heritage and archive world at the moment. However, we need to see that the whole thing does not fall down because it somehow misses out on financing.

Although not absolutely essential, it would clearly be very beneficial to the public interest to make sure that the postal museum and archive continued to be collocated on one site, with the possibility of their development either there or elsewhere as an asset to the heritage more generally. Therefore, there is both an archive interest and a wider heritage interest.

I know that my noble friend Lady Wilcox has visited the museum and I hope that she was impressed, as we were. I am sure that this is a problem that is capable of solution, and we look forward to her response in leading the way towards it.

[Lord Young of Norwood Green]

My Lords, I suspect that everything that needs to be said has been said already and I do not want to fall into the trap of saying “but not by everyone”. There is a common thread relating to heritage. I think that keeping the Queen’s head on stamps would be a reasonable tribute as we come up to her Diamond Jubilee. An amendment on that matter was the only amendment passed in the other place, and I look forward to hearing a confirmation of that. Other noble Lords have eloquently stressed the importance of the archive. When companies are privatised, that poses a real threat to their records, and I witnessed what happened to British Telecom’s archive and heritage. Therefore, I, too, look forward to the Minister’s response.

[Baroness Wilcox]

My Lords, I very much understand and appreciate the sentiments behind these amendments. Royal Mail has a tremendous history and heritage. I know that the noble Lords, Lord Clarke and Lord Christopher, have both campaigned to secure Royal Mail’s future for many years, and they have a strong desire to protect the company’s proud heritage.

As noble Lords have heard, I recently visited Royal Mail’s archive and saw for myself some of the public records, including a sheet of Penny Black stamps—something that I thought I would never see—and museum artefacts on display in the archive. I also saw on my visit the designs for stamps commissioned by the then Postmaster-General, Tony Benn, working with the artist David Gentleman, which did not include the image of Her Majesty. Thankfully, as I think the Committee will agree, these stamps were never issued and the tradition that the noble Lords are seeking to preserve through Amendments 25A and 25B continues to this day.

Clause 60 provides the Secretary of State with a power of direction that can be used to require the universal service provider to maintain that tradition and to make sure that the stamps receive royal approval before they are issued. Amendment 25A would require the Secretary of State to issue such a direction, while Amendment 25B would require that any such direction was subject to the affirmative resolution procedure.

This clause was discussed in the other place and, as was mentioned by the noble Lord, Lord Young, the Government subsequently introduced an amendment to strengthen the safeguards for protecting the future of this unique tradition. We are not here today to remove that amendment in any way. The current voluntary framework governing the approval of stamp designs has been in place for more than 40 years and it has worked well.

Royal Mail has been, and is currently, doing just what a direction would require it to do. I would therefore like to draw on a piece of timeless wisdom that says, “If it ain’t broke, don’t fix it”. That is not to say that we should not have the tools in place to fix it, if fixing were ever required. That is precisely what this clause provides for. However, this power is a failsafe that should be drawn on only when required. It can easily be drawn on by the Secretary of State if there is ever a justifiable need to do so.

On Amendment 25B, we take the view that if there is ever a need to use the power of direction, the direction itself will not be of a nature to warrant the use of the affirmative resolution procedure. This power of direction can be used only for a limited and focused purpose, in effect to re-impose time-honoured practice and processes. Furthermore the direction will be imposed only on the universal service provider, and Clause 60 allows for any such direction to be varied or revoked by subsequent directions. We believe that this clause as it stands is fit for purpose and proportionate to the important task of protecting the future of the sovereign’s image on UK postage stamps, if such protection is ever needed. I hope that I have been able to reassure the noble Lords on this.

On Amendment 29A, and as noble Lords will recognise, archive status and museum collection status are different, although both are currently maintained by the British Postal Museum and Archive—the BPMA. The archives of Royal Mail and its predecessors are part of the public record, and they will remain part of the public record after we dispose of shares in Royal Mail. The Bill makes this clear and ensures that no changes can be made to the way in which the records are kept without consultation with the Keeper of Public Records, which is the National Archive. As public records, the archive must be preserved, maintained and made available to the public in accordance with the Public Records Act 1958. Amendment 29A would, however, place additional requirements on Royal Mail that would not apply to other organisations which have responsibility for keeping public records. I do not think that it would be right to place an additional burden on a privately owned Royal Mail that Parliament does not place on publicly owned bodies.

The museum collection is not part of the public record; I understand that its ownership was passed to the BPMA in 2004. Although the Government, like noble Lords, wish to see the collection maintained, we do not believe that this should be a statutory requirement on Royal Mail. It is currently not a statutory requirement for Royal Mail to maintain the collection. Royal Mail funds the BPMA because it recognises the importance of its heritage; it does so not because it is publicly owned but because heritage is part of the Royal Mail brand. I would fully expect this approach to continue in the future. Royal Mail, whether privately or publicly owned, should be proud of its history and use it to positive advantage in an open and transparent way.

I read in my brief that British Telecom is a good example of a privatised company respecting and maintaining its heritage, although the noble Lord, Lord Young, has just given us an instance of when it was not. It has a purpose-built repository for the archive which is located in Holborn; and although the dedicated British Telecom Museum closed in 1997, it has invested some £6 million in establishing its Connected Earth initiative which provides access to its museum collection online and at its 10 partner museums located around the United Kingdom, including the National Museum of Scotland, the Museum of London and the Amberley Museum and Heritage Centre.

The noble Lord, Lord Clarke, mentioned the Post Office underground railway—Mail Rail. He was even kind enough to mention it to me the other day in passing so that I would not get caught out, as I would have done if he had mentioned it only today. I understand that the Post Office (London) Railway Act was passed by a Select Committee of this House in 1913. Construction began in 1914 but was halted during the First World War, when the tunnels were used to store and protect art treasures belonging to the National Portrait Gallery and the Tate. The railway finally opened in 1927. At its height it was carrying an estimated 4 million letters a day. Royal Mail decided to stop using Mail Rail for operational reasons in 2003, primarily because many of the mail centres that Mail Rail serviced had been closed or changed their function. Of the nine original stations, Royal Mail still owns only four of the properties.

Royal Mail is not unique in deciding to disuse such underground railways. The German and United States postal service providers have similar systems, but they also no longer carry mail. In fact, the United States railway in Chicago is now used to carry rubbish, as part of the city's waste disposal system. Royal Mail has not made any decisions about the future of the railway; it does, however, continue to maintain the tunnels, to ensure that they remain safe and sound. Although there have been previous discussions about putting the tunnels to commercial use, no commercially viable solution has been developed so far. Any suggestions that your Lordships may have on good commercial uses for the railway can be sent on a postcard to Royal Mail at 100 Victoria Embankment. I am sure that the company would be only too delighted to offer a prize to any offer put forward and successfully processed.

In all seriousness, in response to the noble Lords, Lord Boswell, Lord Brooke of Sutton Mandeville, Lord Christopher and Lord Young, I assure them that I recognise their concerns about Royal Mail, its heritage and how it should best be preserved in future. I would like to take away the issues that they have raised for further consideration and will return to the matter at Report. I ask that, with those reassurances, the noble Lord will be kind enough to withdraw his amendment at this time.

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[Baroness Wheatcroft]

My Lords, it is precisely because I do not want what is now known in so many quarters as snail mail to be consigned entirely to our heritage that I have tabled Amendments 25C and 30. I must confess that I have never done a mail round, but I have pushed numerous leaflets through numerous doors. Sadly, I never encountered a famous actor in a silk dressing gown or, indeed, a famous actor at all, but I met a lot of Rottweilers. I therefore know that our post men and women take risks when they go out on their rounds, and I applaud them and want them to continue doing that, but I do not believe that we should isolate Royal Mail from competition in the long term. That is what these amendments are about.

They take it for granted that we will have a regulatory regime that will allow Royal Mail to charge a fair price and to determine what products it offers. We had much discussion about that earlier in the day and received reassurances that the new regulatory regime will be more accommodating. However, there need to be safeguards. Amendment 25C concerns the move over from Postcomm to Ofcom as the regulatory authority. I do not want to malign every regulator, but one has to note that among regulators there are many tendencies towards doing more rather than less. It is somehow in the nature of the beast. Amendment 25C aims to put a line under what the regulator of postal services can touch. It decrees that before the appointed day for the change over from one regulator to another a line will be drawn and no other services should be brought within the scope of the regulation. It may be a technical amendment, but it seems one worth moving. We do not want to see, for instance, motorbike couriers or cycle couriers drawn within the scope of the legislation. There may be many of us who would like to see cycle couriers reined in, particularly those of us who have encountered them while driving, but that is not the role of Ofcom. Amendment 25C is intended simply to make it clear to the market that there are areas of deliveries that will remain free of regulation. I believe that that is important.

Amendment 30 covers the delivery of some of those election addresses that I, for one, have pushed through many doors. As noble Lords will know, the Representation of the People Act 1983 entitles candidates to a free delivery of election mail. I see no reason why we should preserve a monopoly situation here where Royal Mail is the only deliverer of that free address. Assuming that Royal Mail is able to charge a fair and profitable price for delivering what is known as the final mile, it seems perfectly reasonable that any other postal operator should be free to tender for that business. My noble friends Lord Jenkin and Lord Eccles stressed in earlier amendments that what we want to see is a market where competition flourishes. I believe that more competition might generate more business and that Royal Mail could in the end be the winner from that rather than the loser. I beg to move.

[Lord Young of Norwood Green]

My Lords, I oppose Amendment 25C moved by the noble Baroness, Lady Wheatcroft, and Amendment 30 also in her name. I do not think we can say arbitrarily that we are going to draw a line in the sand. Who knows what situations may arise? I did not quite understand that or get a validation of that argument.

As regards Amendment 30, we talked earlier about getting the balance right between trying to ensure the future of the universal service provider and competition. I am not sure why we would want to remove from the universal service provider this important and sensitive material in some cases, with a guaranteed standard of service and delivery of election material. The noble Baroness painted a picture whereby in the future it might be a competitive scenario but for the time being we believe that it should remain with the universal service provider.

[Earl Attlee]

My Lords, before turning to Amendments 25C and 30 in the name of my noble friend Lady Wheatcroft, I would like briefly to outline the important provisions that they seek to amend. The objective of Schedule 9 is to ensure a smooth transition between the current and the new regime, and to provide as much certainty to the market as possible. It enables Ofcom to carry out certain functions, including work on developing the new regulatory regime, during the transitional period between Royal Assent and the date at which Ofcom takes full responsibility for postal regulation on the appointed day. During the transitional period, Ofcom must determine the initial regulatory conditions, which will apply to postal operators until they are modified—if at all—once the Act fully comes into force and we move from a licensing to a general authorisation regime.

Amendment 25C seeks to add a requirement that Ofcom cannot impose any initial,

“conditions that could not have been imposed under Part 2 of the”,

Postal Services Act 2000. I would like to reassure my noble friend Lady Wheatcroft that there is no need for such an amendment. The schedule already provides that initial conditions,

“must be to substantially the same effect as the current licence conditions”.

There is no chance therefore of involving, say, motor cycle couriers.

Given that existing licence conditions stem from the 2000 Act, they will of course need to be compatible with it. It is inconceivable that in practice something could be substantially to the same effect as the current licence conditions without being compatible with the 2000 Act. The schedule also provides that were Ofcom to modify an initial condition, it cannot do so in such a way that was not compliant with the 2000 Act. I hope that this provides my noble friend with reassurance and that she will feel able to withdraw Amendment 25C.

Amendment 30, which concerns the Representation of the People Act 1983, would substitute the words “postal operator” for “universal postal service provider” with the intention of opening up to government the option of utilising any postal operator for the delivery of election material at public expense. My noble friends propose to make this amendment to Schedule 12, “Minor and consequential amendments”. While we see that there could be merit in opening up this area to competition, the proposed amendment cannot, in the Government’s view, be considered a simple minor consequential amendment as it has significant wider policy implications for the management of elections.

We would need to consider carefully all the implications and potential policy consequences before making any such change, and the timing of the Bill does not allow for that. I believe that this is an issue that requires further consideration, including discussion with other political parties, which I am sure will be of interest to the noble Lord, Lord Young. My officials have been liaising with their counterparts at the Cabinet Office, who have given an assurance that the matter is already on their radar for consideration and will be looked at as part of the wider work on the overall operation of elections following the referendum.

While I have sympathy with the intention of the amendment, I hope that my noble friend will accept this reasoning and not move Amendment 30 at the appropriate time.

Postal Services Bill

Lord Young of Norwood Green Excerpts

Monday 14th March 2011 Lords Chamber

Moved by

[Lord Young of Norwood Green]

13: Clause 2, page 2, line 3, at end insert—
“( ) The Secretary of State will ensure that any relevant disposal guarantees that the existing rights of recognition of employees are maintained.”

[Lord Young of Norwood Green]

My Lords, this amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that the existing rights of the workforce recognition are maintained. There are two themes at work here. The first is that the workforce by its own efforts has unionised the industry to such an extent that recognition of the union was achieved more than a century ago. Long before the existing recognition rights existed in legislation, postal workers had come to an agreement with the employers and behind them the Government on the existence of the workforce’s trade unions. This has shaped employment relations in the industry; both workforce and management have seen the value of organised bargaining and representation. We are looking at a mature attitude to industrial relations. Both parties know of each other’s interests and concerns and are usually able to accommodate them. Despite the media caricatures, the reality is that organised industrial relations have created ways of working that make the industry productive and safe; every day many thousands of hurdles small and large are overcome by the timely recourse to the recognised framework of industrial relations in the industry.

If you looked at the media, you would imagine that everything was in total conflict, whereas the reality is very much different. If one looks at some of the positive aspects, one may remember the severe winter that we have come through recently and how tributes flowed as workers in the Post Office and Royal Mail worked with might and main to ensure that whatever the conditions the mail got through. Then there is the role of union learning representatives in encouraging people to lifelong learning and to embark on training. That is another very positive aspect that is overlooked.

Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in the right way and in a fair way. As I remarked on Second Reading, if one wants a good example of that, go to Gatwick to see an example of world-class mail and how well it works when the workforce is involved positively. As I said, the media is interested only in the breakdown of those relations, turning a momentary conflict into a sensation that sells papers. The reality is that countless efforts by management and union reps ensure the everyday smooth running of the industry. It is interesting that the Hooper report apportioned blame when conflicts arise fairly between both management and unions. I am sure that the noble Baroness would agree that that is an impartial analysis.

The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disbursal. Recognition has not just been won as a legal right, it has been established by the efforts of generations of postal workers and managers. Any new owner must begin by recognising that they are buying in to an organised workforce. Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner is in doubt, the Secretary of State will be obliged to dispel that doubt, as the new owner must learn to work with the unionised workforce. Tributes have been paid to the new CEO, Moya Greene, and her ability to work well and productively with the unions.

The second theme on recognition is that bargaining is a natural part of such recognition. It may be argued that under TUPE transfer, the workforce carries across existing terms and conditions, although some comments in the press on TUPE recently give me cause for concern, so that may be true but insufficient. The workforce is an organised one which will address any new employer with the expectation that its bargaining rights remain intact. That is not just about what is currently earned or what is currently an entitlement—to paid holidays, for example—it is also about the right of the workforce to address its future conditions with confidence that it can resolve its problems through negotiations.

Any new employer who bought into Royal Mail on the assumption that it could simply impose its vision, priorities or methods on the workforce would break down what we see now, to which the noble Baroness paid tribute: what we have achieved in the current transformation and modernisation agreement; really constructive partnership working. The workforce has agreements which have been hard-won and painfully negotiated, and it would expect any changes to be negotiated.

That is not necessarily a conflict-ridden process—on the contrary, the only cost for the vast majority of agreements has been the time and patience of management and union reps—but such rights are valued greatly by the workforce. Postal workers know that the industry is constantly changing. They have had to accept losses of about 69,000 jobs over the past decade. It has been painful, but they have seen that as a part of improving productivity and accepting the modernisation programme. That also means that working arrangements and conditions change. That is on the understanding that postal workers will buy into those changes by helping to shape them. Those of us with experience of employment relations know that that is the best way forward.

We expect the Secretary of State to be entirely clear with the new owner of Royal Mail that recognition of the workforce and its union involve a negotiated bargaining framework for employment relations in the workplace. That fact of life will have to be addressed. It is best that we make that clear in the Bill to any potential investor in or buyer of the industry. Carrying the amendment would do exactly that. I beg to move.

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[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, Amendment 13 seeks to place a duty on the Secretary of State to ensure that employees’ existing rights of recognition are maintained. I am not sure whether the amendment fits neatly into Clause 2, which is intended to place a duty on the Secretary of State to report to Parliament when a decision has been made to undertake a disposal of shares in the Royal Mail company. However, I am happy to debate the specific issue raised by the noble Lords.

Before I do that, I reiterate that the Government welcome the positive changes in the relationship between Royal Mail’s management and the CWU over the past 12 months. I say this because, notwithstanding the historic references made by the noble Lord, Lord Young, industrial relationships at Royal Mail have undoubtedly been poor in recent times. The national strikes in 2007 and 2009 were damaging for the company and for the postal market but the business transformation agreement, reached in March last year, has seen the implementation of a new approach to union-management relationships. It has enabled progress on the much needed modernisation of the company and I urge both sides to continue to work together in that improved way.

The noble Baroness, Lady Donaghy, was concerned about uncertainty for employees. Let me be clear that the worst thing for employees would be for us to do nothing and to let the Royal Mail decline through inaction and a lack of investment. People want to work for a stable company and to have a secure pension, and I believe that our proposals will help us on both those fronts.

On employee representation, employees at Royal Mail are mainly represented by the Communication Workers Union and by the Communication and Managers’ Association, which is a section of UNITE. This representation is recognised in voluntary agreements between these unions and the management. The Government do not play a role in these agreements. Such voluntary agreements occur across industries where there is a union presence and it is good practice for the employer to take full account of the views of employees when deciding whether a union should be recognised or continue to be recognised. Union membership remains relatively high within most grades at Royal Mail. That fact suggests that most staff support union recognition.

I have no reason to believe that any new owners would seek to change such agreements, provided, of course, that the employees wish to continue to be represented by those unions. Any new owner will fully appreciate the need to work with employees’ representatives to secure the future of the company in the changing postal market. Management most certainly cannot do this alone. However, as I have said, union recognition within Royal Mail—or any other business—is primarily a matter for the employer and the trade unions concerned. I do not therefore believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements in Royal Mail. I therefore hope that the noble Lords, Lord Young and Lord Lea, will take time to consider my response and that they will withdraw their amendment at this time.

[Lord Young of Norwood Green]

I thank the Minister for her response, even if it did not go as far as I would have liked. I also thank my noble friend Lady Donaghy for contributing to this debate and for pointing out that at a time of great change—and moving to a privatised environment will be a great change—the role of unions will be absolutely vital. My noble friend Lord Lea warned about not taking trade unions for granted in the current environment.

While the Minister welcomed the new approach between management and unions and laid stress on the question of voluntary agreements, any new owner ought nevertheless to recognise the environment that they will be coming into. If they want the company to succeed, it will mean working with the unions, in our view. We will reflect on what has been said and consider whether we need to bring this back on Report. On that basis, I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

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[Lord Young of Norwood Green]

I beg to move the amendment standing in my name.

[The Deputy Chairman of Committees (Lord Skelmersdale)]

You are speaking to it.

[Lord Young of Norwood Green]

My apologies, I shall speak to it.

[Lord Razzall]

Speak for England.

[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.

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[Baroness Kramer]

My Lords, does not the dispute that has just taken place make it clear that this House and the other place are not the appropriate organisations for detailed discussions on how to do a disposal of shares? Obviously there are many different views, but this is not the kind of issue that can be put in the Bill. The financial circumstances of the Royal Mail have to be considered, as have the financial markets and the trade buyers that may be available. There will be a wide range of issues. I agree with those who have criticised past sales.

[Lord Young of Norwood Green]

My Lords—

[Lord Razzall]

We are in Committee, you do not have to interrupt.

[Baroness Kramer]

I am perfectly happy to sit down if that is helpful.

[Lord Young of Norwood Green]

I do not normally intervene; indeed, I am impelled to do so only by the contribution of the noble Lord, Lord Razzall. The noble Baroness, Lady Kramer, compounded the situation by saying that this was not the place to discuss this. I reject that. This is absolutely the right place for us to test the water on this issue. We are entitled to put the argument about tranches; we are entitled to see the Minister’s response. On the point of the noble Lord, Lord Razzall, we have made it clear that we oppose the core of the Bill, which is to achieve 100 per cent privatisation, but we have not adopted a negative attitude in an attempt to undermine every stage. We have endeavoured to engage in constructive debate, and we have a legitimate right to do so on this issue.

[Baroness Kramer]

The noble Lord, Lord Young, and I seem to have discovered a knack of talking past each other. I have no criticism of anyone raising the issues—in fact, I think it is good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets. However, I argue that putting down a set of rules such as 30 per cent, 90 per cent or whatever else does not belong in the Bill. I am not saying that the issue should not be raised or that the matter should not be debated but that one cannot define it in the Bill when it depends so much on market conditions, particular financial circumstances, the specific issues of the time and the deals that can be negotiated. The Bill is the wrong place in which to set down hard and fast and black and white rules on this matter. That does not mean that debate and reporting back on the whole process is not necessary, but I regard those as two different issues. I hope that the noble Lord, Lord Young, is aware of that.

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[Baroness Kramer]

My Lords, I say to the noble Lord, Lord McAvoy, that I remember, not that long ago when we were standing not that far apart on the Floor in the other place, when he whipped his rather unwilling troops in to vote for the closure of 4,000 local post offices. I remind him that his views have taken a rather dramatic turn between that House and this one.

I turn to the issue that seems to be in contention here, which is whether deliveries to the outer parts of the British Isles—such as Orkney and Shetland—are subsidising deliveries to areas such as mine in Richmond or vice versa. Intuitively, I had assumed simply that the more rural the area, the more costly the delivery. I understand that that is not justified by the numbers, and I was going to suggest to the Minister that she might wish to speak to the Post Office because I presume that the appropriate numbers that make that clear could easily be placed in the Library for everyone to look at. That might clarify an issue of fact.

I have relatively little sympathy with Amendment 16A because the devolved Assemblies have many mechanisms for regular conversation with government departments here. They can come to their conclusions and make whatever representations they consider important without us having to encumber the Bill with further administration and burden. As others of us have said, it is important that we proceed in as accelerated a way as possible to make sure that both Royal Mail and the post office network are rescued before more financial damage can be done by the passage of time without a change in regime.

I am concerned that Amendment 16, moved by the noble Lord, Lord Low, might have been obscured in this conversation. That is the important amendment in this group. Whether it is justified or not, many people who are more vulnerable are very concerned by the changes that are coming to Royal Mail and the Post Office. There are many protections in the Bill for people who are more vulnerable and for small businesses, but it is not right to expect people to delve into the details of the Bill and spend time trying to work their way through the Explanatory Notes in order to come to an independent conclusion. It is crucial that the Government and the department are in conversation with more vulnerable groups and small businesses to make it clear that their needs are being recognised and heard, and that a response is available within the context of the Bill. Whether that is done via the mechanism of a formal consultation or in some other way, it is crucial to draw attention to people who are vulnerable.

I remember when local post offices were closed. I have mentioned before the ward of Ham, the most deprived ward in my old constituency. All three branch post offices were closed there. Many older people found themselves deprived of their independence because they had to get a friend to drive them to the post office. They could no longer walk there themselves; they were not capable of getting on to the bus to make the journey. It was an appalling experience for all of them and they still live without a post office. The noble Lord, Lord McAvoy, will be aware of what they went through because this all happened on his watch. That group will be anxious; it will not be certain that the Post Office recognises its needs; and it needs the additional reassurance that the amendment of the noble Lord, Lord Low, in many ways underscores. That is the amendment that we should be debating. The devolved Assemblies have mechanisms of their own which I am sure they are using most successfully.

[Lord Young of Norwood Green]

My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.

We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.

I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.

It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.

Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.

Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.

[Baroness Wilcox]

My Lords, I suppose that I ought to start by saying that I live in Cornwall, which may put the Committee’s mind at rest. I have some idea about the differences of living in Cornwall and in the centre of London. Indeed, I apologise, for so does the noble Baroness, Lady Dean. There are quite a few of us around the Committee tonight.

Amendments 16 and 16A touch on the issues that we will be debating under Clause 11, about the annual report on the post office network, as well as under Part 3 on the regulatory framework for the postal sector. Amendment 16 would require the Secretary of State to consult various groups before a disposal of shares and to lay a report before Parliament setting out how the minimum requirements for the universal postal service, set out in Clause 30, will be maintained. Amendment 16A requires the Secretary of State to submit reports to the devolved Administrations about the impact of proposals in the Bill on post offices, small and medium-sized businesses, communities in remote areas, pensioners and those with disabilities. I hope to reassure noble Lords that the existing and future duties of Ofcom and existing reporting requirements are sufficient to meet their concerns.

I will first address the points raised in Amendment 16 by the noble Lord, Lord Low. Under Part 3, Ofcom will have responsibility for regulating the postal sector and its primary duty in that regard will be to ensure the provision of the universal postal service. The noble Lord, Lord Low, was concerned that Clause 29 would allow the minimum requirements of the USO, particularly the requirement for Articles for the Blind, to be reviewed by Ofcom and changed within 18 months. Let me reassure him that the requirement for a review within 18 months is for the very particular products and services that Royal Mail is required to deliver. It can have no impact on the statutory protections for the minimum USO requirements in Clause 30, including free services for the blind.

The noble Lord, Lord Low, was also concerned that a private Royal Mail could charge higher prices to customers in rural areas. Again, let me reassure him that Clause 30 also provides that pricing of the universal service must be,

“uniform throughout the United Kingdom”.

As I said when we debated Amendment 10, Ofcom will report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay that report before each House of Parliament.

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The amendment tabled by the noble Lord, Lord Touhig, would require the Secretary of State to submit reports to the devolved Administrations on the impact of the proposals in the Bill on the service in Scotland, Northern Ireland and Wales.

[Lord Young of Norwood Green]

I am sure that the Minister is right about the attentiveness of the Bill team in the Box; they all look exceedingly alert to me—bright eyed and bushy tailed. I just want to be sure what we are seeking, as it is not the guarantee that the universal service will be provided. The debate is about the cost of delivery in urban as opposed to rural areas; I trust that I have got that right. Can I see them nodding in the affirmative over there? I hope so.