Postal Services Bill

Debate between Viscount Eccles and Lord Christopher

Wednesday 6th April 2011 Lords Chamber

[Viscount Eccles]

You could run Royal Mail on the basis of the universal service only. That is to say, if you were being properly paid by whoever was using it, you could outsource—I use that word advisedly—every form of sorting except probably the very final sort where you sequence the delivery. You could write a PhD thesis on whether a final-delivery universal service provider should have to sort mail. My answer to that question would be no, it should not have to. It would have to collect it, because that is in the universal service, but it could immediately deliver it to somebody else who did all the sorting. That of course is what is happening with the people who have access agreements. In that way, you would reduce quite dramatically the amount of capital you needed and you might also establish a profitable business which would be attractive to the market.

[Lord Christopher]

My Lords, I had not intended to speak, but some of the comments made require a response. The noble Lord, Lord Flight, put his finger on one point: we have had much discussion about competition for the universal service when it does not exist and, in my own judgment, never will. However, you need regulation, because science moves on and who knows what might happen?

I was interested in the intervention of the noble Viscount, Lord Eccles, because I was going to use as a not-too-strong illustration the supermarkets. It is very interesting that they have not come together to provide a universal delivery service; they all do it on their own. Whether they ever will, I do not know, but I think that people would be very worried if we had the system which the noble Viscount, Lord Eccles, has just suggested, because the delivery of one’s letter in 24 hours would disappear and it would become increasingly difficult to discover who was responsible for it.

I shall move on to something more practical; the low cost of postage in this country, as has been mentioned. A couple of days ago, the Telegraph ran one of its happy headlines about the increase in the price of postage, and now utterly unrealistic correspondence is going on. I should like to put the differences on record. Despite the increase that is about to take place, we are still the second cheapest in Europe and the only country which has a mandatory access service. No other country in Europe has picked that up—not one. The new price of posting a first-class letter in the UK is to be 46p as compared with the following countries, none of which has an access requirement. In Denmark it costs 64p; in Germany 48p; in Belgium 51p; in the Netherlands 38p; in Sweden 58p; in France 50p; in Austria 48p; and in Spain, at the bottom, 30p, which will come as no surprise to anyone who has had experience of its postal service. Whichever company ultimately buys Royal Mail, it will seek to make a profit, so how can we conceivably expect a price structure to exist unless we have some regulation over it? We should be realistic, not only with ourselves but with the country, about the fact that there will continue to be increases in the price of mail in this country.

Postal Services Bill

Debate between Viscount Eccles and Lord Christopher

Wednesday 16th March 2011 Lords Chamber

[Lord Christopher]

My Lords, I apologise for having been diverted to another meeting. There are two issues that concern me on which I would be grateful if there were some comment. There is an assumption that there will be a market in these shares, and I am not at all clear that that will necessarily be the case. If there is not, how is it proposed to deal with that situation?

I may have missed the point on the other issue. Assuming that something like the amendment goes through, we have an employee share scheme of this nature and shares are sold back, will we reach a position where all the shares are in the hands of this trust, or whatever it may be called? How will we deal with that situation?

[Viscount Eccles]

My Lords, both the possibilities outlined by the noble Lord, Lord Christopher, could indeed happen. Again, that reinforces the difficulty of Parliament setting down conditions that will need to be thought through in circumstances that may be very different from those that we in this Committee envisage.

Postal Services Bill

Debate between Viscount Eccles and Lord Christopher

Tuesday 8th March 2011 Lords Chamber

[Viscount Eccles]

My Lords, I, too, apologise for not having been present at Second Reading, but I support my noble friend Lady Kramer and the noble Lord, Lord Jones, on the Cross Benches. This amendment may be based on a misunderstanding. If there is to be a successful deal to move Royal Mail on and to bring in private capital, that deal will need to be set up by the board of Royal Mail and the chief executive of Royal Mail. It will not be set up by the Secretary of State, who I hope will stay right out of any negotiations that might take place to achieve that deal. The noble Lord, Lord Young of Norwood Green, seemed to expect the Secretary of State to play an active role, which is completely mistaken.

[Lord Christopher]

I was not going to speak on this amendment, but I have been provoked. I hope that the Minister will answer directly the question just asked from behind her on whether the Government will have some say on the sale or whether it will be left exclusively to the board of Royal Mail. I do not think that it should. One issue has not been mentioned in this discussion. While there may be much anxiety about the hope that by Christmas 2012 we can all go back to where we were, underlying this is another issue—on this matter I hope that the noble Baroness will have something to say. As I said at Second Reading, it is easier to say to whom you would not wish to sell Royal Mail than it is to say to whom you would. There is such a lack of clarity on this that the Government need to give reassurance. Would we, for example, be prepared to see it sold to a hedge fund? Would we be prepared to see it sold to a private equity fund? Would we be prepared to see it sold to a sovereign wealth fund? If so, would that be to all, to none or to some?

I have one final point on this issue. Would we sell it to any buyer with a reputation for asset stripping? I hope to come to this point on a later amendment, but I believe that unless we get the price right, there are assets in Royal Mail which could easily be sold at a very significant profit.

--- Later in debate ---

[Lord Christopher]

I will put it in simple terms. If I owned a big sorting office in Oxford, I could sell the site at a good price to the university and build a sorting office outside Oxford. I would not have interfered with the universal service, but I would have made a nice profit.

[Viscount Eccles]

Perhaps I might ask the noble Lord whether he would describe that as asset-stripping.

[Lord Christopher]

Of course.

[Viscount Eccles]

Many of us would describe it as a very sensible piece of business.

--- Later in debate ---

[Viscount Eccles]

My Lords, we are dealing with a very different situation here. Unless and until the Bill becomes an Act and the pension issue is resolved for the time being, it would be a very bold person who said that you could put any value on Royal Mail. In the context of a willing-buyer willing-seller market, I do not think that you will find a willing buyer. Even if the buyer thought that the business was residually worth something, he would not want to enter into the deal. This amendment goes to the same point. In a willing-buyer willing-seller deal, neither the seller nor the buyer wants to know exactly how the sums have been worked out and if they thought that the sums had to be submitted to a third party and debated in this Chamber as a matter of parliamentary interest, I think you would scupper almost any deal.

[Lord Christopher]

My Lords, I do not understand what has just been said. However it is done, someone somewhere in Government has to decide whether the Royal Mail is worth X. The issue in front of us is how to arrive at X. I am very sceptical about whether Royal Mail knows what it owns.

To take a trite example, there are some valuable stamp collections in this country: Her Majesty has one, the Board of Inland Revenue has another and, I understand, the Post Office has one. The Revenue’s collection used to be displayed in cases as you walked into Somerset House. A representative of Stanley Gibbons walked in to ask the chairman, “Do you know what you have in those glass cases?”—there were three big ones. The answer was that it was worth well over £1 million. I think that the Post Office has a stamp collection, but I am pretty sure that no one there knows what it is worth. The outfit could well be sold lock, stock and barrel and then someone opens a safe one day and finds all those stamps.

There should be a proper valuation of all the assets of Royal Mail and the Post Office, because it will be divided up. Until that is done, we cannot satisfy the British people that we are asking a fair price. I do not complain about a modest discount, but we should have a clear idea of what assets we have. I will use my mythical Oxford sorting office as an example. What is it worth? An acre of land in most parts of the country is worth £5,000. With planning permission, it is worth nearly £1 million. Unless we explore the assets and ensure that we have an objective valuation of what is there, we will never feel that we have sold the Royal Mail properly.

Others have mentioned previous experiences. There have been two relatively recent ones, one by us of a company whose name I can never get my tongue around— QinetiQ—where people have walked away with millions. I have talked to many Members opposite who would never have privatised our railways in the way they did. Over the first two or three years, people walked away with very large sums of money. We have to avoid that. We cannot value the company in the way that companies are generally valued. Price/earnings ratios and so on have no relevance in that context. We must be sure that when we say to the British company, “We are trying to sell this for X”, that X is a reasonable, accurate figure.