Postal Services in Scotland after 2014

Anas Sarwar Excerpts

Wednesday 10th July 2013 Westminster Hall

[Mr Davidson]

I am sorry. I meant Royal Mail.

[Anas Sarwar (Glasgow Central) (Lab)]

I congratulate my hon. Friend on securing this debate. I am sorry to break the hand of friendship that he has offered to SNP colleagues, but does he not agree that actions speak louder than words? In 2009-10, the Scottish Government awarded £220,000 of contracts to DHL, which delivered 6,162 pieces of literature. FedEx was awarded £49,514 of contracts in 2010-11, and an £8 million contract has just been awarded to TNT, instead of Royal Mail. Does that not demonstrate the Scottish Government’s commitment to Royal Mail and its workers?

[Mr Davidson]

Goodness me! That is a surprise. I look forward to hearing from SNP Members, who are campaigning very strongly with us to oppose the privatisation of Royal Mail, as to why the Scottish Government, which they control, have been giving such contracts to the private sector. Goodness me, there must be some mistake, surely. [Interruption.] Are we going to get a correction? No, we are not. I can remember elections in which certain people sent mail through private companies, but those were just mistakes. Such things happen.

Let us be clear that a privately owned Royal Mail will undoubtedly apply downward pressure on the universal service obligation. We have seen that happen in Holland, for example, where the privately owned universal service is now likely to be reduced from six days a week to five days a week, with services being dropped on Mondays. We must recognise the alternative that lies in the private sector by looking at what private sector operators undertake at the moment. TNT, for example, operates on a principle of zero-hours contracts, whereby people who deliver for TNT are employed for zero hours. TNT constantly invites more people to the workplace than it needs on any given day so that it can guarantee itself enough numbers. That means, of course, as we used to see in the docks when they had the casual labour scheme, people are being turned away, potentially day after day, by privatisers who are treating workers simply as commodities, leaving those workers with zero hours on many occasions, which means they are unable to feed their family during the week. We can have little faith in the system of regulation, because nobody who understands the way in which the privatised industries have been operating has any confidence in the way in which they have been controlling those companies to date.

Finally—as you have previously indicated to me, Mr Hood, when a Member of Parliament says “finally” it usually means that he or she is about 40% of the way through their speech but simply wants to give their audience hope—I will address the question of the alternative future. As I indicated earlier, William Hill has odds of 9:1 on on there not being a no vote—sorry, I mean on there being a no vote. That is a bit like the confusion of Royal Mail and the Post Office.

The alternative future of separation calls into question the future of postal services in Scotland, and I understand that the SNP—rather than the yes campaign, because it has been marginalised, as we all know—has indicated that it intends to ensure a universal service obligation. My understanding is that the SNP has also indicated that there would be one price throughout Scotland, but it has not specified whether that one price would be the same price that applies in the rest of the United Kingdom, and I think it would be helpful if the SNP did specify that at some point. As we approach the referendum, there is an obligation for the SNP to clarify how it intends to fill the gap in financing Royal Mail in Scotland after separation, because that gap is presently filled by cross-subsidy from the rest of the United Kingdom. Operating a national service clearly involves cross-subsidy for rural areas, of which Scotland has a disproportionate number.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

I am pleased to appear under your chairmanship this morning, Mr Hood. I congratulate the hon. Member for Glasgow South West (Mr Davidson) on securing the debate. He made a speech that, by his standards, was encompassing; I could agree with most of what he said until, tragically, he veered off towards the end.

According to Project Fear in Scotland, we might imagine that from the day after independence, Postman Pat will be leading a convoy of little red vans, making a break for the border. That is utterly ludicrous. The assets of the mail service—the pillar boxes, the sorting offices and equipment, the vehicles and, above all, the hard-working and magnificent staff of Royal Mail—will still be in place and will continue, whatever the ownership structure.

The first point to make is that none of us can know for certain what Royal Mail will look like either in 2014 or on independence day in 2016. It is being privatised by the Government; the Scottish National party will fight privatisation, as we have always fought it, even when the Labour party proposed it. If we are unsuccessful, however, we will have to deal with the position that we find on independence. The only protection that the consumer will have, if the privatisation goes ahead, is from the regulator, Ofcom, which should not give any of us comfort.

The hon. Member for Glasgow South West discussed the universal service obligation, and I share his concern. Under the Postal Services Act 2011, Royal Mail is obliged to continue a universal service and is the only one to fund it. The Communication Workers Union has already expressed concerns that Ofcom is allowing trials of end-to-end deliveries from other operators, which will inevitably lead to the cherry-picking of profitable routes in urban areas and the inevitable pressures that that will put on rural and less affluent areas. That is a problem not only for Scotland, but for all areas of the United Kingdom.

What protection does the consumer have for the universal service obligation? Last year, Ofcom decided that price caps should be removed from all Royal Mail products apart from second-class mail. As a result, the only truly universal service is second-class mail. First-class mail could be priced out of the reach of many people, and already our stamp price is one of the highest in Europe. Just how many people and, crucially, small businesses will send mail first class?

None of that is the result of Scottish independence—that is happening now, under the United Kingdom Government and as part of the United Kingdom postal service, even before it is flogged off to a private operator. The Scottish Government have given a clear commitment that, with independence, Scotland will at the very least match the current terms of the universal service obligation.

[Anas Sarwar]

Will the hon. Gentleman guarantee that the Scottish Government’s White Paper will set out in detail how postal services would operate in an independent Scotland? Will a full costing be attached?

[Mr Weir]

The Scottish Government will set out their plans. The hon. Gentleman asks us to do that, even though his party is trying to form a Government in 2015 and yet will not tell us what Labour will do with the postal service, because the manifesto is still being written.

We are told that the highlands and islands could get higher charges. Have Members who say that read the Postal Services Act 2011, because that is already possible under the present system? Indeed, Royal Mail has already tried to introduce zonal pricing in some areas. Nothing prevents Royal Mail or its new private owners from introducing zonal pricing in any service, other than the universal service, which, as I have already explained, could be nothing more than the second-class service.

I took the matter up with Ofcom, which wrote to confirm to me:

“Ofcom does not have any powers to restrict Royal Mail from introducing this pricing variation related to user location, as the Postal Services Act 2011 limits our regulatory powers to universal services and access”.

That comes from the horse’s mouth. Members might think that I am the only one to think this, but the Communication Workers Union made exactly the same point.

Section 43 of the 2011 Act allows Ofcom to review the USO and to recommend, among other things, a review of the minimum requirements. It could reduce what is covered by the USO. That is not the future that we want in Scotland. Royal Mail should be a public service, and if it has not been fully privatised before independence, we will stop the process in Scotland. We have never accepted the mantra of successive Labour and Tory Governments that Royal Mail must be looked at as merely another business. It is an integral part of the country’s infrastructure and will be treated as such in an independent Scotland. Indeed, the postal operator must be recognised as an economic driver, especially in rural areas, and not as a drain on the economy in competition for the resources needed for schools and hospitals, which is how it is so often portrayed by the present UK Government.

An old claim is that somehow postal charges between Scotland and England will increase, but Members should be aware that postal charges are co-ordinated through the Universal Postal Union. Letters and packages that start with one designated postal operator can be passed to other postal operators in other countries, and they take responsibility for forwarding them. Under the universal postal convention, there is an obligation on each country to ensure that such items are quickly delivered on the same terms and conditions as its internal mail.

There is absolutely no reason why costs should increase in Scotland. The Scottish postal service will decide the cost of postage in Scotland and to other destinations. In Ireland, the Republic has an all-Ireland price, and there is no reason why something similar cannot operate in Scotland. It would become a member of the UPU, as have other countries that have gained independence.

--- Later in debate ---

[Jo Swinson]

I welcome the hon. Gentleman’s intervention because it gives me the opportunity to confirm and clarify the situation. I appreciate that there are strong views on different sides about the privatisation of Royal Mail, but many wild stories have been going about. It is absolutely clear that the universal service obligation remains. The obligation is enshrined in the Postal Services Act 2011, which was passed by this Parliament. The Act sets out that there has to be a six-days-a-week service to every location at an affordable and uniform price. That provision is monitored by the regulator Ofcom, and will remain in place after privatisation. The exact same set of protections that is in place at the moment will, therefore, remain.

What is unclear, however, is what would happen in an independent Scotland. We do not know whether Scotland would be a member of the EU and therefore whether the EU postal services directive would apply. If we assumed that it did, there would have to be at least a five-days-a-week universal service—Ireland has such a service. Only five EU countries, including the UK, go beyond that and have a six-days-a-week service. We do not know whether it would be a five-day or a six-day service in an independent Scotland. The SNP says that it will give guarantees—I noted that from the speech made by the hon. Member for Angus—but it does not back up how it would do it.

This comes down to the basic economics point to which various hon. Members have referred, and which applies to both the Post Office and Royal Mail. What we have in Scotland is a different sort of demography and geography to that of the rest of the UK, which is something that the hon. Member for Glasgow North West (John Robertson) mentioned. His area is very urban, and the costs of the logistics of getting about to deliver letters are, therefore, lower than they would be in a very rural constituency. If one country has a higher proportion of rural areas and addresses than another—Scotland compared with the UK for example—the service becomes more expensive to operate, and that cost must be accounted for. An hon. Gentleman chuntered from a sedentary position, “Do you think that Scotland could not run a postal service?” Of course it could, but we need to know what the costs will be. To suggest that they would be the same as for running the service across the UK, where there is cross-subsidisation between more densely populated areas and rural areas to offset the higher costs in the latter, is to misunderstand the basic economics.

[Anas Sarwar]

I apologise to you, Mr Chairman, for chuntering from a sedentary position and getting told off by you, and at the same time I congratulate you on the fantastic jumper you are wearing on this summer’s day.

I have a great suggestion for ending the uncertainty, and the bickering between the Lib Dems and the SNP, and that is to vote no in the referendum next year and return a Labour Government in 2015.

[Jo Swinson]

I agree with the hon. Gentleman, on half of his point at least.