Postal Services Bill

Baroness Drake Excerpts

Tuesday 8th March 2011 Lords Chamber

[Baroness Drake]

My Lords, I wish to speak to Amendments 6 and 17 in this group, which stand in my name.

As currently drafted, Clause 2 requires the Secretary of State to make a report to Parliament only when a decision has been made to dispose of shares or share rights in Royal Mail. That report is to include both the type and the timing of any disposal. Amendment 6 seeks to ensure both that the Secretary of State is more fully accountable to Parliament for any decision that he or she may take regarding the sale of Royal Mail and that the decision is consistent with best practice and legislation governing regulatory reform.

Amendment 6 seeks to do that by means of a super-affirmative order and an explanatory document accompanying the proposed disposal order that are to be laid at the point of a decision on a sale. The amendment would not undermine the Bill’s three main proposals, which are to allow the unrestricted sale of shares in Royal Mail, to introduce a new regulatory regime and to provide for the transfer of pension liabilities. Rather, because of the implications that would flow from an unrestricted sale, I believe that the super-affirmative procedure is appropriate.

Many noble Lords are concerned at the haste with which the Government have sought to complete the passage of the Bill, and one is left anxious about the scrutiny of matters that will arise from the implementation of the Bill potentially at some point significantly in the future. Amendment 6 would require the Secretary of State to return to Parliament to seek approval when a decision is taken on a specific disposal of Royal Mail—a decision that may not occur for, say, another three years. That is very important. The Bill is significant, given that its provisions will have a major impact on business and personal users of the service, on citizens’ interests and on the employees and agents of Royal Mail and Post Office Ltd. It will also have a significant impact on the Exchequer. Such a decision deserves close scrutiny.

The super-affirmative resolution procedure would allow Parliament the right fully to consider the proposals for the sale in a way that is provided for in the Legislative and Regulatory Reform Act 2006. Under that Act, Ministers have wide-ranging powers to amend primary legislation by order and the Act makes provision for determining the parliamentary procedures for such orders. If noble Lords would indulge me—as a new Member of the House, I am all too conscious of the paucity of my knowledge of parliamentary procedures compared to the depth of knowledge held by so many noble Lords—sometimes one feels that a matter is of such significance that one must split an infinitive and be prepared to boldly go. I am advised that there is no simple definition of the super-affirmative procedure, so it is necessary to lay it out fully in the Bill; hence the tabling of Amendment 17, which seeks to do precisely that.

I shall give the briefest of summaries. Under the super-affirmative resolution procedure, during a 60-day period when the draft order is laid the Minister must have regard to any representations received, any resolution of either House and any recommendations made by a scrutiny committee of either House. At the end of the 60-day period, the Minister can decide to proceed with the draft or lay a revised draft with, in either instance, a statement about any representations made and revisions proposed. In each case, the order then proceeds as a normal affirmative order. However, if a scrutiny committee of either House recommends, after the laying of the statement or of the revised draft order and statement, that the order should not proceed, then the order may not proceed unless the House concerned rejects the recommendation.

In the circumstances of this important Bill, the merit of the super-affirmative procedure is that the process would take place over a 60-day period and it would allow the Minister to amend any draft order, if Parliament decides it appropriate, but that decision would not undermine the whole basis of the proposal. Such an approach would have three key benefits: it would allow effective scrutiny at the time that it matters—at the point of sale—which may be some few years hence; it would ensure that the impact of the terms of sale could be understood; and it would ensure democratic accountability on matters flowing from an enabling Bill. In this instance the super-affirmative procedure would be good for users and the taxpayer, who will benefit from Parliament scrutinising a Royal Mail disposal at the precise time that the Government make their decision.

I turn to the explanatory document. Parliament is being asked to consider the Bill one, two, three or maybe even four years prior to the sale of Royal Mail. By adopting the super-affirmative procedure, together with requiring an explanatory document when a disposal order is laid, Parliament has the opportunity to scrutinise the decision of the Secretary of State at the very point at which the sale is due to take place. This scrutiny will also allow more transparency on the valuing of Royal Mail in relation to the proposed sale price. That applies to a post-final-bid situation, about which the noble Baroness, Lady Kramer, was so concerned. Having that transparency prior to the bidding process would undermine the Government’s ability to leverage the price that they could secure. Such an explanatory document would give transparency, but only in a post-final-bid situation.

Amendment 6 sets out what the explanatory document should cover. The terms of agreement for the sale of Royal Mail will be highly significant but they are not yet known. A buyer has to be found and negotiations have to take place. No one at this point knows what the terms will definitely contain but their impact is of public interest. An explanatory document should provide a report on consultations and representations received, which should include those from user groups, bodies representing rural communities, pensioners, those with disabilities, businesses including small businesses, other operators, employee representatives and the devolved Administrations. The amendment provides for certain persons making representations to be afforded confidentiality. I understand that this is consistent with the provisions in the 2006 Act. One can also understand that there may be matters of commercial confidentiality, including some from the bidder and other private carriers, which would require this. The report would also provide a detailed regulatory impact assessment and such other information as the Minister considers would be of assistance to Parliament in considering the proposed disposal.

A number of concerns about the Bill necessitate the Minister returning to Parliament with the proposed disposal order and an explanatory document at the point of sale. These concerns have been reflected in the amendments tabled to the Bill, both here and in the other place, and in contributions by noble Lords from all sides of the House. The central part of the Bill enables legislation; it enables the Government to privatise Royal Mail. However, that is not the end of the story. As the Minister said in replying to Amendment 4, the Government are looking for maximum flexibility in this Bill. There is much detail yet to crystallise. Royal Mail needs capital investment and a buyer will want to see a business case. Therefore, the highest price, or even an acceptable price, may come from giving the buyer the greatest freedom to be profitable. A Government keen to secure a buyer will be under pressure to maximise freedom for the purchaser. There is a great deal left to regulations. Many uncertainties still exist and will require parliamentary scrutiny.

I will recap some of those concerns and uncertainties. While I acknowledge the merits of the transition to Ofcom as the regulator, there is still uncertainty about the regulatory regime, including how the move from licensing to regulatory authorisation will impact on the maintenance of the minimum universal service requirements over time and the robustness of any universal postal service obligation placed on a universal service provider. It is important that the terms of any sale or disposal do not pre-empt the setting or delivery of those obligations in any way that would be detrimental to users’ needs, business needs and citizens’ social and economic interests. We do not know the terms of the sale—no one can know them prior to negotiation or the detail being settled—so there could be a tension between the terms of sale and the regulatory principles in the Bill.

There will be a need for reassurance that the terms of the sale do not qualify or pre-empt the ability of Ofcom to discharge its duties under, for example, Clause 28 on such matters as access points, universal service and financial sustainability; Clause 42 and the financial obligations that could be placed on a universal provider; or Clause 35, to which the Minister referred, and Clause 37 on the universal service provider’s network access and universal service conditions. Ofcom is unlikely to be able to override the terms of any sale agreed by the Government when Ofcom seeks to set or impose regulatory requirements on universal service provision.

A further area of uncertainty is the future of the post office network and the commercial relationship between the Royal Mail and Post Office Ltd. The Government are anxious to suggest that the Bill is not about the post office network. However, one cannot entirely divorce Post Office Counters from this Bill. Parliament has been assured that a commercial relationship between these two businesses will be sustained. The key test here, however, is of whether it is sustained at current levels or is slowly eroded by Royal Mail to the detriment of the nationwide network of post offices. No one can truly answer the question of how the terms of sale with any bidder will impact on those assurances at the moment. Once privatisation has taken place, it will be difficult for a Government to influence an inter-business agreement between a privatised Royal Mail and Post Office Ltd. The Government have not specified to date a minimum number of outlets across the UK where counter services must be provided, notwithstanding that in other countries legislation does so specify.

A primary driver for full privatisation of Royal Mail is the need to secure private capital investment. Securing that investment will be heavily influenced by the viability of the business model captured by the terms of sale. This will not be solely a matter of asset price or of how much the Oxford sorting office can be sold for, but will be about the extent of regulation and commercial freedom and network access conditions. Market conditions for postal service operators are challenging because of the growth of e-substitution and the digital media. Any potential buyer will know this. Any analyst will look at the regulatory framework within which a privatised Post Office will have to operate.

These are weighty issues, which will determine how a future privatised Royal Mail will continue to perform its functions as a provider of affordable, non-discriminatory, universal postal services. Currently no one can truly assert what the full terms of any sale to a purchaser will be because those negotiations have not taken place. That is precisely why scrutiny at the level of a super-affirmative procedure, accompanied by an order with an explanatory document, is appropriate. I accept that Parliament cannot micromanage postal services. However, it should try its hardest, given that the sale may not take place for some years, to ensure that the interests of the user, the citizen, the taxpayer and the Exchequer are protected by directing the Secretary of State to return to Parliament with a proposed disposal order and an explanatory document at the point of the disposal that will be the subject of a super-affirmative order.