Postal Services Bill

Baroness Drake Excerpts

Monday 14th March 2011 Lords Chamber

[Baroness Drake]

My Lords, the Minister in the other place, the honourable Ed Davey, has tried on several occasions to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. In Committee, he said:

“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”.—[Official Report, Commons, Postal Services Bill Committee; 11/11/10; cols. 121-22.]

Those are wonderful and fine sentiments. The only trouble is that the current board cannot bind a wholly privatised Royal Mail board. Noble friends have said that Moya Greene is a very impressive figure and a great asset to Royal Mail. Having met her, I wholly agree. However, she cannot speak for the board of a new owner whose identity we do not yet know. It is wonderfully reassuring that the existing CEO and the chairman have such positive sentiments, but they are not necessarily translatable into what will effectively be an agreement between the Post Office and any new owner.

If one looks at the Bill and the statements that the Government have made, one sees that, as things currently stand, a privatised Royal Mail has little obligation, nor is it required as part of any terms of sale, in principle or in detail, to be bound to any obligation towards the Post Office beyond the current inter-business agreement.

Many people are anxious to extend the agreement significantly beyond the current five years because there is no firm confirmation that it will be so extended. At the point of sale—because one has no idea how long it will take to negotiate and confirm the details of a purchase—there may be only two to three years left on the existing agreement. The situation could be even more insecure, therefore, because at the point of confirming the sale the Post Office may discover that its fortunes are not well favoured and have only a limited time to deal with that.

As far as I can see—I am sure that the Minister will correct me if I am wrong—the Government have to date refused any amendment that would guarantee a continued relationship between the two businesses. They have suggested that there are legal difficulties in legislating on an inter-business agreement, but they have neither detailed why such legislation would be illegal nor defined what is the longest legally permissible period for any inter-business agreement. More to the point of the noble Baroness, Lady Kramer, who said that we should not get into the detail but take command of principles, nor have the Government said anything about whether a renewed agreement or a sustained relationship with Post Office Counters beyond the five years of the current agreement would be a condition of sale, or whether there would be an expectation that any bidders would make submissions as to the relationship with the Post Office.

In reality, there are very few safeguards for keeping the Post Office contract for the long term. As things stand, it is entirely conceivable that, just a few years down the line, there will be a post office network where you cannot undertake mail transactions. That is simply a proposition of possibility under the terms of the Bill. A privatised Royal Mail will be free to cherry-pick, as my noble friend Lord Clarke said. It could select a supermarket chain to meet its requirement in urban areas, with the Post Office picking up, if it was able to, the slack in rural areas where no one else wanted to compete to deliver the service. That would have serious implications for the viability and integrity of the network.

I refer to the very appropriate comments of the noble Lord, Lord Dobbs, in his maiden speech at Second Reading, who captured the point far better than I could. He said:

“In many rural areas, far from the post office subsidising the shopkeeper, it is the shopkeeper who is now subsidising the post office”.—[Official Report, 16/2/11; col. 732.]

This is not careless speculation on my part, because I think that it is highly possible that a private owner would take such an approach. No access criteria are laid down to which a privatised Royal Mail would need to adhere specifically in relation to post offices. This is important for the small business community, which makes an important economic contribution in sustaining employment in key areas. Fifty-nine per cent of small businesses use post offices at least once a week and 77 per cent use them to send their parcels. Perhaps I may therefore put two questions to the Minister. First, what exactly are the legal constraints on extending the five-year inter-business agreement? I may be able to speculate on the legal restraints on an unlimited extension, but I am not at all sure what they are on extending it. Secondly, why are the Government not confirming that maintaining a business agreement with the Post Office for at least a further five years beyond the existing agreement is a defined provision within the terms-of-sale agreement or invitation to tender that potential bidders would have to address? It strikes me that if everyone is saying that they are so committed to Post Office Counters, one would welcome such a commitment to that being in any documentation prepared, or terms set, for potential bidders.

My noble friend Lord Whitty expressed concern about who owns the assets and how they will be allocated. If the Post Office has to compete in a world where the Royal Mail is privately owned, its ability to do so will be heavily influenced by the assets on its balance sheet at the point of separation of the businesses within the post offices.

I noted that in the Second Reading debate in the other place, the honourable Mr Ed Davey, the Parliamentary Under-Secretary of State in the Department for Business, Innovation and Skills, argued that,

“a privately owned Royal Mail will not act against its own commercial interests. It will not give up valued retail space in the heart of communities the length and breadth of Britain”.—[Official Report, Commons, 27/10/10; cols. 426-27.]

He is no doubt correct that a privatised Royal Mail will not act against its own commercial interests and that it will not give up valuable retail space, but he could be incorrect in supposing that its commercial interests will necessarily lie with the Post Office. When the honourable gentleman says,

“It will not give up valued retail space”,

one has to ask whether he has taken a view as to whose retail space it is to give up. If the Crown Office estate is to be with the Post Office, it is not the Royal Mail’s to give up but Post Office Counters Limited’s to sell. My noble friend Lord Whitty is quite right to be concerned that there should be visibility as to who owns which assets at the point of sale.

[Lord Skelmersdale]

My Lords, I tend to agree with my noble friend Lady Kramer on this. Although what comes out of the discussion on this amendment will be valuable to our future discussions, as it is it rather puts the cart before the horse. As far as the noble Baroness, Lady Drake, is concerned, I will ask my noble friend one question, if she will deign to answer it. Quite clearly, from what she said in our last exchanges, she has as high an opinion of me as I do of her. The Government have a policy of supporting post offices and it is quite clear that this is what they intend. The inter-business agreement—currently lasting five years, as the noble Baroness, Lady Drake, has just said—is one of the ways in which post offices are supported. Should her worst fears be realised and there is no future inter-business agreement at the end of the five years, does my noble friend think that the policy of supporting the post offices will continue to be self-sustaining?