Postal Services Bill

Baroness Wheatcroft Excerpts

Wednesday 16th February 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, first, I welcome the maiden speeches that we have heard from the noble Lords, Lord Empey and Lord Dobbs. As a newcomer to this place myself, I am delighted to be in such illustrious company.

The Royal Mail is something that the British public hold in high esteem. It is not to be meddled with without great consideration. Many of your Lordships will have chosen to forget that unfortunate episode when, in a silly quest for change, the Royal Mail and post offices were subsumed into Consignia. That expensive exercise was later summed up by the BBC as:

“Nine letters that spelled fiasco”.

Consignia did not last long; new management tossed it on the pyre of corporate nonsense. As Ecclesiastes says:

“A good name is better than precious ointment”,

and, despite its occasional problems, the Royal Mail undoubtedly retains a good name because it delivers a remarkable service.

However, the need for change in the business is pressing. The Bill enables that change. It seeks to separate Royal Mail from the network of post offices. They are separate businesses with a trading relationship that we are assured will remain. However, guarantees of that, at least for the medium term, might be appropriate. The current chairman of Royal Mail has given his absolute assurance of that continuing relationship, and there is every reason why we should trust Donald Brydon. However, as part of our review of the regulatory framework, we might, for the benefit of post offices, seek something stronger. Even the best chairmen do not last for long in corporate Britain.

I wish to make two points, one on each of the organisations which will emerge. The first concerns the crucial proposal that the Royal Mail should be sold entirely. Its need for a new life freed from the constraints of the public sector is clear. There is a future for Royal Mail despite declining volumes. Direct marketing may be junk mail to some of us but is potential revenue for Royal Mail, so is much that is purchased via e-commerce, the business which has taken over from mail order. The picture is not all gloomy.

The universal service obligation must be maintained but we have to be realistic about this. The Bill gives Ofcom the right to review the sustainability of that obligation. It needs to be measured against genuine demand. A recent survey found—admittedly by a narrow majority—that individuals and small businesses would consider a move to a five-days-a-week service if reliability could be upheld. We should remember the outcry at the loss of the second daily delivery. I contributed to that outcry. Some said that it would be impossible to live without that second delivery. Life went on and business did not, on the whole, suffer.

My plea now is that we should aim to float the company through an IPO, rather than to sell it to a corporate bidder, almost certainly from another country. That is not because I echo the “little Englander” views that the noble Lord, Lord Mandelson, said were far too prevalent these days, but we need to try once more to create the share-owning democracy that was part of the ambition of the noble Baroness, Lady Thatcher. We have heard reference to the successful flotation of BT. What happened afterwards was not entirely wonderful but was nevertheless part of obtaining a bigger shareholding base in this country.

Yet, since the success of those early privatisations, the proportion of UK-listed shares owned by individuals here has been on a downward trend. From a height of 54 per cent, it had by 2006 sunk to 13 per cent, and the most recent figures from the Office for National Statistics put the proportion at just 10 per cent. The Bill makes provision for employees to become shareholders, but as we heard from the noble Lord, Lord Christopher, employee shareholders do not always hang on to the stock. A solid core of private investors, however, makes for good corporate governance. These people invest for the long term and take an interest in the company far more than institutional shareholders. Private shareholders turn up at annual meetings and ask questions. Institutional investors are too often the absentee landlords of British business.

An army of “Sids” subscribing to shares in Royal Mail would not be able to turn back the tide of correspondence migrating from letters to e-mails, but they might make a difference. They would see the merit in doing business with the company they owned. They might decide to send greeting cards through the post, rather than merely pressing the button on that abhorrence, the e-card, which is a poor replacement for an enticing envelope arriving through the letter box. For that and for more fundamental reasons, I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government’s position is that the sale is open to all comers, but an IPO would get my vote.

My second point relates to the post office network, which this Bill promises will not be sold, although it could be mutualised. Like the noble Lord, Lord Christopher, I should like to hear more details of the proposed mutualisation. Nevertheless, as we have heard, post offices remain a remarkable retail business, each week serving more than 21 million customers. That puts the organisation on a par with Tesco. The Post Office is a trusted brand. Compare that with the banks. The annual trust barometer recently published by Edelman showed that the UK’s trust in banks had fallen to just 16 per cent—a 30-point reduction over three years. Hence, I agree with those who this afternoon, led by the noble Baroness, Lady Kennedy, have said that the Post Office is, and should be, an alternative bank. Noble Lords may recall Girobank, launched in the 1960s, but it was not properly nourished and was eventually sold in 1990. Today’s climate would surely be more welcoming to such a venture.

The Banking Commission, when it reports later this year, will undoubtedly highlight the need for greater competition in banking. The Post Office could provide it. That is not a novel thought. The previous Government came up with the name, the “People’s Bank”, although that may have overtones with which some noble Lords do not feel entirely comfortable. However, the concept of building up the Post Office as a trusted bank is surely worth pursuing. It already offers mortgages and credit cards. Some might argue that as a major owner of bank shares, the Government would not wish to encourage more competition in the marketplace—but competition is required and it is coming. The Post Office is surely well placed to provide it. I take this opportunity to add my voice to those asking the Minister to look again at the possibility of building up the banking business of the post office network.