Postal Services Bill

Baroness Wilcox Excerpts

Monday 14th March 2011 Lords Chamber

[Lord Lea of Crondall]

My Lords, I am afraid that we now see week after week in some newspapers—I would include under that heading a magazine such as the Economist—thinly disguised attacks on collective bargaining. We cannot debate that topic in its totality this evening, but I refer the Committee to the central point. Across the OECD countries, there is a close statistical fit between the amount of collective bargaining in a society and its equality. It is therefore the grossest hypocrisy—it is not conscious, but perhaps subliminal—for people to say that they do not like the gap between rich and poor when they are attacking collective bargaining. Both at a point in time and over the decades, the weakening of collective bargaining means that the forces in society are no longer balanced. We now have a gross imbalance between the oligopoly of power in the City of London and the attempt to weaken the workforce.

I think that we will see in the demonstration to be organised by the TUC in London on 26 March that the workforce has woken up. It will demand that its rights be respected, which will have great resonance with the people of this country. I therefore fire a warning shot across the bows of people who think that they are now able to administer the coup de grace to people who have collective bargaining. When the postal services are in the private sector, they may be expected to fit the private sector model whereby workers are not covered by collective bargaining and it is much more difficult for them to be so. Therefore, it is fair to take the opportunity to point out, in the spirit of this amendment, that it would be very unwise for people to think, “The public sector has collective bargaining. In the private sector, we don’t have collective bargaining and we can just say goodbye to it”. Anybody who thinks that is deluding themselves.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, Amendment 13 seeks to place a duty on the Secretary of State to ensure that employees’ existing rights of recognition are maintained. I am not sure whether the amendment fits neatly into Clause 2, which is intended to place a duty on the Secretary of State to report to Parliament when a decision has been made to undertake a disposal of shares in the Royal Mail company. However, I am happy to debate the specific issue raised by the noble Lords.

Before I do that, I reiterate that the Government welcome the positive changes in the relationship between Royal Mail’s management and the CWU over the past 12 months. I say this because, notwithstanding the historic references made by the noble Lord, Lord Young, industrial relationships at Royal Mail have undoubtedly been poor in recent times. The national strikes in 2007 and 2009 were damaging for the company and for the postal market but the business transformation agreement, reached in March last year, has seen the implementation of a new approach to union-management relationships. It has enabled progress on the much needed modernisation of the company and I urge both sides to continue to work together in that improved way.

The noble Baroness, Lady Donaghy, was concerned about uncertainty for employees. Let me be clear that the worst thing for employees would be for us to do nothing and to let the Royal Mail decline through inaction and a lack of investment. People want to work for a stable company and to have a secure pension, and I believe that our proposals will help us on both those fronts.

On employee representation, employees at Royal Mail are mainly represented by the Communication Workers Union and by the Communication and Managers’ Association, which is a section of UNITE. This representation is recognised in voluntary agreements between these unions and the management. The Government do not play a role in these agreements. Such voluntary agreements occur across industries where there is a union presence and it is good practice for the employer to take full account of the views of employees when deciding whether a union should be recognised or continue to be recognised. Union membership remains relatively high within most grades at Royal Mail. That fact suggests that most staff support union recognition.

I have no reason to believe that any new owners would seek to change such agreements, provided, of course, that the employees wish to continue to be represented by those unions. Any new owner will fully appreciate the need to work with employees’ representatives to secure the future of the company in the changing postal market. Management most certainly cannot do this alone. However, as I have said, union recognition within Royal Mail—or any other business—is primarily a matter for the employer and the trade unions concerned. I do not therefore believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements in Royal Mail. I therefore hope that the noble Lords, Lord Young and Lord Lea, will take time to consider my response and that they will withdraw their amendment at this time.

[Lord Young of Norwood Green]

I thank the Minister for her response, even if it did not go as far as I would have liked. I also thank my noble friend Lady Donaghy for contributing to this debate and for pointing out that at a time of great change—and moving to a privatised environment will be a great change—the role of unions will be absolutely vital. My noble friend Lord Lea warned about not taking trade unions for granted in the current environment.

While the Minister welcomed the new approach between management and unions and laid stress on the question of voluntary agreements, any new owner ought nevertheless to recognise the environment that they will be coming into. If they want the company to succeed, it will mean working with the unions, in our view. We will reflect on what has been said and consider whether we need to bring this back on Report. On that basis, I beg leave to withdraw the amendment.

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[Baroness Wilcox]

My Lords, this has been a stimulating evening all round. Amendment 14 is a sister amendment to Amendment 2 which we debated last week. Amendment 13A provides a new twist on the disposal of shares in Royal Mail and seeks to place time constraints on the disposal of shares specifically in the case of an initial public offering—an IPO.

I will first respond to Amendment 14 which seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill which was considered by this House in 2009 but never found its way on to the statute book. As I said when we debated Amendment 2, the Government believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. Amendment 14 proposes a staggered approach to a sale of shares but with a limit on the disposal of 49 per cent of the value of the shares in Royal Mail. Given that the Government are also committed to establishing an employee share scheme—we will come later to amendments from noble Lords opposite to increase the size of the scheme—these amendments would in fact limit even further the amount that could go to private investors. However, the difference between this Government’s position and the previous Government’s position is that we do not believe that it is necessary for the Government to retain overall ownership of the Royal Mail.

The noble Lord, Lord Young, was concerned about maximising the value of Royal Mail. That concern is welcome although somewhat surprising given his earlier amendments which sought to limit how much could be sold, which would undoubtedly impact on the value. The Bill as drafted allows for the sale of shares in tranches, as set out in Amendment 14. However, we do not believe that there should be a rigid structure for how shares can be sold. There is nothing to stop the Government, in the first instance, selling a minority stake in Royal Mail or for Government to retain a stake in the company in future. However, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. As I have said before, our focus is simply on what is best for the Royal Mail and the taxpayer.

The noble Lord, Lord Lea, was concerned that Richard Hooper had steered the Government towards an IPO and that the Government would undervalue Royal Mail in such a flotation. I wish to make it clear that Richard Hooper did not express a preference for any form of sale. In his 2010 report he said that an IPO had become an option as Royal Mail now had less need for corporate experience from a partner thanks to its strengthened board. The Government are focusing on securing the best outcome for Royal Mail and the taxpayer. I hope I have already assured the noble Lord that we can sell in tranches, as he suggests, if that best meets our twin objectives.

As I said in my remarks on Amendment 14, and earlier amendments, the Government want to maintain maximum flexibility in the method and timing of any disposal of shares. This will give the Government the opportunity to make the right decision at the right time and to ensure that we can get the best result for Royal Mail and the taxpayer. Placing statutory arbitrary deadlines in legislation will not help to achieve the Government’s objectives. If we choose to dispose of shares through an IPO, I believe that it would be impractical to be faced with a deadline of 31 July 2012 and to have to rush the process through by then. We heard last week from the noble Lord, Lord Jones, and the noble Baroness, Lady Kramer, about the damage caused by imposing statutory deadlines on commercial transactions. What if we were not ready to launch a flotation until August 2012? We would then have to wait until July the following year to make the disposal and give Royal Mail the access to the capital that it so badly needs. That would be in the interests of neither the company nor the taxpayer.

As I said on Amendment 14, nothing in the Bill would prevent the Government staging a disposal in the way that the noble Lord, Lord Lea, suggests, but Amendment 13A would reduce the flexibility to make the right decision and I do not believe that that would be in the best interests of Royal Mail or the taxpayer. I hope that the noble Lord is persuaded by my argument and I therefore ask him to withdraw the amendment.

[Lord Lea of Crondall]

My Lords, it will not surprise the House that I will in due course withdraw the amendment pro tem, but that in no way assumes that our arguments have been overwhelmed by the firepower of the noble Lord, Lord Razzall, or the Minister.

The Liberal Democrats must have been reading too much Machiavelli recently. I am not surprised at that, given the extraordinary arrangements that they have been making with the Conservative Party, and I am sure that they are being kept awake at night wondering who is going to stab them in the front instead of in the back. As to the idea that the amendment is aimed at killing the Bill, we have experience of killing Bills but this would be a peculiar way of going about it. This is about helping the Government and society to avoid a fiasco by feeling our way on how this disposal will be carried out.

Is the noble Baroness prepared to respond on whether it is her view—along the lines of the view of noble Lord, Lord Razzall, for whom he knows I have the greatest respect—that we are living in fantasy land if we think that this sale can be carried out by way of an IPO. The alternative, presumably, is the Sheikh of Kuwait. It may be that Colonel Gaddafi is no longer the likeliest candidate. The alternative is an IPO. We will all avidly read Hansard tomorrow—which means that we will not—but I do not think I said that Hooper advocated an IPO. I said that the most likely presumption to be made after reading Hooper is that an IPO would be a strong candidate as the means of sale. If that is the case, the amendment is the exemplar and states that if the scenario is an IPO, some of the experiences of the IPOs in the 1980s should be borne in mind.

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[Baroness Wilcox]

My Lords, I believe that the intended effect of Amendment 15, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, is to seek to ensure that Royal Mail remains a single company providing the universal postal service and that it is the only universal service provider. We will, of course, come on to the protection of the universal postal service when we debate Part 3 of the Bill, but I should make it clear now that we expect Royal Mail to be the universal service provider in the UK for the foreseeable future. I hope that reassures noble Lords.

I now turn to the issue of whether Royal Mail should be a single company. I do not consider that we should be legislating on the future structure of a company that will no longer be in public ownership. A privatised Royal Mail should be free to organise its business and operations in such a way that enables it to provide the universal postal service efficiently and effectively. This could mean establishing subsidiaries to deliver part of the service or it might mean no change at all. We simply do not know, in 2011, what the best operational structure should be for Royal Mail. Through a disposal of shares, we are giving Royal Mail real commercial freedom, and I do not consider that it is appropriate for the operational structure of Royal Mail to be set in primary legislation.

I have two answers in the question and answer part of the brief on subjects that the noble Lord mentioned. On whether Parcelforce or GLS will be part of the package, no decision has been taken on the formal method of sale. Just as for the Royal Mail, we have no plans to retain either Parcelforce or GLS in public ownership in the long term. The noble Lord also asked about the risks of a new owner stripping the assets from Royal Mail. The Government simply would not sell to a bidder if they believed that they would not assist in securing the future of the universal postal service. Furthermore, any shareholder would want to see a successful business and a sustainable universal service, given that the cash generated by a successful Royal Mail will outweigh the asset value in a very small number of years. Investors would also face significant reputational damage if they allowed Royal Mail to become insolvent. We believe that there is ample protection against that, both in the Bill and more generally. With those answers and the answer I gave previously, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for that response. We seem to be placing a great deal of stress on hopes and aspirations about what will happen after the sale—other noble Lords picked up on this, I think—and very little on what many people in the country would regard as sensible and appropriate public interest measures, which are being taken on board by the Government or even considered in a serious way.

From what the Minister has said, there is a grave danger of cherry picking. That will still be a possibility. If the successful owner is robust and strong enough, they will be able to do what they wish once they have control of the assets. It is particularly important to register that the Government have not ruled out dismantling the Royal Mail and cherry picking the most popular parts, in particular GLS, which is the most successful European parcels service, as I said earlier. That must be a worry as we go forward.

The assets can be taken away; they do not have to be very large or prestigious to be capable of being sold. On the first day in Committee, the noble Lord, Lord Christopher, considered selling the Oxford sorting office at a profit. Heaven knows why. I have not visited it yet, but perhaps the Minister has. If that is his vision of it, then clearly the assets are valuable and they will go. There is also the possibility of the Royal Mail being split in a geographical way or by function, which would undermine the viability of the universal service provision, which in effect cross-subsidies rural and other diverse locations. We think this is an important issue, but on this occasion we shall not push the matter to a vote. I beg leave to withdraw the amendment.

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[Lord Young of Norwood Green]

My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.

We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.

I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.

It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.

Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.

Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.

[Baroness Wilcox]

My Lords, I suppose that I ought to start by saying that I live in Cornwall, which may put the Committee’s mind at rest. I have some idea about the differences of living in Cornwall and in the centre of London. Indeed, I apologise, for so does the noble Baroness, Lady Dean. There are quite a few of us around the Committee tonight.

Amendments 16 and 16A touch on the issues that we will be debating under Clause 11, about the annual report on the post office network, as well as under Part 3 on the regulatory framework for the postal sector. Amendment 16 would require the Secretary of State to consult various groups before a disposal of shares and to lay a report before Parliament setting out how the minimum requirements for the universal postal service, set out in Clause 30, will be maintained. Amendment 16A requires the Secretary of State to submit reports to the devolved Administrations about the impact of proposals in the Bill on post offices, small and medium-sized businesses, communities in remote areas, pensioners and those with disabilities. I hope to reassure noble Lords that the existing and future duties of Ofcom and existing reporting requirements are sufficient to meet their concerns.

I will first address the points raised in Amendment 16 by the noble Lord, Lord Low. Under Part 3, Ofcom will have responsibility for regulating the postal sector and its primary duty in that regard will be to ensure the provision of the universal postal service. The noble Lord, Lord Low, was concerned that Clause 29 would allow the minimum requirements of the USO, particularly the requirement for Articles for the Blind, to be reviewed by Ofcom and changed within 18 months. Let me reassure him that the requirement for a review within 18 months is for the very particular products and services that Royal Mail is required to deliver. It can have no impact on the statutory protections for the minimum USO requirements in Clause 30, including free services for the blind.

The noble Lord, Lord Low, was also concerned that a private Royal Mail could charge higher prices to customers in rural areas. Again, let me reassure him that Clause 30 also provides that pricing of the universal service must be,

“uniform throughout the United Kingdom”.

As I said when we debated Amendment 10, Ofcom will report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay that report before each House of Parliament.

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[Baroness Wilcox]

I thank the noble Lord for expressing that more clearly than I did. The Government have already produced an impact assessment on the proposals in the Bill. It looked at the impact of the proposals on all parts of the United Kingdom. The universality of the universal postal service means that the impact is the same across the UK. The assessment also looked at the impact on small firms, rural communities and disadvantaged groups.

As I said in my remarks on Amendment 16, it will be the regulator, Ofcom, that will have responsibility for ensuring the provision of the universal postal service. Ofcom will report annually on its activities, including ensuring the provision of the universal service throughout the United Kingdom. In addition, we expect that Royal Mail will report, as now, on its quality of service performance broken down by postcode areas, so that there continues to be transparency about the provision of the universal postal service to all parts of the United Kingdom.

With regard to post offices, Clause 11 requires a Post Office company to send a report annually to the Secretary of State on its network of post offices. The report on the post office network must contain information about the accessibility of post offices to, among others, individuals living in rural areas, small businesses, individuals with disabilities and elderly individuals. In recognition of the importance of post offices to all communities, Clause 11 requires the Secretary of State to give a copy of the report to Ministers in the devolved Administrations, as well, of course, as laying the report before this Parliament. I expect that we will discuss this reporting requirement in great detail when we come to Clause 11.

The noble Lord, Lord Touhig, raised a number of specific points on the post office network and I am sure that we will consider these issues in full when we debate the proposed amendments to Clauses 4 to 7 and to Clause 11. The report in Clause 2 is specific to when a decision has been made to undertake a disposal of shares. I reiterate that, regardless of any change in ownership from the public to the private sector, the obligation on Ofcom to ensure the provision of the universal service will remain. The universal service is protected by Parliament through this regulatory framework, not by the Government’s ownership of Royal Mail.

The information that is already in the public domain and that which will be provided as a result of the Bill will provide long-term transparency on the protection of the universal postal service and the accessibility of post offices throughout the United Kingdom. I therefore, at this late hour, ask the noble Lord to withdraw his amendment.

[Lord Low of Dalston]

My Lords, I am grateful to the Minister for her full reply and to all noble Lords who have spoken. At times I felt caught in the crossfire to the right and the left of me when I was simply moving a simple amendment designed to secure a fair deal for users of postal services. I am certainly most grateful to the noble Lord, Lord Razzall, for his intervention. I am sorry that I was not in my place earlier when he made his point and he had to repeat it, but I am grateful to him for repeating it because I yield place to nobody in my commitment to evidence-based legislation. The point that the noble Lord brought to our attention for a second time struck me as being counterintuitive, as the noble Lord, Lord Young of Norwood Green, said, but there are many things that are counterintuitive and may yet be true. I will certainly take the opportunity, before we come to Report, to follow the lead that the noble Lord has helpfully given us.

I assure the noble Lord that I was not making any party-political points; I was simply interested in curbing the rough justice that the market can sometimes cause in the interests of the consumer. I am sorry that the noble Lord felt it necessary to make his point with such acerbity. I may unwittingly have said something that was not correct, as the evidence and my further researches may reveal, but I assure the House that while I may have been mistaken there was no intention to mislead the House or to say anything that was untrue. I will follow that up and will be able to set the record straight by the time that we come to Report.

The Delegated Powers and Regulatory Reform Committee has pointed out that the Secretary of State has a power to alter the minimum requirements of the universal postal service. Without following the conclusions of the Ofcom review, this is, as the Committee pointed out, a significant power for the Secretary of State to have. It would not be unreasonable for the Secretary of State to be obliged to consult the groups that we have mentioned in the amendment before having the opportunity to exercise that power.

At this late hour I do not wish to press the amendment, but I will look carefully at the Minister’s reply—I repeat that it was very full and I am sure that it was helpful—to ensure that it contains the safeguards that we are looking for and I reserve the right to return to the matter on Report. For now, I beg leave to withdraw the amendment.