Chris Evans
Main Page: Chris Evans (Labour (Co-op) - Caerphilly)Postal Services Bill
Chris Evans Excerpts
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I start with a declaration of interest. I am a Labour and Co-operative Member of Parliament, with an 18-year involvement with the Co-operative movement prior to coming to the House. Since entering the House, I have at various times been chair of the employee share ownership group and the all-party building societies and financial mutuals group. Philosophically, there are considerable elements of the Bill that I instinctively support. The Government’s recognition of the potential role of employee share ownership and mutuality in delivering postal services in this country is welcome. My regret, which forces me to oppose this Second Reading, is that the Bill’s other parts will militate against the successful implementation of either employee share ownership or mutuality.
My experience within the movement has demonstrated a couple of things to me. We cannot legislate for mutuality. We can set up a framework of legislation in which mutuality can thrive, but we cannot look at a business and say, “We will make that a mutual.” Mutuality and co-operation have to stem from the desire of those who work within an organisation to work in a certain way, driven by a certain culture. That culture may exist in Royal Mail and in the post office service, but the issue has not yet been determined.
I welcome the consultation on the Bill with the co-operative movement, but I did not feel too confident when the Secretary of State seemed not to know whether it had taken place with Co-operatives UK or with the Co-operative Group. The fact that he fails to understand the difference between the two does not exactly reassure me of a heavy commitment to that line of organisation.
As the hon. Member for Northampton South (Mr Binley) said, the previous Business, Innovation and Skills Committee examined the Royal Mail and the Post Office and made a range of recommendations, many of which the Minister alluded to, but many of which have not been implemented. That prompts the question that if their implementation is necessary to make the privatised model work, why have they not been implemented while the company has been in public ownership? Indeed, if they had been implemented, it might have made the private offer more acceptable. The Secretary of State did not sufficiently explain that situation.
My fundamental objection to the whole privatisation programme is that it basically instils a contradictory philosophy to that in the mutual and co-operative elements of the Bill. I have not seen it fully explained how the drive for shareholder appreciation and profit will be mitigated to allow for the regulatory and social obligations of the privatised Royal Mail. There has been a long debate about the universal service obligation, the six-day delivery and so on, and the fact remains that whoever buys Royal Mail in the long term will have to satisfy shareholders, but the potentially irreversible drive to make profit must call into question the regulatory framework that we have been assured will contain the privatised industry. That situation will have serious consequences for the post office service.
If the Royal Mail withdraws its current contract at some stage, or under some ownership or model, it could sound the death knell for hundreds, if not thousands, of post offices. Only 4,000 of the current 11,000 post offices are profitable. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) said that mutuals can fail, and in this context there is a high possibility of failure.
Chris Evans (Islwyn) (Lab/Co-op)
I hear what my hon. Friend says. Does he not agree that for a mutual to be successful, it needs to have a viable business plan, which the Bill does not include?
Mr Bailey
Exactly. That will be one of the determining factors in whether post office sub-postmasters and other employees want to work within a mutual framework. The fact remains that Royal Mail, driven by an imperative to make more profit, will be bound to re-examine some of its contracts with the Post Office, and there is no guarantee that they will be sustained. About a third of Post Office Ltd’s total income is dependent on those contracts with Royal Mail, and that creates a degree of uncertainty and risk that could well work against those involved in the Post Office being prepared to accept a mutual organisation.
Chris White (Warwick and Leamington) (Con)
Even after listening to the previous speaker, I think that we all share the same view, which is that we have to create a sustainable future for our post service, so that it can both serve our economy and continue to serve as a public good. We should all accept that Royal Mail has been lagging behind its competitors, and, with a potential reduction in the volume of letters of between 25 to 40% over the next five years, despite the use of e-mail and modern technology, we need to find ways to make Royal Mail change with the times. The injection of private capital will help to fund the necessary modernisation, which has already begun, but which needs to continue apace.
However, a more innovative way of achieving rising productivity—one put forward by the Bill—is by providing employees with shares in Royal Mail. Evidence has consistently shown that employees who feel a sense of ownership of a company have higher morale, and are likely to be more successful as a consequence, than those who do not feel that sense of ownership. The employee share scheme will give staff at Royal Mail a real stake in the future of their company and give employees a financial incentive to see improvements in the company and an even larger turnover. Given the clear benefit of that approach, my only regret is that the Government have not made the employee share scheme greater than 10%. However, given the financial constraints and the need to attract fresh investment into Royal Mail, I appreciate that doing so may not be practical. That said, I have some other concerns.
Chris Evans
Does the hon. Gentleman not think that the best thing would be to offer Royal Mail a mutualisation, as has happened with Post Office Ltd ?
Chris White
No, I think that the offer as it stands is sensible and practical, although as I have said, it would be better if the level was greater than 10%. However, as it stands, that is the only way that we are going to move forward.
I recognise that the injection of private capital has been sought in order to protect the universal service obligation, although I would like to use this opportunity to state how damaging it would be for communities and small businesses if Royal Mail dropped the USO. I understand that there are considerable costs involved. However, for many communities—particularly rural communities—and a vast number of small enterprises, Royal Mail is an important lifeline, with nearly 60% of small businesses wanting to continue to receive mail deliveries six days a week. Given that the small and medium-sized enterprise sector will play a large part in our economic recovery, we should avoid any changes to the USO that might damage growth or hamper development in that part of our economy.
The future of Royal Mail is not the only concern for communities and businesses, however. People also want a strong future for our post offices. In the past few years, post offices have closed in many communities, including my own, and those vital local amenities must be protected. If they are to survive, they must become more than simply a place for posting or holding letters.
The Post Office already needs a subsidy of around £80 million in order to carry out its functions, and this will increase if other income streams are not found. I believe that a Post Office bank offers a real solution and could provide a strong future for our post offices. About 25% of small businesses bank with the Post Office’s financial services, and I am confident that more would do so if the limited number of transactions that they are able to make could be expanded. A survey by the Federation of Small Businesses showed that nearly 40% of its members were in favour of a Post Office bank and would bank with it. The present arrangements mean that 50% of the profits made on financial services provided by the Post Office leave the Post Office business, and that is simply not sustainable. Moreover, the joint venture with Bank of Ireland has not been able to deliver the basic, core banking products.
An independent Post Office bank would bring banking right back to the centre of our communities and help to revive trust between the public and the banking sector. A Post Office bank would help small business, and thus our economy, and it would provide those who have difficulty accessing the high street banks with an opportunity to get hold of basic financial services, helping the most vulnerable in our society. In many of the poorest areas, people have lost access to traditional forms of banking, and a Post Office bank would provide a trusted face and a chance for those communities to use the financial services that many of us take for granted.
Such a bank would not be unique to Britain. The French postal service launched its bank in January 2006, and, by 2007, it had 11 million postal banking accounts providing significant revenue. The Italian postal service, Poste Italiane, launched BancoPosta in 2000. By 2002, Poste Italiane had shown a net profit for the first time in 50 years. So it can be done; it is just a question of putting the framework in place to achieve it.
Mr Reid
Those are completely different examples. If the question arose in the hon. Gentleman’s constituency of allocating public funds to a scanner for his local hospital, to the troops in Afghanistan or to a sorting machine for his local sorting office, I think a survey would establish that the scanner and better equipment for the troops in Afghanistan would rank high in the pecking order. Because Royal Mail is operating in a competitive market, it is important for it to secure private sector expertise. The health service is a national health service for the whole country, which is why it should be in the public sector.
It was the last Government who introduced competition to the mail business in their Postal Services Act 2000. However, the structure that they created allowed private companies to cherry-pick the most profitable parts of the business, while leaving Royal Mail to deal with the expensive part—delivering to remote parts of the country. Royal Mail is now suffering as a result of the unfair competition created by the last Government’s regime, and I am pleased that the Bill will allow Ofcom to remove much of that unfair competition.
Under the last Government, all that we saw was worsening service. Opposition Members seem to have forgotten that. It was not the fault of the postal workers, but the fault of the competition regime that the Government had created. Mail is now delivered much later in the day than it used to be, Sunday collections have been abolished, and stamp prices rise every year by far more than the rate of inflation. Worst of all, thousands of post offices have closed. I was delighted by the announcement today of a vital £1.3 billion of new funds for the Post Office.
Mr Reid
No. I am afraid that I have already taken the two interventions that I am allowed.
The Post Office is extremely important, and it is also important for the whole Government to back it. Given that it has branches throughout the country, it is in an ideal position to deliver Government services. I hope that we shall not see from this Government some of the silo thinking that we saw from the last Government. I am thinking particularly of the Department for Work and Pensions. Owing to the way in which government is structured in Departments, there is often an incentive for silo thinking, and for looking only at an individual Department’s budget and not the wider budget. I can understand the pressures on the DWP to cut costs and therefore perhaps to allow services such as the payment of pensions and benefits to go to a competitor that does not have as wide a network as Royal Mail and the Post Office, but I hope that those pressures will be resisted, that the whole Government will back the Post Office, and that in particular when considering the contract for the payment of benefit cheques, the DWP will continue to give it to the Post Office. Any other private sector competitor does not have the same widespread network.
The key test of whether I would support the Bill was always going to be, “Does it protect the universal service obligation?” The Bill clearly passes that test. I intervened on the hon. Member for Angus (Mr Weir), because he clearly had not read the Bill. I draw his attention to clause 28(1), which states:
“OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service”,
and to subsection (2), which states:
“the power of OFCOM to impose access or other regulatory conditions is subject to the duty imposed by subsection (1).”
That is the USO.
Tom Blenkinsop
I would normally, but I am pressed for time.
Liberalisation is often introduced piecemeal, with the private sector being handed a slice of the pie at each stage. The report found that competition was often based on price-related targeting, as a result of which many new companies home in on niche targets and cherry-pick, concentrating on business-to-business, business-to-consumer, dense urban markets or bulk mail. Previously, Royal Mail was able to use profitable bulk mail business to cross-subsidise unprofitable but socially necessary deliveries to remote areas, but private competitors have snatched 40% of bulk mail in downstream contracts. As a result, Royal Mail’s £233 million profit in 2006-07 was transformed into a loss of £279 million the following year. Privatisation and liberalisation have resulted in huge job losses and exerted pressure on wages and conditions.
Chris Evans
My hon. Friend knows that TNT has a terrible track record on employee relations. If it takes over Royal Mail, will productivity be affected in terms of worker happiness?
Tom Blenkinsop
As a former trade union official, who often likes to stand and cannot normally sit down, I agree with my hon. Friend. Between 1996 and 2006, Germany’s Deutsche Post axed more than 21,000 full-time and 12,000 part-time jobs. In some cases, the employment situation has been transformed beyond recognition. In Holland, the 27,000 mail deliverers employed by the three major companies have service contracts rather than employment contracts, thus they are without employment protection, holiday pay, disability insurance and entitlement to unemployment benefits.
Chris Evans (Islwyn) (Lab/Co-op)
I know that time is short, so I will be as quick as I can. I apologise to any Member if they cannot understand my accent.
This Bill is one of the great “might have beens.” It might have set out a positive policy on employee share ownership. Instead it does not tell us how the shares will be distributed and what employees can do with them. It might have strengthened the link between Royal Mail and Post Office Ltd. Instead it raises new concerns about the viability of many post offices.
The Government's plan for the wholesale privatisation of Royal Mail threatens to turn a public service into a private monopoly. The Government have come up with myriad reasons why Royal Mail should be privatised. First, we were told that privatisation was necessary because Royal Mail could not compete. Royal Mail delivers 99% of the mail to 28 million houses, six days a week. Which competitor in their right mind would want to take that on? The idea that Royal Mail is unable to compete with the private sector is complete and utter nonsense.
We were also told that the privatisation is the only way that Royal Mail can access capital, yet the entire modernisation programme of Royal Mail for the next three years is fully funded. Royal Mail is a profitable business and those profits could and should be retained for future investment.
The proposal to separate Royal Mail from Post Office Ltd, the postal service’s counter network, is of huge concern to many sub-postmasters throughout my constituency. Any retail network losing its main customer base would struggle to remain viable. The Post Office relies on Royal Mail for a third of its income and the fact is that a privatised Royal Mail will be free to use other outlets for its counter services. Should that be followed through, there will be mass closures among local post office branches, and I hope that the Government Members who said that they would campaign to save post offices are getting ready to campaign once the Bill goes through.
I welcome the proposal for mutualisation of Post Office Ltd, but that does not mean that I do not have reservations. Currently sub-postmasters have £2 billion of their own money invested in the post office network and it is vital that they be granted a far greater say in how Post Office Ltd is run. The success of the Co-operative Group provides an excellent model for Post Office mutualisation. However, any attempt at mutualisation would inevitably fail unless backed by solid actions to get the post office network on its feet, with a viable business model. There will be no mutual option for Post Office Ltd if there is no credible business plan. A 10-year inter-business agreement is an absolute must to ensure Post Office Ltd’s viability as both a business and a universal service provider, but the Government have so far refused to look at that. I hope that the Minister does that tonight.
The most important argument against the proposed sell-off is that the public do not want it. The polling is clear on that. They do not want it in Islwyn and they do not want it in the rest of the country. They understand that prices will go up and that the quality of postal services will go down if Royal Mail is sold, and they are right to take that view. The privatisation of Royal Mail makes no political or economic sense and the Bill is nothing but a wasted opportunity.
Mr Deputy Speaker (Mr Nigel Evans)
Order. A couple of Members have sat here throughout the debate but, unfortunately, were not called. I know they will be disappointed, but I will make sure that this counts in their favour when they next put in to speak. I call Nia Griffith.