Royal Mail and the Universal Service Obligation

Chris Stephens Excerpts

Thursday 12th January 2023 Westminster Hall

[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to follow my comrade, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell). I have to say that I agreed with many of his remarks, which will no doubt concern him greatly. I also congratulate my good friend, the hon. Member for Jarrow (Kate Osborne), on securing this important debate.

It would be remiss of me not to mention my family connections to Royal Mail: my late grandfather worked for it for many decades, and two uncles also worked for it. They cared passionately about the Royal Mail service when they worked for it, as do the workers in the Govan and Hillington delivery offices—when I have met them on the picket line during the present dispute, it is clear just how much they care. As I have said to the Scottish secretary of the Communication Workers Union, its members in Govan and Hillington are a credit to themselves and their trade union, because they care about the public. They know the communities and they look after vulnerable members of those communities, looking in on them and making sure they are okay. They care about the service and the key principles around that service.

Royal Mail staff have no interest in turning the service into a gig economy-style parcel courier, but Royal Mail is introducing insecure contracts and lower pay into the service to try to turn Royal Mail into just that sort of gig economy parcel courier service, which should be of deep concern, for many of the reasons that the right hon. Member mentioned. My concern is that Royal Mail’s direction of travel will leave communities, businesses, customers and workers worse off.

In discussing the universal service obligation, we need to ask questions about the financial mismanagement of Royal Mail, which I believe puts the universal obligation at risk. Questions need to be asked about how a company can make profits of £758 million, as reported in March last year, which would easily qualify for any excess profits tax, and, six months later, that profit has been turned into a loss of £57 million. The company is almost Carillionesque in its management approach. As someone who was part of the Carillion inquiry, I can see similar themes in Royal Mail’s management approach in terms of profits, sending money to its shareholders, running down the service and then making losses. The comparison is not unfair.

The end of Saturday deliveries would have a harmful effect on other industries, such as the publishing sector, as has been mentioned. It would result in millions of pounds in losses from people cancelling magazine subscriptions, for example, and reduce advertising revenues. It would also lead to thousands of decent Royal Mail jobs being lost around these islands, and it runs completely counter to the often stated levelling-up agenda that we hear about so often.

In closing, I hope the Minister will talk about the proposed takeover by Vesa Equity, which has been allowed to increase its stake in Royal Mail; we have had no explanation about that as yet. I have a very real concern that it wants to break up the service and break Royal Mail apart. If that is the case, the company will hear from many hon. Members, and not just myself, as to why that should be opposed and obstructed.

--- Later in debate ---

[Kevin Hollinrake]

As the Minister concerned, clearly I will vote in favour, as the hon. Gentleman would imagine, but let us have a good debate about that on Monday. I spoke to one of the hon. Gentleman’s colleagues, the Chair of the Business, Energy and Industrial Strategy Committee, the hon. Member for Bristol North West (Darren Jones), today, and he said he was very supportive of a minimum service level, so we should not draw battle lines on this issue simply on party political grounds. But perhaps we should have a go at debating that on Monday.

The importance of the universal postal service is a key element of today’s debate, as mentioned by many hon. Members, including my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale, my hon. Friend the Member for Wimbledon (Stephen Hammond), and the hon. Members for Reading East (Matt Rodda), for Luton South, for Wansbeck (Ian Lavery) and for Ilford South (Sam Tarry). Our objective continues to be the provision of a financially sustainable and efficient universal service that meets the needs of users, within an open and competitive postal market. That is why the six-day-a-week, one-price-goes-anywhere, universal service remains at the heart of the regulatory regime, and why Ofcom has a primary duty to secure its provision.

My hon. Friend the Member for Wimbledon asked what I am doing to make sure that Ofcom meets its responsibilities. I met the head of Ofcom and other members and pointed out very clearly its role as a regulator, and in ensuring that this service continues.

To be completely clear, the Government currently have no plans to change the statutory minimum requirements of the universal postal service, which are set out in the Postal Services Act 2011.

[Chris Stephens]

I take what the Minister says in good faith, but could he maybe just respond to some of our concerns about the actions of Royal Mail and the proposed takeover from Vesa Equity? While the Government are saying that they want to keep the six-day service, Royal Mail management and some of its shareholders seem to be trying to do something completely different.

[Kevin Hollinrake]

The hon. Gentleman raises an important point. I will come on to the Vesa point later, but set out in the legislation, from back in 2011, there is a clear and transparent process for how any changes to the universal postal service should be considered. That was coalition legislation. Any such change would need to be made through secondary legislation and be agreed by Parliament. We would also expect Ofcom to consult with all stakeholders. Our position has been very clear in my meetings with Royal Mail and Ofcom: we think that the six-day service should continue.

Ofcom has a monitoring regime in place to identify any risks or threats to the universal postal service. Since 2012, it has published an annual report setting out key data and trends in the postal sector, the impact of the changing market dynamics on UK postal services, and Royal Mail’s performance. Royal Mail is clearly facing some challenges, particularly given the long-term decline in letter volumes and the currently challenging economic backdrop, but I have yet to receive any convincing case for a need to change to meet users’ needs and to ensure the financial sustainability of the universal postal service.

A number of hon. Members, including my hon. Friend the Member for Wimbledon and the hon. Member for Jarrow, raised a point about large business owners and the impact on large businesses, such as those that produce magazines and the like, and how they would be impacted. We would fully expect their needs to be taken into account, in terms of user needs’ surveys. The hon. Member for Reading East talked about the impact on small and medium-sized enterprises—something that is very important to me personally—and making sure that they can get marketing messages out to communities across their target areas.

I have made it clear to Royal Mail that it needs to make any case for change to Ofcom and that I will fully consider any advice the regulator gives me on the future scope of the universal postal service.

Hon. Members have understandably raised concerns about Royal Mail’s service delivery performance. The hon. Member for Liverpool, West Derby (Ian Byrne) and my hon. Friend the Member for Wimbledon both raised that point. It is true that the business has faced increasing pressures over the last few years, not least the coronavirus pandemic and the industrial relations dispute with the Communication Workers Union. There have been impacts on the business and the users of postal services. It is regrettable to see postal services disrupted due to strike action and to see the impact that that is having on consumers, businesses and other users.

We are not involved in the negotiations, given that Royal Mail is a private company. However, we are monitoring the dispute closely and have urged Royal Mail and the CWU to reach a resolution as soon as possible. I know there are ACAS talks right now and there will be no further strikes until 20 January, until the talks have concluded. I very much hope that the talks will prove successful.