Postal Services Bill

Debate between Chris White and Chris Evans

Wednesday 27th October 2010 Commons Chamber

[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.