Postal Services Bill

David Anderson Excerpts

Wednesday 12th January 2011 Commons Chamber

[Bob Russell]

I am sorry if the hon. Gentleman is not aware of my views on the Bill. I thought that I had made it quite clear that I do not favour privatisation, but I accept the reality that it will happen, and I am trying to make things as good as I can. Of course I know the CWU’s views. I have met CWU people both nationally and locally, and I have told them, “I do not like it, but it’s going happen—accept the reality.” I do not like lots of things, but we have to accept the reality.

The new clause is designed to try to assist the post office network—our neighbourhood post offices. It is also designed to try to ensure that Post Office workers—the people who deliver our mail—have a sustainable business. That is what it is all about. I have encouraged my local CWU people in Colchester to understand that the concept of mutualisation and employees having shares are positive things—they seem to work for John Lewis, as one model, and for the co-operative movement, as another model—and to embrace, not deny what will happen.

[Mr David Anderson (Blaydon) (Lab)]

I thank the hon. Gentleman for giving way; he is being very generous. Does he agree that neither the Co-op nor John Lewis had arrangements foisted on them by a Government against the will of the work force and the British people?

[Bob Russell]

I need to reflect on what the Labour Government, particularly Lord Mandelson, had in mind, and how that may or may not differ from the proposals.

I am critical of the Labour Government, but I am also critical of the Government who preceded them. This is the third time that I am going to say this: for the past 30 years, this great British institution has been run down by successive Governments. It was the envy of the world—it no longer is—and ultimately the blame must rest with Government and, it must be said, the somewhat mediocre management for many of those years.

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[Mr Anderson]

Has not the Minister just let the cat out of the bag—that the Liberal Democrats, at least those in the Government, just like the rest of the Government, know the cost of everything but the value of nothing?

[Michael Connarty]

Tomorrow, the Liberal Democrats will find out the value of making various pledges to the public and then breaking them. Even the proposal to privatise 50% of the Post Office, which was very similar to the proposal that a certain Minister in the Lords made on behalf of the previous Government, has been betrayed by the Liberal Democrats. I shall support the new clause, because it is a cross-party proposal that would ameliorate some damage for a short term. The most important thing, however, is to vote against the Bill and to let people know that what is being done is a dirty deal by the Liberals to let the Conservatives privatise and smash the post office network.

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[Mr Weir]

My hon. Friend makes a very good point. Of the 12,000 current post offices, only 7,500 are needed to meet the universal service obligation. The Minister laughed at the hon. Member for Edinburgh South, I believe, for mentioning the German model and 80 sq km, but one wonders what exactly might happen in large swathes of rural Scotland if this were to come about.

I have spoken longer than I intended, but I end by saying that, while we maintain our position of opposition to the privatisation of the Royal Mail, a 10-year inter-business agreement would give Post Office Ltd the necessary guarantee and stability for a lengthy period after the privatisation. I hope that it would allow the stabilisation of Post Office Ltd, allow a reasonable period to get new Government business, if possible, into post offices, provide some hope for the temporarily closed post offices or others up for sale, and some comfort to those thinking of entering the post office market. That would at least provide them with some confidence that there is a future. Otherwise, they would not go into that market. I urge all Members to support the new clause, which I hope the hon. Member for Colchester will press to the vote in order to show the House’s strength of feeling on the issue.

[Mr Anderson]

I welcome the debate. Like the hon. Member for Colchester (Bob Russell), I do not want to see the privatisation of the Post Office at all, but if it happens the new clause will ameliorate its effects. Does anyone really believe that the Post Office, going out into the world of competition, would be able to survive against some of the competitors it would be up against? The case for going outside has not been made, but if it does go outside, the Post Office should be protected. I am not quite sure where the Liberal Democrats are coming from—there is nothing unusual in that—but they seem to think that European Union law stops us passing this new clause. We have had no evidence to demonstrate that, and I do not believe that any evidence was shown in Committee either.

I hope that the Minister will explain exactly what rule in European legislation prevents an inter-business agreement. Everybody else who appeared before the Committee seemed to think it was a good idea. George Thomson of the National Federation of SubPostmasters said:

“On separating Post Office Ltd from Royal Mail, it is unprecedented and we have to get it right, which is why we need a 10-year inter-business agreement… We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI…you would get a 21-year contract. I am not asking for a 21-year contract, but…for a 10-year IBA contract.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 29, Q70.]

He was not alone. Paula Vennells, managing director of Post Office Ltd, who ought to know as she was part of the new management, said that

“we have a very strong commercial relationship with Royal Mail and that is something that both businesses would want to continue, so as we transform the post office network we will make it into something that Royal Mail will want to use.”

Moya Greene, the chief executive of Royal Mail, concurred, stating that it was

“unthinkable that we would not have a very long-term relationship with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17-18, Q42.]

Even Richard Hooper, who brought forward the original report, said in the updated report that he believed that the

“importance of the inter-business agreement should not be underestimated”.––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 114, Q228.]

It is a shame that those three people did not say that they wanted the IBA to continue in the way the amendment suggests. If we do not have that in black and white, we shall experience a rerun of what we witnessed in the Chamber between 12 and 12.30 pm today, when the Prime Minister repeatedly replied to questions by saying, “We hope that this can happen”, “We wish this to happen”, or “We are looking into ways of making this happen.”

If privatisation takes place in the way that is being proposed, when the contract goes outside people will eat it up. I spent 30 years in the trade union movement trying to unravel agreements and contracts or renegotiate agreements with organisations. I would say, “That must be there in black and white. If it is not in it, you cannot win it.” If we do not provide protection for Royal Mail and the Post Office that works in the way in which the IBA has worked so far, the service will clearly not be saved.

I appreciate that members of the Government are naïve amateurs who are doing their best to make things work, but that is not good enough. We need to ensure that services are supported. We are told that European Union rules are preventing that, and I hope that the Minister, who has now returned to the Chamber, will be able to explain exactly how they are doing so. When Corus was threatened with closure on Teesside, my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and I were constantly told that EU rules prevented Government intervention. We were told that the Germans and the Dutch used those rules, and that the British must play by the rules. We were losing out. Unless we have real, clear evidence that this cannot be done under law, the Government’s case will not hold water.

[David Mowat]

The hon. Gentleman has talked of the way in which the IBA works, which seems to have resulted in three quarters of the network becoming unsustainable or unviable. How does he think that extending the IBA in its current form will improve the position?

[Mr Anderson]

The hon. Gentleman is clearly under the misapprehension that public service is about nothing more than making money. We must accept that the public sometimes have to pay for the delivery of a public service in a way that does not satisfy accountants. We have a health service that costs £100 billion. No one says that it is in deficit. We have a defence system that effectively requires us to pay out all the money: we are not given any proper help. The postal service is also a quality public service that we should be proud of. The Labour Government invested a large amount of public money in it, but the truth is that we did not succeed. We were maintaining post offices that we had to accept were effectively a drain on public resources. The question that we must ask, and the question that people in the country will ask, is whether this is money well spent, and I would argue that it is.

[David Mowat]

I entirely agree that the sustainability of the post office network is a valuable public service, which is why I am delighted that the Bill will provide £1.3 billion to sustain it over the next four years—an average of £40,000 per post office per year. What I want to understand is how the continuation of an IBA that has apparently caused three quarters of the current network to lose money will help.

[Mr Anderson]

I think that that question should be put to Ministers. Nothing else will change: the need is still there, and the service must still be provided. In the last Parliament we invested £3.9 billion in the network, but that was clearly not sufficient. As was pointed out by the hon. Member for Angus (Mr Weir), we must accept that we are living in a different world now. People are obtaining their television and driving licences on line and using e-mail, but that does not mean that we as a nation should not be prepared to say that the post office network is so important that it should be subsidised by the public purse.

[Mr Russell Brown]

The hon. Member for Warrington South (David Mowat) has mentioned that £1.3 billion twice, but the fact is that money alone is not the answer to the problem affecting our post office network. It also needs the business that comes through the door and is transacted over the counter.

I assure the hon. Member for Warrington South that if there were an easy answer to all this, a Labour Government would have found it. There is no easy answer, which is why the IBA is such an important element. It will deliver more than 30% of the business that is transacted. As I said earlier—and I apologise for repeating myself—if that goes, post offices will wither on the vine.

[Mr Anderson]

We may compare the IBA to a sticking plaster covering a wound, but if it continues following privatisation, it will provide that little bit of additional protection that would not be there otherwise. Otherwise, post offices will be left wide open to businesses that simply want to make money. Why else would they want to take on post offices? Who wants this not to happen? The people who want it not to happen are those who want to buy postal services, who want to compete, and who want to make more and more money.

If we had been sitting here 25 years ago, we would have been debating the privatisation of the utilities. We would have heard all the arguments that we have heard today about how dynamic privatisation is, and about the efficiencies that it produces. E.ON is raising prices by 9% at a time when people are facing pay freezes. That is the truth about privatisation, and that is what will happen in the case of this privatisation.

[Richard Fuller]

I should like some clarification. We are using the phrase “inter-business agreement”, but the hon. Gentleman seems to be describing it as a 10-year continuing subsidy mechanism. Is he saying that he wants an inter-business agreement to be the transport mechanism for a continuing taxpayer subsidy, regardless of whether Royal Mail is privatised?

[Mr Anderson]

I want the IBA to give sub-postmasters the security that they have asked for. They say that it will give them faith in their ability to continue in their business. After all, it is their money. As I said earlier, they will lose £2 billion if the Bill does not work. They would much rather remain in a system enabling post offices to remain in operation and to receive support from the public purse. If we had adopted that attitude, we would not be having this debate.

[Richard Fuller]

I thank the hon. Gentleman for giving way to me again. There is an issue here that specifically concerns subsidy, and we should call it subsidy rather than an inter-business agreement.

The hon. Gentleman has cited the comments of Royal Mail executives as well as those of members of the National Federation of SubPostmasters. They did not ask for a 10-year IBA. Was that because the changes proposed in the Bill will enable managers to manage the operations of the business? Is not one of the problems that we have experienced in the past the fact that Government have shackled management and prevented it from managing effectively? That is the reason for the programme of closures and the inability to modernise effectively.

[Mr Anderson]

That is true, but the managers have not made the best of the deal that they have been given. They have received plenty of public money, but they have not succeeded. There are a number of reasons for that, but in recent months we have seen a break from it. We have seen new management; we have also seen the trade unions presenting a modernisation plan that can and will work. Those developments are being stopped in their tracks by the attitude of the Government, who want privatisation at all costs.

[Richard Graham (Gloucester) (Con)]

Does the hon. Gentleman agree that the other side of the equation, which focuses on the agreement between Royal Mail and the post offices, is the amount of business that post offices can do by other means? That revolves first around their ability to distribute financial services—access to banking and credit union arrangements—and secondly around their role as “front of office” providers of a series of services for customers coming from other Departments. I hope that the Minister will tell us more about that.

[Mr Anderson]

I could not agree more. As was pointed out by the hon. Member for Colchester, the post office network is unique. Over the past few years, however, we have let the country down by allowing it to be weakened. I must admit that I have argued against that in the House: I have argued against my own Government. The network is being offered a huge opportunity, but the security of being in the public sector will make it even more possible for it to succeed. If it is allowed to leave that sector and to face unbridled competition, it will fall apart.

[Lindsay Roy]

Does my hon. Friend agree that subsidy is often viewed in a negative context, and that profit is gauged not in social terms but solely in a financial context? In fact, it is about dividends for communities. That kind of social investment is vital to our nation.

[Mr Anderson]

I could not agree more with my hon. Friend. It is strange to hear Liberal Democrats who, justifiably, used to make that case say that it no longer holds water. The Minister mentioned the cost of the United States social service, but the United States Government obviously decided that the cost of providing a service that they believed to be second to none was money well spent. Perhaps we should take a lesson from them. There are not many lessons that I want to take from the Americans, but that may be one worth considering.

The truth is that we have been here before. There has been compulsory competitive tendering. There has been the privatisation of cleaning services, when we were told, “You’re not allowed to build into contracts clauses that prevent some people from bidding for them.” However, there were discussions between employers and trade unions after both sides found that the cowboy contractors were undercutting the service and not delivering what they were supposed to, and we ended up with an agreement between contractors and the trade union side that there would be a baseline that nobody would be allowed to go below.

We could have a similar agreement. We want protection for people, so they know where they are going and they have the strength of knowing that they have the security of this agreement behind them to make sure that things are right. Otherwise, the only people who will benefit will be those who want to take over the post offices: the international companies who want to come here and make money out of public services. It is a disgrace that the Liberal Democrats have given cover to the Tories to push this through.

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[Mr Davey]

I was coming to that, so I am delighted that my hon. Friend intervened just then. There is a legal barrier—

[Mr Anderson]

Will the Minister give way?

[Mr Davey]

Let me just finish the point, because there is a legal barrier. This also addresses the point made by the hon. Member for Blaydon (Mr Anderson), who asked whether the European Union was involved in creating problems for legislating in the way proposed in the new clause. The legal barrier to legislation requiring an IBA is the EU’s competition framework. Legislation providing an exclusive arrangement between Royal Mail and Post Office Ltd would face a significant risk of legal challenge as being incompatible with competition law. Article 101 of the treaty on the functioning of the European Union contains rules prohibiting anti-competitive agreements between undertakings. Article 4(3) of the treaty on European Union obliges member states not to jeopardise the attainments of the objectives of the treaty. The effect of those provisions, together with article 102 of the treaty on the functioning of the European Union, is that member states cannot introduce measures that would render the competition rules ineffective—that is clear. In addition, legislating for Post Office Ltd to have a guaranteed income stream would risk a successful state aid challenge being mounted. There are real barriers to doing what new clause 2 seeks to do.

However, I can assure the House, as I have done previously, that we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.