Ed Davey
Main Page: Ed Davey (Liberal Democrat - Kingston and Surbiton)Postal Services Bill
Ed Davey Excerpts(13 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Michael Connarty
It might be useful to read the Bill. That is not in the Bill. It is an under-the-counter promise by the Government that they have set aside a sum of money. That is no different from the sum set aside in the past by the Government every time they carried out a reorganisation to sustain the unsustainable. It is clear that those post offices are not viable in the market. If those post offices and sub-post offices lose another £343 million, which is the cost per year if the business arrangement is broken, that is where the money will go. It will replace the money that should have come from the agreement. The money will be required to pay the people. At present 900 post offices are up for sale, apart from those that are temporarily closed, as the hon. Member for Colchester said.
It is important that we realise that, in this process, the Conservative-led Government, supported by the Liberals against their pledges in their own manifesto, are trying to move the Post Office and Royal Mail into a market and away from a controlled situation. There is talk now of the inter-business agreement. There will be talk later of the universal service obligation, which will also be destroyed by the Bill. In the USA, the arch-capitalist country, the postal service is permanently in the public sector. It will not be taken out of the public sector because it is seen as a public institution. We will follow a route that will cause us to destroy part of our institutions.
I do not believe that Members are kidding themselves. I am sure they have talked to their communities when a sub-post office has been closed and heard the anger when that happens. I am sure that they have talked to people when they lose their Crown office and get a second-rate service from a post office put into the back of a supermarket. People do not like it because it destroys the structures of their communities.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)
The hon. Gentleman mentions the United States Postal Service. Is he aware that it made an $8 billion loss last year?
Michael Connarty
What I am aware of is that the public purse supports an institution in the USA. If the Liberal Democrats in the Government are saying that they believe it best not to subsidise but to let the market rip, why do they talk about subsidising those 700 post offices that do not make any money? Is the Minister arguing for the withdrawal of the subsidy in the USA but not here? It does not make sense, and he knows it.
Mr Davey
It is not appropriate for me to comment on the previous management, but I invite my hon. Friend to contact the new chief executive of Royal Mail, Moya Greene, and the new managing director of Post Office Ltd, Paula Vennells. If he seeks to meet them and to listen to them, he will find that the management in Royal Mail and in Post Office Ltd are of the highest calibre.
Mr Binley
I, of course, welcome the Minister’s intervention in that respect. I have no wish to vilify the current management; I just make a statement about why we are in our current position with the Post Office. We have to be realistic if this debate is to have any meaning at all. I have outlined an important reason for being in the position we are in, and I have no fear in doing so.
Mr Davey
I am grateful to the hon. Gentleman for mentioning Deutsche Post and its legal protections. He and hon. Members who served on the Postal Services Public Bill Committee will be aware that the protection given to post offices in rural areas of Germany is that there must be a post office every 80 sq km. Is that what he proposes for this country?
Ian Murray
We are proposing protection for the post office network in any fashion, which the Minister point blank refuses to give, even though his Back Benchers are asking him to consider it through the new clause.
In Committee, the Minister said:
“No previous Government have thought to put it on any different footing.”
However, no other Government have needed to intervene on the inter-business agreement because no other Government have separated the post office network from Royal Mail, which is what will happen under this full-scale privatisation. He has tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. As has been said, the stated aims of the management of Royal Mail and the Post Office are to keep the relationship, but to be frank, management changes rather quickly and regularly. We need more reassurance in the Bill, rather than words from the management of Royal Mail and the Post Office. The Minister went on to argue in his evidence to the Committee:
“If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-123, Q244-245.]
He therefore admitted that there will be no inter-business agreement going forward and that the post office network is essentially being hung out to dry by this legislation, along with the Royal Mail and tens of thousands of workers.
Mr Davidson
No, I do not agree with that at all, because I do not believe that a structure will be established for Royal Mail that necessarily allows all shareholders to come round and cast a collective vote on whether they want to maintain a collective post office network. It will be in the management’s interests to maximise the return for the shareholders, so screwing the post offices into the ground will probably be in their interest. I am sorry if my comparison about ham and eggs, and chicken and bacon was not understood. The concept is that the pig provides the bacon, and the chicken provides the eggs. The chicken can carry on afterwards, but it is not quite as easy for the pig. I am sorry if that is beyond senior members of the Conservative party, but we are prepared to explain these things to them later.
Returning to the question of how we can secure the strongest possible commitment to the IBA, as proposed in the new clause, which the Committee had not seen when it prepared its report, we thought that having that in legislation would be an extremely strong protection. If the Minister can give us an assurance that legislation is not necessary because the same things will be achieved without legislation before there is any question of a sale, then, because we are reasonable, we would be satisfied. However, the House will understand our anxiety, because after the by-election on Thursday, the Minister might not be here any longer. We want to make sure, while he is in a position of authority, that he allows his heart to rule and produces measures that we find acceptable.
I should like to touch on one or two other worrying issues relating to the Post Office. On the size of the network in Scotland, we accept that the Government’s access criteria are helpful in setting out the structure of the network that they want. We welcome, too, the fact that they intend to keep 11,500 post offices. However, it is not the case that the access criteria necessarily mean that the 11,500 will remain, because our understanding is that the access criteria could be met with 7,500 post offices. A commitment to 11,500 is not necessarily a commitment to the 11,500 that are there at the moment. It would be possible in those circumstances for a substantial denuding of the post office service to take place in the highlands, the islands, the borders or Argyll. Rural areas could maintain the present access criteria, and the 11,500 criterion could be met because other post offices might set up elsewhere in urban areas, but the service would undoubtedly be worse than it was before.
The Minister shakes his head. I would welcome a commitment from him that the intention is to maintain the network pretty much as it is. I genuinely understand his difficulty. Individual post offices are controlled by individual private contractors. We cannot legislate to refuse somebody permission to leave. There will always be some degree of coming and going. If it were one in, one out in a particular area, we would not object to that, but there could quite easily be a couple of hundred post offices going out of the rural areas or the poor areas, and a couple of hundred starting up in the richer areas where need is perhaps less. The Minister’s criterion would still be met, but the social objectives that we are pursuing would be lost. I am happy to give way if the Minister wants to solve my problem.
Mr Davey
Philately has got me to my feet. I am looking forward to reading the Scottish Affairs Committee’s full report. I thought that I had said to the Committee that the 11,500 commitment is in the contractual agreement between the Government and Post Office Ltd. That is a strong commitment and it is backed up by the access criteria that we inherited from the previous Government, which could be delivered by a network of 7,500 post offices. Obviously, there is a debate about that, but the two together give a strong reassurance to Members and to communities around the country and meet all the concerns that the hon. Gentleman is raising.
Mr Davidson
The Committee unanimously welcomed the points that the Minister was making about the access criteria and the fact that he was guaranteeing, as I understood it, 11,500 post offices, but surely he will accept that his guarantee does not guarantee the same 11,500. It does not guarantee them in the same locations. In some areas, particularly rural areas, where there are small post offices, the access criteria are, thankfully, better met. One of those could easily close, one could open somewhere else, such as London, and both sets of criteria would still be met.
If the Minister cannot give us a commitment today, perhaps he will take that away and consider whether something could be done at a later stage in the passage of the Bill. I think that he accepts that this is a genuine anxiety and that we are here to help him. We are identifying gaps in provision and trying to strengthen the Bill.
Mr Davey
I thank my hon. Friend the Member for Colchester (Bob Russell) for sparking the debate, and particularly for the way in which he introduced it, in his unique style. I thank him for his practical approach to the issue, and for his support for the mutualisation and employee share ownership provisions. I hope I shall be able to reassure him that new clause 2 is not needed, and that our policies for the Post Office will ensure that some of the more scaremongering predictions that we have heard will not come to fruition.
Members who have spoken in support of the new clause have expressed the fear, which has been debated at length in Committee and in other forums, that taking Post Office Ltd out of the Royal Mail Group of companies will put the commercial relationship between Royal Mail and Post Office Ltd at risk, and thence pose a risk to the post office network. I share my hon. Friend’s laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd. However, the approach taken in this new clause, of legislating a contract of a certain length, is not the way to achieve our shared objective.
In the evidence given to the Public Bill Committee, we heard strong backing for the separation of Royal Mail and Post Office Ltd. These are different businesses, which will benefit from focusing on the different challenges they face. It is worth keeping in mind that postal services account for only about a third of Post Office total revenue, as post offices undertake many other activities. Evidence to the Committee from Richard Hooper—the last Government commissioned him to report on Royal Mail, and this Government asked him to refresh his report—and from Consumer Focus and Postcomm all supported the separation of ownership of the two businesses. I was grateful for the support for this from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso).
Let me reassure Members, however, that the separation of Post Office Ltd and Royal Mail will not lead to the dangers for the post office network that people have talked about. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners, because there will remain an overwhelming commercial imperative for the two businesses to work together.
Let me expand on that a little further. In evidence to the Bill Committee, the chief executive of Royal Mail, Moya Greene, called the post office network
“the best and strongest network in the country, by any yardstick”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]
Yesterday, she reaffirmed her commitment to that relationship, saying:
“There is already a very strong and enduring commercial relationship between the Post Office and Royal Mail. It is clearly in the interests of us all that this strong relationship is maintained in the future. We are committed to securing as long an agreement with the Post Office as we are legally able to.”
That confirms what Donald Brydon, the Royal Mail chairman, said in his evidence to the Committee. These are very strong pledges, and both Moya Greene and Donald Brydon make them not for sentimental reasons, but because they are business people and they know this relationship makes commercial sense.
Nia Griffith
If this makes such good commercial sense, what is the problem with putting it in the Bill? Royal Mail will still be an attractive proposition to any prospective purchaser.
Mr Davey
I will, of course, address that in detail, if the hon. Lady will let me. However, I first want to stress that it is the commercial incentive in the relationship that is so important. The Labour party forgets that commercial rationale is what makes people work together and what makes partnerships successful, not regulation.
I invite Members to consider the counterfactual of why Royal Mail would end its relationship with the post office network. Many of us fought the previous Government’s post office closure programmes precisely because the public value their local post offices so highly and see them as the natural place for high-quality postal services. As I asked on Second Reading, why would Royal Mail walk away from the Post Office, leaving a vacuum which its competitors would willingly fill? That would be commercial nonsense, and it will not do it.
The new clause would put the contract between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 10 years. Let me explain why I am opposed to this suggestion. I do not believe that legislation is appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. I am unaware of any statutory precedent for the Government requiring particular commercial terms between two independent businesses. When we debated this in Committee, I appealed to Committee members to tell me whether they could find such a precedent. None has appeared, and for good reason. These negotiations are best left to the businesses themselves, who know far better than we in this House their customers, the markets they serve, the products and the services they require of one another.
Mr Binley
I noted that the Minister said, “I do not believe,” and not, “It is a fact.” His not wishing to include this provision in the Bill is a matter of judgment, not a matter of law. May I add something on the idea of there being two independent businesses? In reality, the nation has a sizeable holding in them, so we are not quite talking about two businesses that are quoted on the open market. Would he therefore confirm that there is no legal reason why this arrangement cannot happen, even though it might be breaking new ground?
Mr Davey
I reassure my hon. Friend that I will be coming to this legal point and that I wish to address the remarks made by the hon. Member for Llanelli (Nia Griffith), but I stress that we were not given any statutory precedent for this arrangement. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volumes, service levels and duration. If we adopted the new clause, there is a real danger that we could end up with an IBA that would damage the post office network. That has not been discussed at length and we should concern ourselves with it. The new clause focuses on the duration of the contract and, thus, would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us here in Parliament.
On the key issue, Donald Brydon made it clear in his evidence to the Public Bill Committee that Post Office Ltd and Royal Mail would sign an agreement for the longest legally permissible period before a future separation. As shareholder, the Government will ensure that that commitment is met before any separation. I hope that the House will welcome this new commitment; we are making it very clear that we will ensure that Royal Mail delivers on the commitment that it has given, repeated and outlined to the Committee.
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.
Mr Weir
I understand that after the Bill is passed, if that indeed happens, one company—and only one—that has a statutory universal service obligation will be entering into a contract with Post Office Ltd. I fail to see where the competition problem lies, because nobody else is offering a universal service obligation to challenge that.
Mr Davey
Let us be clear that the commitment that Royal Mail has made is that the refreshed or new IBA would be entered into before separation. We, and the EU legislation that I mentioned, say that there is a problem if the Government legislate for such a long contractual arrangement. The hon. Gentleman is not paying attention to the constraint on the Government.
Malcolm Wicks (Croydon North) (Lab)
Let us put to one side the earlier amusing moment when a radical said that he needed a precedent before acting—fortunately, that did not stop Lloyd George in 1906 with old-age pensions. The Minister has read the careful legal advice from departmental lawyers. Are they saying that it would be difficult to accept the new clause, or have they ruled it out entirely as clearly illegal? Will he tell us what the advice is?
Mr Davey
I have made it very clear that it would be open to serious legal challenge and I believe that we must take that into consideration. Let us remember that this agreement is not negotiated by the Government, as some hon. Members seem to think. It is negotiated by two independent bodies. The right hon. Gentleman, as a former Minister, ought to realise that for a Government to intervene in negotiations that involve commercially sensitive terms and to follow that by putting it in the Bill is completely the wrong way of going about things.
Malcolm Wicks
As a former Minister in the Minister’s Department, although not one with responsibility for this area, I can recall many occasions on which one was given legal advice and difficulties were presented. Unless a provision is 100% ruled out as clearly illegal, Governments must govern, at the end of the day, and Ministers must act in the interests of the democracy.
Mr Davey
This Government are governing. It was the previous Government who moved away from taking action on Royal Mail, who closed post offices and who did not take action. The right hon. Gentleman is absolutely right that we must make judgments, and we are making judgments. I can tell him the judgment that we will not make: the judgment that the previous Government made, which was that the way to sort out the post office network was to close thousands of post offices. We will not do that. The Government can and will help to create the conditions in which both businesses can flourish in partnership with one another.
One thing is certain. A struggling Royal Mail will lead to problems for the Post Office. The Bill introduces the ability to bring in much needed private capital for Royal Mail to invest in its transformation, so that it can offer the best service to its customers. It is important, too, that the Post Office continues to offer the best possible service to Royal Mail as well as to other current and potential clients. I am sure that hon. Members are well aware following the debate that we have committed funding of £1.34 billion, so that Post Office Ltd can invest in its network to ensure that that happens. For example, Post Office—
Mr Davey
No, not yet.
For example, Post Office Ltd is piloting branches that offer greater flexibility and convenience in customer services, such as longer opening hours. The Committee heard evidence from Paula Vennells, the Post Office’s managing director, that those branches offer customers opening hours that are between 40% and 60% longer than current opening hours. That is the real change that the post office network needs. That is the change that will attract more customers and will mean that we do not repeat the appalling closure programmes that we saw under the previous Government.
Mr Binley
I want to pin the Minister down, because it is vital that we do. He said that there was a “significant risk” that we might be challenged by the European Courts on competition matters. Yet the two organisations have agreed that it is vital that they have an agreement. How can the EU challenge the Government on that matter when there is an open statement to the effect that it is what is needed and what is good?
Mr Davey
Let me take my hon. Friend back to the point I was making about articles 101, 4(3) and 102. The point I was making was not that the two businesses cannot have an IBA. That is clear—they have one now, and they have committed to refreshing it or to creating a new one. I gave the commitment to the House today that we, as shareholder, will ensure that that happens before there is a separation. I hope that my hon. Friend will welcome that. The risk is about legislation and I hope he understands that point.
Sir Alan Beith
The more I read the new clause, the objective of which I fully support, the more concerned I am that if it were in the Bill the Minister would be open to judicial review from an aggrieved party who made an unsuccessful bid to buy Royal Mail and wanted to judicially review the Minister’s unreasonableness in going ahead with a sale on the basis of an agreement between Royal Mail and the Post Office.
Mr Davey
My right hon. Friend is absolutely right. Let us be absolutely clear: the problem with Royal Mail has been the inaction, particularly from the previous Government, that has led to its parlous state. We do not want to create significant risks of legal challenge that would undermine the modernisation and investment process that Royal Mail needs to deliver on the universal postal service and that we need to ensure that the post office network does not have to face the closure programmes we saw under the previous Government.
Mr Davidson
Could we possibly agree, first, that the EU is a bad thing? Secondly, is the Minister telling us that he does not wish to have the new clause in the Bill in case the EU steps in, while also promising us that he is going to do all this anyway?
Mr Davey
The commitment that I have given today is what the hon. Gentleman and his Select Committee were seeking. That is what I understood from his very well-informed remarks earlier. Now that he has intervened, let me tell him that his point about mobile vans is dealt with in Government amendment 5, which I hope we will get to. There are currently 39 such vans serving 240 communities, and Post Office Ltd has no plans to increase its fleet of vans. I hope that gives him some reassurance on his very detailed point.
Anas Sarwar (Glasgow Central) (Lab)
Following on from the hon. Member for Northampton South (Mr Binley) in wanting to pin you down—the Minister that is, not you, Mr Evans—if the legal advice from civil servants is so clear, will the Minister publish it?
Mr Davey
The hon. Gentleman is a new Member of the House and he might know that there are various protocols on publishing legal advice.
Our policies on post offices will ensure that people will continue to see their local post office as the natural and convenient place to access Royal Mail products, and Royal Mail’s management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, as laid out in our policy document, which sets out a whole range of ideas for new Government services, we will be able to achieve those objectives.
The new clause tabled by my hon. Friend the Member for Colchester is well intentioned and I have always been impressed by how he, the voice of Colchester, campaigns for his constituents, not least for important services such as local post offices. I hope that I have reassured him that his new clause is not needed to support our precious post office network.
Nia Griffith
It still is not at all clear what the Minister is giving away. We have absolutely no idea what agreement he is planning and he has given absolutely no indication that he has had any talks with Royal Mail. He is talking about some sort of negotiation that might take place, but he is not telling us why he cannot explain what the legal problem is. We are not the slightest bit convinced, so will he explain exactly what he is doing to secure the Royal Mail business that provides a third of the post office network’s income? No organisation can survive without a third of its income, so what is he doing to ensure that it does not lose it?
Mr Davey
The hon. Lady cannot have been listening. What I have said today is absolutely clear: a commitment has been made to the Committee on which she served by the chairman and the chief executive of Royal Mail that they will refresh the IBA or have a new one before the separation. I am saying that the Government, as the shareholder, will make that happen, and she ought to welcome that.
Sarah Newton
I am very much reassured by the clear commitment we have heard today that it is the Government’s intention to support the post office network. To convince our colleagues on the Opposition Benches, would the Minister be kind enough to share with us the conversations he has held with the chief executive about what she thinks is the longest legally possible period for the new agreement?
Mr Davey
I think I should definitely be advised to share neither those private conversations nor the legal advice that may or may not have been given to Moya Greene and that she may or may not have shared with me.
The wider policies of the Government for the post office network will prevent major closure programmes. We have heard no apology today for all the closures of post offices under the previous Government. We saw 7,000 post offices close under the Labour Government. This Government have policies to make sure that that will not happen again, and I urge my hon. Friend the Member for Colchester to withdraw the new clause.
Bob Russell
When we read Hansard tomorrow, we shall see that there was at least one commitment—if not more—in the Minister’s response. Whatever the outcome of the vote, the fact that we have held the debate is worth while.
To be told four hours into the debate that my new clause may not be lawful was a little strong. I am pretty sure that, if the proposal were not lawful, somebody, somewhere, would have drawn it to my attention, if not when I tabled it, certainly in the few weeks since the Christmas and new year period. When I am told that there could be a serious legal challenge, all I can say is that nobody has challenged me as to the legality or otherwise of new clause 2.
Although I am grateful for all the contributions to the debate, I am disappointed. Had this been a boxing tournament, the ref would have ended the bout at least two hours ago. If this were an Oxford Union debate, the vote in favour of new clause 2 would have been overwhelming, because the case against the new clause is not very strong. It may be that all the Members who oppose new clause 2 are not present, and only the minority who support it have come to the Chamber to speak, but I am grateful to Members on both sides of the House. I think that we all agree that our sub-post office network is a vital part of our communities. Whether it is sustainable communities or localism, all Governments come up with such ideas and then promptly do things that do not appear to be community oriented.
It is on record that I am opposed to the privatisation of Royal Mail, but I accept that it will happen, so this is a question of what is best. I genuinely feel that new clause 2 is a way of taking things forward.
It is less than nine months since the utopian era of 13 years of new Labour came to an end; of course, it was a golden era for Royal Mail and the Post Office, so although I welcome the support that has been given we need to put it in historical context. The closures under the previous Government were the greatest of any time in the history of the Post Office and Royal Mail. I believe that the coalition Government have proposals—
Mr Weir
New clause 4 and amendments 11 and 14, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill’s passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail’s privatisation, the universal service obligation, which is so important to my constituents, is maintained.
Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope—a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.
The new clause is an attempt—perhaps not a triple lock, but at least a lock—to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.
What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.
I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.
The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company—albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.
I raised the matter during the Committee’s eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:
“The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail’s existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create ‘any significant risk that the necessary resources will not be available’ to enable it to continue its business.”––[Official Report, Postal Services Public Bill Committee, 18 November 2010; c. 289.]
The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.
I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.
Mr Weir
The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.
Katy Clark (North Ayrshire and Arran) (Lab)
Thank you, Mr Deputy Speaker, for giving me the opportunity to speak to amendments 29 and 30. I fully appreciate the time constraints, given that the Minister must be brought into the debate.
The amendments are designed to look at the issues surrounding regulation, particularly at the legal requirements that oblige Royal Mail to process and deliver its competitors’ mail. Many hon. Members will be fully aware of this problem as whenever they attend a postal delivery depot, postal workers will advise them forcefully about it. At the moment, the reality is that on average every letter that Royal Mail delivers for its competitors leads to a loss of 2.5p to Royal Mail. Amendment 29, which was tabled with the support of communication workers and which I would like to put to the vote if given the opportunity, is designed to address that issue.
Briefly, we have a fully liberalised market, but the way the current system operates goes way beyond that required by the European directive. It requires compulsory access by competitors to every point of the Royal Mail’s network and it provides a guaranteed margin for them. Amendment 29 would ensure that the regulator no longer had the power to set that price. There would be a commercial negotiation, and the price established would mean that it was in Royal Mail’s interest to deliver the correspondence.
At present, a competitor will collect letters from customers who make bulk postings. Those letters will be part-sorted, and branded with the competitor’s stamp. The competitor will then drive the letters to a Royal Mail sorting office, where Royal Mail will sort them and deliver them at a loss.
I know that we have a problem with time, so I shall end my speech now. I ask the House to support the amendment, which seeks to ensure that Royal Mail is able to negotiate freely and deliver letters at a profit.
Mr Davey
Because of the shortage of time, I shall begin with a brief overview of our reaction to the new clause and amendments.
The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.
I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail’s existing licence. That prevents Royal Mail from doing anything—such as transferring assets or paying out dividends—that
“creates any significant risk that the necessary resources will not be available”
to carry on its business.
If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman’s speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal Mail’s current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention—although I had told him in Committee—that there are additional protections in company law relating to what the pensions regulator can do.
In my view, new clause 4 is not needed. We already have the necessary protections, and I hope that the hon. Gentleman will at last be reassured and will withdraw the new clause.
In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom’s actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of
“the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas”.
We are extending those duties to Ofcom’s functions in respect of post: “communications matters” in section 3(1)(a) of the 2003 Act will now include postal matters.
Mr Davey
It has been well established that, in the Act, “persons” also means businesses.
On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Public Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.
This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.
Mr Davey
I want to make some progress, as I have a lot of amendments to deal with.
I was grateful to my hon. Friend the Member for Argyll and Bute (Mr Reid) for his welcome for most of the aspects of regulation in the Bill and for how we have sought to ensure that remote rural areas, particularly in Scotland, have the protections they need. However, I gently say to him that there is the requirement for letters to be delivered six days a week. If a parcel is ready to be delivered on a Saturday, Royal Mail will deliver it because a postman or postwoman would be going to that address anyway to deliver letters. I ask him to think about the practicalities of that. Where they are delivering in remote places to remote addresses, they deliver letters in vans. Where they are delivering in towns, increasingly in future, because of the roll-out of this programme, posties will use delivery trolleys. Those are being introduced as a deliberate reform in the way that letters and parcels are delivered. They are being brought in partly to ensure that posties can deliver parcels as well as letters. Given that there is already the minimum service requirement of six days a week for letters, I think my hon. Friend will be reassured on this point.
Amendment 14 to clause 32 is unworkable. It would add disproportionately to the burdens on the universal service provider and it would put at risk the health and safety of hard-working postmen and women. I am surprised the hon. Member for Angus wishes to do that. The exception in clause 32 has been in place for many years. It is in the European postal service directive. Removing it would put at risk the health and safety of Royal Mail men and women. I think he should think very seriously about that.
On amendments 23 to 26 to clause 33, the Bill is about protecting the universal service. Clause 30 enshrines the same minimum requirements in this Bill as are in the current legislation. The power in clause 33 to review the minimum requirements enhances the safeguards against changes to those minimum requirements. As the hon. Member for Ochil and South Perthshire (Gordon Banks) had to admit, at the moment—his Government failed to acknowledge this—there are powers for the Government in this regard. We could, by negative procedure, move the current minimum service requirements down to the level of those in the European postal service directive. I think that is unacceptable, however, which is why we have added extra safeguards to the Bill. They include the requirement that should Ofcom make a judgment that it is in the consumer’s interests for there to be changes, and should the Secretary of State accept that, there would have to be votes in both Houses of Parliament. That is a very strong protection, and he ought to welcome it. Is he going to welcome it?
Gordon Banks
No, but what I am going to do is ask the Minister whether he agrees with the Secretary of State that he has no intention of reducing the level of service. If that is the case, the Minister should support our amendments, not talk about what he has put in the Bill.
Mr Davey
The problem with the hon. Gentleman’s amendments is that they are very confused. For example, in proposing a review after five years in respect of Ofcom, rather than 18 months, he does not seem to understand how the universal service regulations work. We have the minimum service requirements in clause 30, but there is also clause 29, and the reason why there is an 18-month review is to allow the universal postal service order to be brought in so that the sorts of requirements and the level of universal service that exist at present can be introduced quickly. I would have thought that the hon. Gentleman would welcome that. The fact that he does not shows that, despite all our work together, he still does not understand the Bill.
Amendments 29 and 30 are very important, but I am not going to be able to give them the time that they deserve. I simply say to the hon. Member for North Ayrshire and Arran (Katy Clark) that if we were to accept them, they would remove important safeguards for competitors and consumers, and that would not be welcomed by people at large. It would undermine competition and the incentives for efficiency. Our Bill, unlike the one in 2009, seeks to change the regulatory system—
Mr Davey
I beg to move, That the Bill be now read the Third time.
We have had an excellent debate on the Bill, not just today but throughout its passage through the House. Hon. Members have rightly spent a lot of time scrutinising the detail of our proposals, but I would ask all of them to stand back and remember what we are trying to achieve. We are trying to preserve two great British institutions—the Royal Mail and the Post Office. As we heard from Richard Hooper in his reports, both to the previous Government and to this one, unless we take urgent action, the future of the universal postal service is at severe risk.
Letter volumes are declining faster than anyone predicted—15% in the past five years alone—and some estimates suggest that they could decline by up to another 40% over the next five years. Is Royal Mail yet ready for this most challenging of business trends? Without the Bill, I believe not, for despite some progress on modernisation, Royal Mail has not adapted sufficiently to that market decline. Unless we take action, that will only worsen and Royal Mail’s position will become even more precarious. Let all hon. Members be in no doubt: doing nothing is not an option.
The previous Government recognised that, for in many ways the Bill is similar to that which was put before the other place by the previous Government in 2009. The previous Business Secretary was aware of the need for urgency. He said:
“We cannot simply ignore these facts, or put our plans in a bottom drawer”.—[Official Report, House of Lords, 10 March 2009; Vol. 708, c. 1068.]
Unfortunately, the previous Government ended up ignoring the facts. As they oppose the Bill, I suggest that the Opposition ought to go back to that bottom drawer. If they look hard enough, they might find the bottle that they lost in 2009.
The present Government are aware of the urgency. That is why we have pressed ahead with the Bill so early in the Parliament. We will send to the other place a Bill that is significantly better than the previous Government’s 2009 Bill. It is better for employees of Royal Mail, with employee shares to give them a genuine stake in the future of the business. It is better for the Post Office, setting it free and creating the possibility for a mutual ownership model in the future. Above all, it is better for the universal postal service and Royal Mail, as our Bill takes a more flexible approach to regulation and is much better structured to attract the private investment that this business desperately needs.
The House should have no doubt about the overriding aim of the Bill. It is to protect the universal postal service. I do not believe it is possible to protect that in the public sector any longer—at least, not without ever-increasing levels of taxpayer subsidy, which even Lord Mandelson, as he doled out largesse in the run-up to the last election, would have baulked at.
Royal Mail needs to modernise. Its business is changing with the impact of the digital world. I am sure that I was not alone among hon. Members in paying a Christmas visit to local delivery offices in my constituency. Not only was I impressed by the hard work of Royal Mail employees, dealing with some of the worst weather conditions in living memory, but I was staggered by the huge increase in the volume and size of parcels. No one, none of the posties there, had seen anything like it.
In recent years, the volume of internet shopping has been increasing, especially items such as books and CDs, but now it seems that the British consumer’s confidence in internet shopping has grown dramatically. That is good news for the longer-term future of Royal Mail. Although the increase in parcels will not offset the decline in letter mail, and the parcels sector is intensively competitive, there is a chance—an opportunity —for Royal Mail to grow.
The other dramatic impression that one has after visiting Royal Mail sorting and delivery offices and then visiting similar sites elsewhere—as I did in Berlin, visiting a Deutsche Post sorting office—is the lack of capital investment in Royal Mail so that it can make the best of this opportunity. Since Deutsche Post shares were first sold in 2000, it has invested the equivalent of £11.7 billion and about half of that investment has gone on modernising its parcels and express business because it knows that that is the future for its organisation.
We need to give Royal Mail that sort of freedom to invest in the delivery businesses of the future. We need to ensure that it can access capital, not just for its immediate modernisation plans, but well into the future. I do not believe that if it remains constrained by Treasury borrowing, it could ever access the right amount of cash, with the commercial speed needed.
As we privatise, we are ensuring that the employees get a good deal. Our pension plans and our employee share plans must represent the best deal on offer to any large group of employees in the UK today. I am immensely proud that Liberal Democrats in government with our coalition partners are delivering the deal on pensions that Labour failed to deliver, and I am immensely proud of the strongest legislative commitment to employee shares in any major privatisation.
Given the time, although I want to say something about post offices, before doing so I shall comment on stamp design. The amendments passed by the House will ensure that Her Majesty’s head will appear on stamps in the future.
Mr Davey
Let me anticipate the hon. Gentleman, because the concerns that the nationalist parties expressed in their amendments are unfounded. The Bill will ensure that nationalist emblems can be placed, and be required to be placed, on stamps in future. I hope that he is reassured by that.
Mr Davidson
Surely the Minister does not mean “nationalist emblems” can be placed; can he assure us that Alex Salmond’s head will not appear on any stamps provided in Scotland?
Mr Davey
I cannot tell the hon. Gentleman how delighted I am to be able to give him that reassurance. It was a slip of the tongue.
Some people have concerns about the wording of our amendments, which ensure that Her Majesty’s head will be on our stamps in future. I can assure hon. Members that, under section 10 of the Interpretation Act 1978, “Her Majesty” can be taken as
“a reference to the Sovereign reigning at the time of the passing of the Act”
and construed as applying to any future Sovereign, so people should not worry about that.
May I turn to the Post Office? There has rightly been a lot of debate about the impact of the Government’s proposals on the network of post offices. First, I want to be absolutely clear that we are talking about a sale of shares in Royal Mail, not in the Post Office. They are both cornerstones of British life, but they are different businesses facing different problems, and that is why separation has been so widely supported by the experts. Of course, their futures are closely linked, and we expect that they will always have a strong commercial relationship, but securing the future of Royal Mail will of course help to secure the future of the Post Office as the natural outlet for purchasing Royal Mail services.
I shall say again something that I have said many times before. There will be no programme of post office closures under this Government. I have been very clear on that, as has my right hon. Friend the Business Secretary. That is why we have pledged £1.34 billion of funding to support the post office network, funding that will ensure the continuation of at least 11,500 post office branches throughout the United Kingdom.
Ian Murray
The debate about new clause 2 was certainly robust. Can the Minister give the House a cast-iron guarantee that, as a result of the decisions he is just about to take, no post offices will close?
Mr Davey
If the hon. Gentleman had been present for our debates in Committee, he would have found that his Opposition colleagues understand that it is impossible for any Minister in this or previous Governments to say that no individual post office will ever close. Why? Because in large part they are private businesses, and individuals can retire, decide to close their business or, of course, die. So, it is impossible to give him that reassurance. The reassurance I can give him, which his colleagues could not during the previous Parliament, is that no programme of closures will be driven by this Government. That is why we have secured the money, and the deal—the contract signed by the Government with Post Office Ltd—ensures that there will be a network of at least 11,500 post office branches throughout the United Kingdom.
When the Opposition scaremonger on that issue, we simply need to remind ourselves of their record on post offices. When urgency was needed to invest in Royal Mail, the only urgency the previous Government demonstrated was an urgency to close post offices. The numbers do not lie. The number of days the previous Government were in office: 4,753. The number of post offices closed in their two major closure programmes: 4,854. That is a strike rate worthy of an English batsman, not of a Government seeking to protect communities, small businesses and the most vulnerable throughout our country, yet we have had no apology for that appalling record.
Through this Bill, the Post Office also has the opportunity to move to a mutual ownership model, which would give employees, sub-postmasters and communities a real stake in their post office network. With our work to pilot more and more new Government services, both national and local, through the post office network, such new ideas will give local post offices a fighting chance.
Let me end by returning to the universal postal service. I reiterate that this Government are fully committed to that service: six-days-a-week collection and delivery to the UK’s 28 million addresses at uniform and affordable prices. This Bill gives Ofcom an overriding duty to secure the provision of the universal service, and the tools that it will need to do so. It gives greater safeguards to the minimum service levels for the universal service, with parliamentary protections, and it creates a new regulatory regime that can bring rapid deregulation for the universal service provider where there is effective competition in the market. Ofcom has a statutory duty to deregulate where it can, and we are giving Ofcom the tools to do so for the postal sector.
I would like to thank all those who have been engaged in the Bill’s passage through the House, particularly Bill Committee members for their work over the past couple of months. We have certainly had some lively discussions. I would also like to thank the hon. Members for Llanelli (Nia Griffith), for Ochil and South Perthshire (Gordon Banks) and for Angus (Mr Weir). Although we may not have always agreed, I am grateful to all of them for the detailed scrutiny that they have given the Bill.
The coalition Government have not shied away from grappling with this issue, which has defeated two one-party Governments. This shows the Government at their strongest and most radical. This Government are taking decisive action to tackle the problems that the previous Government ducked. I commend the Bill to the House.
Mr John Denham (Southampton, Itchen) (Lab)
I shall make a few remarks on Third Reading to summarise where we are as a result of the discussions of the past few months. The House may be aware that in what I can only describe as a spirit of total selflessness and altruism, I allowed my hon. Friends the Members for Llanelli (Nia Griffith) and for Ochil and South Perthshire (Gordon Banks) to lead for the Opposition in Committee. I thank them for doing so and for the excellent way in which they helped to scrutinise the Bill. I also thank the other Committee members and, indeed, the Minister, who I can see from looking at the Committee records and my colleagues’ reports was open and helpful in responding throughout its 20 sittings. There is no doubt that, including the evidence sessions, there was a great deal of opportunity to consider many parts of the Bill in detail.
The problem is that the Bill comes to Third Reading with many of the fundamental issues and concerns that were raised on Second Reading and that have been raised outside the House still unresolved. The earlier debates, including that on the new clause tabled by the hon. Member for Colchester (Bob Russell), show that concerns are not by any means limited to the official Opposition. This might not have been or have become an issue on which a head of steam builds up into a full- blown parliamentary revolt, but it is clear that the Government have by no means persuaded all their supporters of the wisdom of their policies and approach.
The Bill will now go to another place and no doubt the same issues will be discussed there. Those on the Labour Benches in another place will make every effort to make the progress that we have not made in the House of Commons. The central part of the Bill is, of course, enabling legislation. It enables the Government to privatise Royal Mail and to transfer this vital part of our national infrastructure to a foreign buyer. The Bill does not require the Government to do so and therefore today’s debate is not the end of the story. As I shall set out, too many uncertainties still exist to proceed just on the basis of where we are today. That is not just the view of the Labour Opposition; that is the view of Consumer Focus, which has looked at the matter from a customer point of view. As I shall show, that is also the view of the National Federation of SubPostmasters—the people who in many ways are meant to be at the heart of the Bill.
The House did not agree to secure a 10-year inter-business agreement today, but that does not mean that the campaign to get one will go away. If we have not so far explained to all the constituents of hon. Members who support the Bill why their post offices are under threat, we have plenty of time yet to do so and to push for a change in Government policy. The basic problem is that the Government have still not made the fundamental case for the full-scale privatisation that they have proposed, nor have they addressed the concerns that exist. It is very interesting and, of course, welcome that a new clause has been introduced that is designed to ensure that the Queen’s head remains on postal stamps. That is interesting because it has been made necessary solely as a result of the desire to privatise Royal Mail.
As long as the Post Office and Royal Mail remained in public ownership, as they would have done under the Bill introduced by the Labour Government, no one thought for a moment that it would be necessary to introduce legislative protection to retain the sovereign’s head on our stamps. It is only because privatisation is being brought in that that is at risk. The problem is that the Government, by conceding on this point, have accepted that full-scale privatisation opens up all sorts of possibilities and dangers that simply do not exist if the Post Office remains in public service.
Mr Denham
But the evidence remains, some 50 years later, that that did not happen. My point remains—public ownership, and the debates around it, protected that position.
Before Christmas, when the Minister was challenged on this issue, his response was, “Don’t worry. No sensible private buyer would dream of removing the monarch’s head.” He has now conceded that that response is not enough. Yet when Members asked him today about a private buyer’s relationship with the post office network, the same argument came into play: “Don’t worry. No sane private buyer would take the business away from the post office network.” If the guarantee is necessary for the sovereign’s head, it is necessary for the inter-business agreement with post offices. It will not do to ask the House to accept this on trust, because thousands of post offices are at risk. That is, and has been from the outset, the fundamental argument against a majority privatisation of the Post Office. Although Royal Mail must be run as a commercial enterprise, majority shareholding for the public gives an ultimate protection that privatisation will not provide. If the Bill is flawed, as it is, then that protection will not exist.
The case has not been made in other areas, because, in contrast with the situation just a few years ago, transformation and modernisation are under way. The challenge of bringing in capable, senior management has been met, as I am sure all Members who have met the chief executive will confirm. Investment funds are currently available, and there are mechanisms well short of majority privatisation or a minority shareholding that could be used to raise equity in future.