Fiona O'Donnell
Main Page: Fiona O'Donnell (Labour - East Lothian)
Jack Dromey
I was just about to do so, Madam Deputy Speaker, but like the Minister, I embarked on some historical anecdotes, as the Post Office is very proud of its history.
There is a simple inescapable reality, which is that the Post Office is dependent on Royal Mail’s business. A third of its revenue—£334 million—and a third of sub-postmasters’ pay—£240 million—is generated by selling Royal Mail products and services. The Bill does not safeguard on a continuing basis the inter-business agreement. The Government will not undertake to extend the current five-year guarantee to 10 years. Key stakeholders recognise the importance of making a longer commitment on the IBA. Let me cite what Consumer Focus said in its evidence to the other place:
“There are few safeguards to keep that contract for the long term. It’s entirely conceivable—though it seems an odd thing to suggest—but several years down the line you could have a post office network where you cannot undertake mail transactions. It would be for Royal Mail to determine which operator—whether it was Post Office Ltd or Tesco or whomever—to offer mail services and there would be no requirement for stamps or parcels.”
It continued:
“You could see a scenario where Royal Mail looked to cherry pick so Tesco, say, could meet its requirements in urban areas and the Post Office would pick up the slack in rural areas where there isn’t anybody else. And that has very serious implications in terms of the viability and integrity of the network because urban areas typically make money.”
Consumer Focus went on to argue that the number of post offices could fall by 37% as a consequence of these measures—from the current level of 11,900 to the minimum number consistent with the Government’s access criteria of 7,500. In Birmingham alone, seven post offices face closure.
The National Federation of SubPostmasters has added its call to the need for action. It also argues for a minimum 10-year IBA. Let me quote what it says:
“The NFSP believes that in order to avoid further post office closures, existing levels of Royal Mail work at post offices must be maintained with a minimum 10 year IBA between the two companies following separation.”
The Government’s stance is clear, albeit sad. They have rejected a number of opportunities to make the commitments that have been called for.
Fiona O'Donnell (East Lothian) (Lab)
Is my hon. Friend aware of the recommendation in the Select Committee on Scottish Affairs report that the Government should be doing more to remove the barriers to local post offices providing services in relation to devolved and local government?
Jack Dromey
To develop our post office network, it is necessary to be imaginative and creative. Sadly, we are moving in the opposite direction.
The Government’s stance could not be clearer. They have rejected a number of opportunities to make the commitment firm in this important legislation. They have declined to accept a statutory commitment, as exists in countries such as Germany and the Netherlands, to a figure of 11,500. They have rejected the embedding in the Bill of the access criteria on how near people’s local post office will be. Post offices locally cannot live on warm words alone; good intentions and high hopes mean naught if we cannot have guarantees for the future.
Mr Mike Weir (Angus) (SNP)
I have expressed opposition to post office closures for 10 years in the House, and my view is unchanged. My colleagues and I do not think that the Post Office should be privatised, but the Bill is going through. I would laugh if it were not so sad to hear Labour Members slagging off the Government, given the number of post offices that their party closed, but I had better confine my remarks to the amendments so that you do not call me to order, Madam Deputy Speaker.
Although I welcome Lords amendment 1 to an extent because it would improve the report, it does not provide a guarantee of business. That remains a difficulty: there is considerable uncertainty in local post offices about future business, and I fear that many more will close if it is not dealt with. Many are closing now, not just because of the Post Office side of the business but because of the general state of the economy. At the risk of opening up another front of argument between the two sides, I will cite Ferryden in my constituency. During the closure programme it was agreed that Ferryden’s post office was needed, but the post office was in the local shop, which recently closed. The reason was not to do with the post office itself—and I appreciate that it is not within the Government’s immediate control—but the fact that the small shop, the last in the village, was considered to be no longer economic. When the shop went, the post office went as well.
The same difficulty exists in rural areas throughout the country. With respect to the hon. Member for Birmingham, Erdington (Jack Dromey), post offices will not take up the slack in rural areas, because they are closing there as well. It is a simple case of economics. It is unlikely that the Ferryden post office will go to another business, because it does not exist. The chances are that it will end up as an outreach programme and a restricted service to the village. The important thing is to try to keep some postal services in that village. I should have preferred an inter-business agreement that provided certainty about the future level of business. I appreciate the difficulties, but the continued uncertainty does not help.
My main point about the Lords amendment relates to new section (3A)(b), which concerns the proposed share scheme. I wanted to raise the issue at an earlier stage, but unfortunately we ran out of time. The amendment states that when shares are sold for the first time, details of the employee share scheme will be given. However, we do not know what the structure of the scheme will be. Clause 3(2) states that when the Crown no longer owns any part of Royal Mail, the share held by or on behalf of the employee share scheme must be at least 10%. I know that the Minister said that on the first sale of shares the share scheme details would be given, but the 10% is vitally important, because the Bill otherwise allows the sale of 90% of the company to one other entity, such as another postal operator. Leaving aside the argument put by the hon. Member for Llanelli (Nia Griffith) on behalf of the Opposition about whether 10% is an appropriate figure, the choice of this level does present a potential difficulty, depending on how the shareholding is held. In Committee, the Minister was pressed on whether the shareholding would be held in a trust for the benefit of the employees—the so-called John Lewis model—or whether it would be given in individual shares to the workers. We did not receive an answer to that question.
Fiona O'Donnell
Has the hon. Gentleman’s party had any discussions with the Government about the future of Royal Mail in an independent Scotland?
Mr Weir
The hon. Lady has taken her chances by asking that question, but it goes beyond the scope of the amendments before us. The Post Office is very important to rural areas of Scotland, and I will merely note that the Scottish Government have done much more than the UK Government to help rural post offices in the future—such as through the diversification and rates rebate schemes. That illustrates what we would do in an independent Scotland.
To return to the point I was making before being led down this interesting side road, the lack of detail about the structure presents a dilemma because, depending on what method is chosen, there could be unintended consequences in the future. If the John Lewis method is pursued, there may well be no problem, in that it will be a trust holding and will, in all likelihood, be held at or above the 10% level. However, if the shares are distributed to individual employees, we could have a very different scenario. Experience of previous privatisations suggests that a number of employees would immediately sell their shareholdings, and others would be likely to sell at some future date, either when they retire or, perhaps, by their executors on death. There is absolutely nothing wrong with that; they would be their shares so they can dispose of them as they see fit. Such actions could, however, have a serious consequence for the continuation of a workers’ shareholding within the company, because of the operation of our current company law, and especially as Ministers have made it absolutely clear that they would be relaxed about Royal Mail being bought either by one of the major foreign postal operators or by private equity companies up to the remaining 90% figure.
I remind the House that in cases where private equity companies have bought listed companies, they have on occasion de-listed the company and operated it as a private company. I particularly draw Members’ attention to the terms of section 429 of the Companies Act 1985, which gives provision in respect of implementation of the EU directive on takeover bids. One of the purposes of the directive was to deal with the problems of, and for, residual minority shareholders following a successful takeover bid, processes known as “squeeze out” and “sell out”. The provisions in question provide that following a takeover offer:
“If the offeror has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire—
(a) not less than nine-tenths in value of the shares to which the offer relates, and
(b) in a case where the shares to which the offer relates are voting shares, not less than nine-tenths of the voting rights carried by those shares,
he may give notice to the holder of any shares to which the offer relates which the offeror has not acquired or unconditionally contracted to acquire that he desires to acquire those shares.”
In effect, therefore, anyone who acquires 90% of the shareholding in a company can force the sale of the shares of the remaining small shareholders and become sole owner of the company. If the Government were to sell 90% of Royal Mail to, say, Deutsche Post, there could clearly be a potential difficulty in regard to the workers’ shareholding in the future if that is held individually by Post Office workers. If at any time the individual shares held by the work force were to fall below 10%, there is the potential for the owner of the remaining 90% to force a sale and therefore wipe out the shareholdings of the workers.
I am sure the Minister will, in his usual inimitable manner, tell me that I am constructing a theoretical problem that would not occur in the real world, but I wanted to propose an amendment on this point because of a real case of this kind involving constituents of mine. My constituents, who are pensioners, were shareholders in Dana Petroleum, and had been for a large number of years. The company was not paying dividends, but the shareholding did increase in value and my constituents regarded it as a nest egg for the future. Unfortunately, Dana Petroleum was subject to a hostile takeover by the Korean National Oil Corporation, which I believe is state-owned—I believe it is part of a sovereign wealth fund. That company purchased the majority of shares, although my constituents did not wish to accept its offer. The new owners decided to de-list the company, with the effect that my constituents were forced to sell their shareholdings, in their case causing a capital gains tax liability.
Unless the Government give us details of the form the shareholding will take, there is a genuine danger that we could face that situation within Royal Mail in the future. If the Minister will stand up and say, “It will be the John Lewis model; it will be a share trust of at least 10% of the shares for all the employees in the company”, I do not think there will be a problem. Alternatively, however, we might go down the same road as with previous utility sales, where individual shares were given to the workers and that shareholding within the companies has been reduced over the years. It is interesting to note that many of the former utilities are now offering special deals to get small shareholders to sell out their remaining shares because they do not want the small shareholders. Although this idea of worker participation is a good one, I would rather the company was not privatised. If that does happen, however, the bigger the workers’ shareholding within it, the better, and the shareholders would, it is to be hoped, have real rights.
As there is a lack of detail on this point, there is a danger that we will end up with nothing for the workers and the company wholly in the hands of one, possibly foreign, postal service or private equity company. The recent experience of private equity companies buying out limited companies is not a good one; we need only look at the current problems with Southern Cross to see that. I ask the Minister to reflect on this issue, and give us an assurance on it, or at least more information as to how the shareholding is to be held.
Mr Davey
The hon. Lady is right—and we have been clear about this—that the network must be viable before going to mutualisation. The problem is that we inherited a post office network that was so badly managed that we had to turn it round. She asks for specific details, but she knows that several were set out in our November policy statement. She ought to know that the National Federation of SubPostmasters welcomed the start of the pilot scheme offering document verification for pension applications in 106 post offices in the north-east. She should also know that that is only the first of three planned pilots with the Department for Work and Pensions; the other two involve national insurance applications and testing the impact of requiring jobseekers who sign on by post to attend their local post office instead. I would have thought that she would have welcomed such pilots.
Fiona O'Donnell
I note that the Minister missed the green giro off that list. The position not only puts the post office network in my constituency at risk, but means that people who cannot access a PayPoint in their villages must travel to cash their cheques.
Mr Davey
I expressed my disappointment that Post Office Ltd did not win that contract from the Department for Work and Pensions, but I have described three pilots on which the DWP is working with Post Office Ltd. I could also have talked about the proposals on credit unions that we hope will go forward, or the fact that Post Office Ltd has won a contract with the London boroughs so that local authority staff can have an authentication service at the local post office. If that scheme develops, it might have applications throughout the country. Such developments have been welcomed by the National Federation of SubPostmasters, but of course we want to go further, which is why we are so pleased to have persuaded the Royal Bank of Scotland to enable its customers to access their bank accounts through the post office network, which we believe will start to happen from September. I would have thought that the hon. Lady would welcome such developments.
Mr Davey
I certainly would not—but when Labour Members make such points they really have a cheek, because their Government removed more than £300 million of Government services from the post office network. We are working hard across the Government to ensure that we can position Post Office Ltd in a place from which it can win contracts from Government Departments in Whitehall and local authorities to deliver the front office of government. I can tell the hon. Gentleman that a huge amount of work is being done on this, and he needs to be a little patient.
The problem is that when we came into government and developed the strategy, the cupboard was bare because the previous Government had done almost nothing. They had allowed the post office network and the process for developing new business to wither on the vine because they were so busy closing 7,000 post offices. I have to tell Opposition Members that the tender for the green giro began under the previous Government, so they really ought to be careful. We have had to deal with the tender that Labour Ministers wrote.
Fiona O'Donnell
The Minister will no doubt want to read the piece of paper that has just arrived in front of him, but perhaps I should read him what the National Federation of SubPostmasters actually said:
“The government’s decision not to award the new contract for benefit cheques to the Post Office does not bode well.”
It seems to me that competence in the Government is not as high as he—
Madam Deputy Speaker (Dawn Primarolo)
Order. Will the Minister, in answering, return to the question of viability and the links with mutuality in the context of the amendments we are discussing?