Postal Services Bill

Gordon Banks Excerpts

Wednesday 12th January 2011 Commons Chamber

Once Royal Mail is sold to a private operator, that operator will be focused solely on the needs of its enterprise to deliver postal services, not on the various other activities carried out by the Post Office. As I mentioned earlier, we already know that only 4,000 of the current post offices are profitable and that only around 7,500 are required to meet the current terms of the universal service obligation. Is it such a leap of imagination to think that a new owner of Royal Mail might consider whether its needs could be met with a deal with, say, supermarkets, which are increasingly opening for longer hours? I think not—especially now that Tesco Express or Metro are opening everywhere, and although they do not have the 24-hour opening of their hypermarkets, they are still open from 7 am to 10 pm. Even if that did not happen, there would still be two companies of vastly differing sizes and economic muscle negotiating an agreement. It is difficult to see Post Office Ltd not coming out very badly from that.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

On the hon. Gentleman’s point about doing a deal with a supermarket, does he agree that there is absolutely nothing to prevent Royal Mail from doing a deal with other supermarket chains?

[Mr Weir]

The hon. Gentleman makes a perfectly good point. It does not have to be with Tesco. It could be with Sainsbury or Asda for all we know, and it could cover the whole country.

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[Mark Durkan]

We are not worried about why we should impose an agreement of 10 years; most of us are worried about why the Government would not impose an agreement of 10 years. If someone says they want the maximum agreement possible, it is entirely reasonable for us as a legislative body to say that 10 years is a reasonable period. Given that the legislation is going to construct new realities and impose new conditions on these businesses, we at least have a duty and responsibility to make sure that one of them can have a measure of confidence that it will not have if this new clause is not accepted.

[Gordon Banks]

Does the hon. Gentleman agree that the argument put by the hon. Member for Solihull (Lorely Burt) is not assisted by the fact that people such as Mr Brydon are unable or unwilling to put a figure on what the maximum number of years will be? That undermines her argument.

[Mark Durkan]

I accept fully the point that my hon. Friend on the Front Bench is making. In the absence of other indications, that is why we as legislators have a duty at least to indicate what we think is a reasonable time. It is unreasonable for us to do otherwise in the circumstances.

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[Mark Durkan]

I fully take the hon. Gentleman’s welcome point. That is precisely what we as legislators are being asked to do—provide some back-up certainty and reinforcement on such an agreement.

There is a suggestion that the EU would upset an agreement, or frown on it. Let us remember that we are not talking about the House suddenly legislating to impose an agreement on two currently free, private and commercial enterprises; we are talking about a very different starting point. All Members of the House and of the devolved Assemblies have dealt with lots of situations where, through legislation and other means, we provide for various restraints, guarantees, restrictions and obliged agreements in contracts over a period of years. Such provisions could relate to restrictive gas and energy licences over long periods, guaranteed contracts between providers in different markets to create stability, or even to opening and developing markets. Such things are done all the time, and the measures are respected and accepted by the EU.

[Gordon Banks]

Does my hon. Friend agree with the people who believe that it may not be legal pressure that prevents the Minister from making the proposed arrangement possible, but Treasury pressure?

[Mark Durkan]

I join my hon. Friend in that suspicion; no doubt the Treasury is asking where the proposal will go and what would be the margin of attraction if there were changes. Because the Treasury believes that the proposal would make the business less attractive to the market, it has drawn conclusions and made an assessment.

On that point, I shall close to allow other Members to participate. I stress that we cannot hide behind the assumptions and presumptions that have been casually made, either in Committee or in the House, that the new clause is neither necessary nor feasible because other things are unthinkable.

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[Mr Reid]

As I said in my interventions on the hon. Member for Angus (Mr Weir), I hope that the Minister takes away the proposal in amendments 12 and 13 to extend the universal service obligation for parcels to six days a week. As I said, I am concerned that parcels will not be delivered on Saturdays in the highlands and islands without such an extension. Apart from that one remaining concern, I think that the Minister has done a great job in the Bill to strengthen the USO in many ways, which is so important for the highlands and islands.

Amendment 14 deals with the hon. Gentleman’s concern that the geographical exceptions clause will be used to remove large parts of the highlands and islands from the universal service obligation. I do not share that concern. The wording is the same as that in the Postal Services Act 2000. The regulator, Postcomm, has used that exception only in a small number of cases, such as for islands that do not have a daily ferry service. Obviously, it would be nonsense for Royal Mail to charter a boat to an island to which Caledonian MacBrayne does not have a daily ferry service. The solution is for Caledonian MacBrayne to improve the service so that islands such as Tiree, Coll and Colonsay have a daily ferry service, but it is not for Royal Mail to charter special boats. Postcomm has also introduced exceptions on health and safety grounds, such as dangerous dogs. Under amendment 14, Royal Mail would have to deliver to houses with a dangerous path or animal. The wording in the Bill, which is taken from the 2000 Act, is satisfactory. I questioned Postcomm and Ofcom in the Scottish Affairs Committee and Ofcom gave an assurance that it will maintain Postcomm’s regulatory regime for geographical exceptions. Given those assurances, amendment 14 is not necessary.

[Gordon Banks]

I wish to speak to amendments 23 to 26, which we have tabled. Amendments 23 and 24 are similar to those tabled in Committee and are intended to ensure that no review of the universal service obligation can take place for at least five years after clause 33 is enacted. I note that the hon. Member for Northampton South (Mr Binley) tabled a similar amendment that was not selected, and I commend him for doing so. I trust that he will be able to support us in our aspirations tonight.

The minimum service requirements laid out in clause 30 are exactly the same as those set out in the Postal Services Act 2000. However, as my hon. Friend the Member for Llanelli (Nia Griffith) said in Committee, clause 33 will allow them to be eroded. The Bill sets in train a range of processes to reduce the universal service obligation, and I imagine that many Members fear that we cannot even be sure to which Secretary of State the powers in clause 33 will fall. Perhaps it will not be the Secretary of State for Business, Innovation and Skills, and who knows, it may even be the Secretary of State for Culture, Media and Sport. Perhaps, if time allows, the Minister will be able to tell us which Secretary of State will inherit those powers if the Bill is passed, and then I will leave it to my hon. Friends to determine whether that is a good thing.

[Mr Reid]

I point out to the hon. Gentleman that clause 33(7)(a) states that the review of the minimum requirements would be subject to the affirmative procedure, so it would require a vote of both Houses of Parliament. The Secretary of State could not take the decision on his own. Is that not adequate security?

[Gordon Banks]

No, it is not, and I will come to that if I have time. The Minister will be aware of my office’s deliberations with him on parliamentary scrutiny when the Bill was in Committee, and I will deal with that matter if I can.

We believe that it would be better to relieve both potential contenders of the powers to be granted under clause 33(5). At least the current Secretary of State for Business, Innovation and Skills would then know about that change in advance, and it would have been made through the democracy of Parliament and not by the Prime Minister as punishment.

In a letter to the Public Bill Committee, the Minister mentioned the failsafe of clause 29(5), which is relevant to clause 33. However, that failsafe could work only if one had faith in the actions and intentions of the relevant Secretary of State, and we do not.

Restrictions to ensure that there could not be a review before five years had passed would provide important stability to both the business and customers following privatisation. The universal service obligation is of such immense importance that it will need that period to bed down under a new, private provider. I am afraid that throughout the Committee stage, the Minister was unable to convince my hon. Friends and myself why a review should take place after 18 months. We want a statutory period of five years, during which everyone would know that today’s universal service obligation was in place. We want the consumer to be protected. As it stands, the inter-business agreement could be subject to review after 18 months, when an Ofcom review of the USO could also be ongoing. That would mean turmoil. As the Minister heard in Committee and from some of my hon. Friends today, we have only his best interests at heart. I am trying to save him from that turmoil, and that caused by the Secretary of State.

The Secretary of State told Members on 27 October last year:

“The Bill will maintain the universal postal service at its current levels…I have no intention of downgrading this service.”—[Official Report, 27 October 2010; Vol. 517, c. 360-361.]

That does not square with the Bill’s contents, and the Secretary of State needs to come clean. If he has no intention of downgrading the service, why does he need a review within 18 months? In fact, the Bill is riddled with review opportunities. There are three—in clauses 29, 33 and 42. It is obvious that the Secretary of State’s actions in promoting the Bill do not live up to his words. Maybe, in line with other matters that he has promoted, he does not really support the Bill anyway.

We would argue that the modernisation programme under way in Royal Mail needs to be completed and bedded down before any review of the USO takes place. It is only a few months since Postcomm and Consumer Focus completed a review of customers’ universal service needs, and it is against that backdrop that the Government are proposing the minimum service levels in the Bill. There is therefore no good reason to recommence the review process within 18 months of the Bill being passed.

We do not believe that such a review at this time would be in anyone’s interests other than those of the provider, who may want to downgrade the service for a bigger shareholder return. More than anything, we want to protect the interests of the consumer. I believe that, in principle, the amendments have cross-party support. Whereas our appeals to the Minister and his colleagues in Committee fell on deaf ears, I am a little more hopeful today. Indeed, in accepting our amendments 23 and 24 today, the Minister would be committing himself to recognising the value of the current USO, while also alerting potential bidders to his clarity on the matter—after all, we are always told that that is what business wants these days. Our amendments will offer that.

It would be wrong for a business to purchase Royal Mail with the intention—or should we say the hope?—that a quick review by Ofcom and a stroke of the pen by the Secretary of State, or perhaps by some other Secretary of State, would lead to a better deal. Why do we have such fears? It is because we can see how committed the private sector is to the universal service obligation.

The Minister regaled the Committee on more than one occasion with his international understanding of postal services. I would therefore like to refer him to an article in Holland’s De Telegraaf on 9 June last year, so that he can test his Dutch reading skills, as opposed to his usual double-Dutch Government jargon. In that article, Pieter Kunz—I do hope that I have pronounced that gentleman’s name accurately—who is the managing director of TNT’s European mail networks, said that his company planned to cut 11,000 employees from its Dutch mail operations and wanted to move to a three-day-a-week delivery service. Mr Kunz went on to say that collection and delivery services would be outsourced, and that TNT would become managers of mail. However, the worrying bit about how the private sector sees the USO in the round came when Mr Kunz stated that the universal service obligation was

“a kind of Jurassic Park and we should get rid of it”.

The worry is accentuated by the possibility that TNT could be the successful bidder for a privatised Royal Mail.

Although Mr Kunz might think of the USO in such terms, my constituents and the businesses in my constituency see it as a valued, necessary and fundamental service. We want to prevent any such erosion wherever possible. I wish that we had an opportunity to guarantee the current service levels indefinitely, but I recognise that this is not the Government’s will. However, we want the minimum five-year period to be included in the Bill, I suppose for the very same reasons that Mr Kunz, and perhaps the Minister, do not.

Amendments 23 and 24 would allow the newly privatised Royal Mail to be secure in the current service delivery levels for the next five years without change. As the Bill stands, the first review could come along at any time and have far-reaching effects. I referred earlier to our time in Committee, where my hon. Friend the Member for Kingston upon Hull East (Karl Turner) said that a similar amendment was

“a reasoned amendment that turns on the issue of speed versus proper consideration.”––[Official Report, Postal Services Public Bill Committee, 7 December 2010; c. 592.]

He recognised that such a safeguard would prevent Royal Mail’s new owner or owners from exerting any pressure on Ofcom to re-examine the minimum requirements straight after a sale, as a way of trying to secure bigger returns for shareholders. However, he and other members of the Committee recognised too—I hope that other Members will recognise this today as well—that such a safeguard would also prevent Ofcom from undertaking a hasty review before the full effects of privatisation and modernisation were understood and their impact on the service evaluated.

It is not just those on this side of the House who want to protect the USO in the long term. The Federation of Small Businesses also believes that the USO

“must be protected and services must not diminish”,

stating:

“Any change to the scope of the USO could have a negative impact on small businesses.”

Indeed, FSB members have shown their further concern, in that 82% of small businesses want to keep the single UK-wide pricing structure. Then we have the National Federation of SubPostmasters, which has said that

“communities across the UK depend”—

that is the key word—

“on the six-days-a-week collection and delivery at a uniform and affordable price”.

Indeed, in their recent report, that august group of cross-party and pan-UK parliamentarians known as the Scottish Affairs Committee also expressed alarm about

“the Bill’s requirement for Ofcom to review the minimum requirements for the USO within 18 months. We fear this may be seen as an opportunity to decrease the requirements of the USO.”

Many Opposition Members get fed up with listening to the Government telling the country what they are doing to help small business, when there is precious little sign of such help in the real world. Here is an opportunity for the Government to do just that—help small business, support these amendments and support the Federation of Small Businesses.

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[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—