Royal Mail

Debate between Jim Cunningham and Baroness Clark of Kilwinning

Tuesday 25th June 2013 Westminster Hall

[Katy Clark (North Ayrshire and Arran) (Lab)]

It is a pleasure, Mr Davies, to see you in the Chair and to have secured this debate on the privatisation of Royal Mail. I should declare an interest here. I am chair of the Communication Workers Union’s parliamentary group. Members may well be aware that only last week in a consultative ballot on Royal Mail 96% of CWU members voted to reject the Government’s proposals in relation to privatisation. Other organisations such as the National Federation of SubPostmasters have also expressed concerns about the Government’s plans and have called for a delay in the proposals. It says that post offices will face an “extremely uncertain future” should the proposals go ahead. Given the concern in the industry about the Government’s plans, Parliament should have the time and the opportunity to debate such issues.

In addition to the concerns that I have just outlined in relation to post offices, the affordable six-day service is under threat and would be less secure if Royal Mail is transferred into private ownership. The Government claim that the universal service is enshrined in law, but many aspects of the universal service obligation are set by the regulator and can be easily changed. The track record of the regulator to date does not inspire confidence. The regulator has recently consulted on user needs from the universal service. It looked at ways in which the universal service could be changed to make it cheaper to run, including getting rid of first-class mail and therefore next-day service, reducing quality standards and cutting delivery days from six to five days each week. The regulator stepped back from making any changes, but a privatised Royal Mail under severe pressure to compete and to generate a return for shareholders is likely to lobby for such changes.

In the coalition agreement, the Government said that they would aim to inject private capital into Royal Mail. The Postal Services Act 2011, which was passed by Parliament in the last parliamentary session, enables the Government to proceed with the sell-off of the 497-year-old postal service.

In January 2012, during the passage of the 2011 Bill, I secured a debate on the privatisation of Royal Mail that focused on the impact that privatisation might have on the post office network.

[Mr Jim Cunningham (Coventry South) (Lab)]

I am sure that, later on, my hon. Friend will touch on the matter of the remote areas of this country, such as Cornwall, Devon and the isles in Scotland. Under the proposals, many people will not get regular mail and will therefore feel cut off, especially when it comes to receiving giro cheques and other such things and communicating with their families.

[Katy Clark]

As my hon. Friend will be aware, I represent a constituency which has, as well as many deprived areas, rural and island communities. I am aware of the concern in such areas over the implications of privatisation should it go ahead.

--- Later in debate ---

[Katy Clark]

I agree with my hon. Friend that that is indeed something that many people are fearful of.

Frankly, I say to the Minister that it is completely unacceptable to proceed to develop our postal services in this country in the way that TNT is operating at this time. We all know from our own experiences that if we allow sectors to offer poor conditions and poverty pay then it is the state and society as a whole that end up paying the price by subsidising bad employers. If the Minister is saying that his policy is not ideological, surely he must accept that allowing operators to come into the market in this way is highly damaging, both to the universal service obligation and to the public sector employer, which takes people on with better terms and conditions of employment. This cherry-picking of work is undermining the Royal Mail service and the universal service obligation.

If a privatised Royal Mail were to operate in a similar way, which we can only presume it would given that its main motive as a private company would be to maximise profits for its shareholders, then we can only expect it to try to cherry-pick, given that it has to compete with the TNTs of this world. This is incredibly bad news for our mail service.

[Mr Jim Cunningham]

I congratulate my hon. Friend on securing this debate. Another thing to consider is the pension fund and its future, particularly regarding effects on Royal Mail employees. A reasonable pension fund will be a magnet for a lot of asset strippers.

[Katy Clark]

The fact that the Government have taken over responsibility for the pension fund has made Royal Mail a far more attractive prospect to anyone who wants to buy shares. I believe that that was why the Government decided to go ahead in that way.

In the run-up to privatisation, price controls have been removed from the cost of stamps. The cost of first-class stamps increased from 46p to 60p in April 2012, and second-class stamps have gone up 36p to 50p, although there is a 55p cap on the cost of those. The Business, Innovation and Skills Committee, of which I am a member, expressed concern, in our report on stamp prices, about the impact that this will have on vulnerable customers.

On 29 May, the Government announced the appointment of advisers to the Government for the sale of Royal Mail. We understand that they are working on a flotation with a value close to £3 billion. This will be the largest privatisation in the UK since the railways in the 1980s. However, the Government have not specified what the form of that sale will be, whether an initial public offering or a sale to private equity, although they have said that an initial public offering is their preference. Will the Minister give an update to the House on the Government’s thinking on this aspect?

The Minister took the unusual step of saying that Royal Mail may be sold to a foreign buyer if the communication workers continue with their campaign against privatisation. Can the Minister say when a decision will be taken as to what the form of a sale will be?

As my hon. Friend the Member for Wigan (Lisa Nandy) highlighted, there has been a great deal of concern about the costs associated with privatisation, which are likely to be huge. Barclays, Bank of America Merrill Lynch, Goldman Sachs and UBS have been employed to work on the sale. It is believed that the banks alone will receive £30 million in fees. No detail has been provided to the House. Will the Minister outline in detail all costs that will be incurred by the taxpayer in the process of this privatisation, and undertake to ensure that all costings are put into the public domain?