Postal Services Bill

Jim McGovern Excerpts

Wednesday 12th January 2011 Commons Chamber

[Bob Russell]

No.

As the interventions have indicated, the post office network is still fragile. Some 9,000 sub-post offices have closed over the past 20 years. I am advised that 900 are for sale at the moment and that more than 150 are designated as “long-term temporarily closed”. That is not a phrase I understand, because I am not sure in which order the words should go.

The sub-postmasters who run those businesses have retired, are about to retire or want to sell their business because it makes no money. That is an important point, because in calculating the number of post offices that are open, Post Office Ltd includes those that are euphemistically described as “temporarily closed”. It is clear that many post offices find it hard to survive and sustain business. I am pleased that the Business Secretary recognises the difficulties that face the network. His announcement of a £1.3 billion subsidy will bring much comfort and will help the network to continue to operate for the next four years.

All of us want post offices to operate without subsidy. It is certainly unique that a high street retailer should be financed by the taxpayer; no other retail outlet would be allowed such support and nor would any Government want to provide it. The subsidy to the post office network reflects the unique nature of the business and the services post offices offer. When the social historians look back, they will acknowledge that just as the telegram has gone, so modern technology means that the business has to adapt. What should have happened in 1997 was a recognition of the potential use of modern technology through that wonderful network of outlets across the country—in towns, cities and villages. The Government should have asked what else that unique network could provide. They did not, and the result was that business continued to go down, which is why we are in the mess we are in now.

The relationship between Royal Mail and Post Office Ltd is governed by the inter-business agreement, or IBA, which sets out in detail the commercial relationship between the two companies. Typically it will include the goods and services that Royal Mail offers exclusively—or not—through the post office network. The IBA is essential to those post offices, as well as their commercial retail activity. I had the privilege of opening a fish and chip shop in a post office so that the owner could, it was hoped, keep the post office going. I believe it was the only fish and chip shop post office in the country. Sadly the post office has gone, but the Myland chippy is still there.

Royal Mail provides the post office business with a significant proportion of its income through transactions in respect of the postage of letters, packets and parcels. As we all know, historically, the combined businesses were known as the General Post Office—the GPO for those of us of a certain age—and then the Post Office. Integrated businesses operated together to handle mail and provide post office services. Over time, the businesses have become increasingly separate and the Bill breaks the company link between Royal Mail and Post Office Ltd entirely—exactly as British Telecom broke away from the Post Office.

There was a time when working for the post office was a family thing; it was generational. There was pride and security of employment, but now, as we have already heard, morale is on the floor. My new clause seeks to ensure that before the sale of Royal Mail, the two businesses have a copper-bottomed inter-business agreement in place and that it stays in place unmolested for 10 years.

Ministers may ask why it is necessary for such an agreement to be in the Bill. No doubt, they will point to the current IBA and, of course, the subsidy the Government, or rather taxpayers, are generously providing. They will point to evidence given in Committee by Royal Mail that it has no intention of breaking its commercial relationship with Post Office Ltd. There should thus be no problem with the new clause, because it will put in writing what the Committee was assured would be the case.

[Jim McGovern (Dundee West) (Lab)]

May I ask the hon. Gentleman about the 10-year period? Why not one year, or an indefinite period? How did he arrive at 10 years?

[Bob Russell]

That is a good question. The number could be nine or 11. Those with whom I have discussed this point—including the Communication Workers Union and others—are of the view that the period cannot be open-ended. There is general acknowledgement that the provision cannot last for ever. The number of years could be five, eight or 10—it is just a figure. I do not think it was scientifically arrived at—if that is what the hon. Gentleman is asking; it was really a question of trying to cement an existing operational mechanism on a formal legal footing for at least 10 years, in the hope that it would continue way beyond that. It would be a guarantee for 10 years, but the hope is that it would continue.

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[Jim McGovern]

The hon. Gentleman said that the Communication Workers Union supports the 10-year period. I am part of the Select Committee on Scottish Affairs, and when we visited the sorting office in Glasgow the manager told us that he favours privatisation—the very first Royal Mail employee to say so. Is the hon. Gentleman aware that the CWU has made it clear that it is against privatisation? Does he support the CWU’s position?

[Bob Russell]

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

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

--- Later in debate ---

[Bob Russell]

Again, that is a good argument, and the hon. Gentleman may be proved right as time moves on. I hope that that will not be the case, but he makes his point.

Why would it be any different with Royal Mail? It may operate an agreement with Post Office Ltd, but there would be nothing on this earth to stop Royal Mail renegotiating it. In fact, Royal Mail would be obliged to change the terms of the inter-business agreement. It would, under any commercial logic, seek a wider set of outlets for a broader range of its services, including supermarkets, petrol stations and retail outlets. That will take vital revenue away from those post offices that currently have exclusive rights. Royal Mail will seek to chip away at the transactional costs that it pays to Post Office Ltd. It will want to revisit the IBA, renegotiate terms, and demand changes. As they say, it is nothing personal, only business, but every little counts.

What can we do to protect the UK’s network of post offices from the predatory actions of a privatised Royal Mail? If we leave the whole issue to be resolved in the commercial arena, there will be only one winner and one big loser. Even more of our neighbourhood and community post offices, both urban and rural, would go.

[Jim McGovern]

May I take the hon. Gentleman back to proposals to reduce costs, and what he said about there being one loser? Does he agree that probably the biggest cost to Royal Mail is paying its work force, and that the way to reduce costs is probably to drive down terms and conditions, so the biggest loser of all will be the work force?

[Bob Russell]

I am sure that the hon. Gentleman is right, which is why the new clause is important, not only for the retention of the sub-post office network but for the interests of employees whose morale, as I have said, is exceptionally low.

The new clause seeks to bring certainty, and ensure that the post office network will not face an immediate onslaught from Royal Mail. It places the IBA in legislation and ensures that it cannot be broken for 10 years. I accept that in order to help the process of privatisation along, Royal Mail managers have pledged undying love for their supplier. However, it could be argued that directors of a dynamic, privatised Royal Mail would be negligent in their duties if they did not try to cut the cost of doing business through Post Office Ltd.

The new clause can absolve them of that responsibility. It would enable all sides to point to the legislation and walk away from having to renegotiate the inter-business agreement. It would manage the expectations of institutional shareholders, who would not be able to exert pressure on Royal Mail to cut those costs. I am sure that my right hon. Friend the Secretary of State for Business, Innovation and Skills will recognise that together we are protecting the post office network. The omission of the inter-business agreement from the Bill can now be rectified.

--- Later in debate ---

[Mr Binley]

I am most grateful to the hon. Gentleman, whom I worked with for some time on the Business, Innovation and Skills Committee, for that intervention. He spent many hours with me questioning the management whom I have criticised so heavily. He is absolutely right: temporary closure does not take into account the fact that post offices are private businesses that need to have people to buy them, run them and invest in them. My hon. Friend—I mean the hon. Gentleman, but he is still my friend—makes a valid point. The post offices are for sale, but there are not any buyers for them. The reason is not difficult to work out. I have grave concerns about the viability of the Post Office.

[Jim McGovern]

I am sure that the hon. Gentleman would agree that we—or any new owners—must push business towards the post office network. During the last post office closures in 2007-08, I visited the sub-post offices in my constituency. The sub-postmaster of one of them freely told me that he renewed his TV licence and his road tax online. In addition, seven out of 10 pensioners and nine out of 10 new pensioners get their pension paid into the bank. We need new business for the post offices. That sub-postmaster was willing to bite the Government’s hand off for the compensation he was getting because he just wanted out.

[Mr Binley]

I accept the hon. Gentleman’s comment. The Post Office could have been much more imaginative in supporting sub-post-offices to increase their business. Over the past 10 or 12 years, the lack of that support has been one of the reasons why they are less viable as a business than they should be—even the good ones now are less viable. We must accept that steps have been taken recently and I welcome that. However, the general thrust of his intervention is absolutely right.

Let us consider the post office network. I have already made the point that 150 post offices are closed and will remain closed because there are not the buyers to buy them. Some 900 are up for sale, which supports that point totally. Let us not mess about with stupid phrases such as “temporarily closed.” They are pretty much finished and that is the end of it. We need to be honest.