Postal Services Bill

John Denham Excerpts

Wednesday 12th January 2011 Commons Chamber

[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 Davey]

The right hon. Gentleman is incorrect on this point. It was a Labour Minister in the 1960s—Tony Wedgwood Benn—who tried to remove the Queen’s head from the stamp. I hope that he will correct the record.

[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.

[Damian Collins]

Moya Greene, the chief executive of Royal Mail, said to the Bill Committee:

“I think that if the Bill does not go through, you will see a continuation of what have been chronic problems for Royal Mail.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 4, Q3.]

She was very clear with us that this is a path that Royal Mail has to go down.

[Mr Denham]

I understand those remarks, but I believe that it would be possible for a Government who wished to do so to resolve the need to bring in additional investment in future through measures that fall short of selling a majority shareholding in Royal Mail. Some of those measures have been proposed by my party in the past, while other mechanisms have been proposed from outside. The truth is that the Government are driven by the desire to raise the albeit relatively paltry funds that they will get from selling as quickly as possible. That is fundamentally why they have refused to provide the safeguards on future business that many Members have been seeking. The highest price will come from giving the buyer the greatest freedom to make money through eroding the quality of service by closing post offices and transferring functions elsewhere.

If the Bill goes through this House today, and if it succeeds in another place, that is not the end of the story, because uncertainties still exist. First, there are the state aid discussions that will have to take place with the European Union. That arises from the need to deal with the Post Office deficit, and it will arise, if not in exactly the same form, if Royal Mail remains in public hands. We do not yet know whether any restructuring of Royal Mail will be required or whether profitable subsidiaries will need to be sold off, as the press have speculated, so we do not know what would be available for sale.

Secondly, there is still uncertainty about the regulatory regime. There is agreement about the transfer to Ofcom, but there is a crucial question about whether it will review the regulatory relationship between Royal Mail and its private sector competitors. Royal Mail has argued, most recently in a letter from the chief executive this week, that the current arrangements are commercially unfair, and that many of the letters that we all saw being delivered on our Christmas visits to post offices were, in effect, costing Royal Mail money because of the terms of the agreement. The crucial question on the proposed privatisation is whether Ofcom will review that relationship and, if so, when. Clearly, any change, particularly if it conceded Royal Mail’s argument, would make a very big difference to the future financing of a publicly owned Royal Mail and a huge difference to the price that could be obtained from a privately owned Royal Mail. We must begin to say that a final decision on whether to sell can be made only once it is clear whether Ofcom will investigate this issue, what the time scale of such an investigation will be, and after there is an indication of the likely outcome. That is the second reason to say that there is great uncertainty.

The universal obligation has been debated this afternoon, and I will not take it further.

The final area of uncertainty is the future of the post office network. The major argument today has been about the inter-business agreement, but there are other questions about the amount of business that will go to local post offices. I welcome the Government’s promise of substantial investment in the network. In some ways, that is a bold decision, because if they are wrong about the future business that goes to local post offices, that will be public money not well spent. Capital investment cannot of itself secure revenue from the Royal Mail. Promises of other work are slim and not tied down. Our plans for a Post Office bank have been dropped, and the promises from other Departments are vague.

The National Federation of SubPostmasters has supported the principle of the Bill, but the briefing it has circulated to right hon. and hon. Members for today’s debate could not be more explicit. It states that

“ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy.”

It goes further and states that if adequate levels of new Government work at post offices are not secured, it believes that the separation of Post Office Ltd and Royal Mail, and the sale of Royal Mail, must be “indefinitely delayed”.

The House has rejected the first thing that the federation asks for, which is a long term deal. The Government have failed, as yet, to deliver the second thing that it asks for, which is a clear commitment for future levels of other Government work. The argument over indefinite delay is, I think, the battleground on which the forthcoming campaign to save our postal services will be fought.