Royal Mail Privatisation

John Hayes Excerpts

Tuesday 18th January 2011 Westminster Hall

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

It is always a delight to serve under your chairmanship, Mr Hollobone. It is a delight, also, to welcome a debate on the implications for the post office network of the privatisation of Royal Mail, and I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing it. She introduced the subject with typical courtesy and clarity. I know that her concerns are widely felt, and I want to be as responsive and sensitive to those concerns as I can. I shall try to deal with as many of the points raised in debate as possible; I hope that hon. Members will not mind if I am not as generous as usual in taking interventions, as we have a lot of ground to cover.

The matter has been extensively debated over recent weeks, including during the Committee stage of the Postal Services Bill, the oral evidence session of the Scottish Affairs Committee, the Third Reading of the Bill last Wednesday and at Business, Innovation and Skills Question Time. Indeed, the matter has been aired in a number of forums. I fully appreciate that people are concerned about the future of the post office network. In essence, this debate focuses on that subject, and I shall try to restrict my remarks to that, for understandable reasons.

I start by putting the matter in context. I do not mean the economic context—the fact that the Government inherited the largest peacetime deficit in our history, and that the state is borrowing one pound in every four that it spends and is paying only the interest on the nation’s debt, which costs £43 billion each year, or about £120 million a day. That is not entirely relevant, Mr Hollobone, and you would not want me to dwell on it, but it needs to be said. I mean the context that surrounds Royal Mail—the need to invest in Royal Mail, to update it and to make it a business that can compete in an increasingly complex international scene.

As the hon. Member for Solihull (Lorely Burt) said, social change and the way in which people access, exchange and use information are having an impact on post offices and Royal Mail, as has the increasingly competitive nature of the marketplace. In order to get that investment, the Government needed to think afresh about the ownership of Royal Mail. That is widely acknowledged. I put on record the fact that that the previous Government were indeed considering the matter, and introduced a Bill in the Lords. Had they been re-elected, I have no doubt that we would be having a debate in Government time about the future of Royal Mail, but on a different set of assumptions about its ownership.

The context is one of a need for change, and a need for fresh ideas about how to guarantee a strong future for Royal Mail. In that spirit, I do not want to dwell too much on the previous Government’s record, but it would be remiss of me not to say that between 1997 and 2010, about 7,000 post offices closed, 5,000 of which were in two Government-funded closure programmes in 2003-05 and 2007-09. Government Members should not be expected to take too many lessons from the Opposition.

I do not want to be excessively partisan or to get into an argument about this, but the Government value post offices. We understand their social and cultural value as well as their utility. As constituency Members, we have fought for them to be retained up and down the land, so we have nothing to be embarrassed about in those terms. It is in that spirit that this Government approach the subject of post offices and make it clear there will be no further post office closure programme. That is enough of my partisan points; I just felt that it was important to put them on the record.

Let me make 10 points to kick things off, then I will try to deal with the points that have been raised in the debate. First, the Government have made it absolutely clear that the Post Office is not for sale. Secondly, we recognise that the Post Office is a unique national asset, so there will be no repeat of the closure programmes of the past. Thirdly, we have committed £1.34 billion to the Post Office for it to modernise its network and safeguard its future, thus making it a stronger partner for Royal Mail. Fourthly, the Bill before Parliament proposes to separate Post Office Ltd from the Royal Mail Group, thus allowing the Post Office to focus more attention on developing its business. It also allows for the possible future mutualisation of Post Office Ltd.

Fifthly, under a mutual structure, the ownership and running of the post office network could be handed over to employees, sub-postmasters and communities. Sixthly, the Government are committed to secure a sustainable future for the Post Office and we want it to become a genuine front office for Government at both a national and local level. Seventhly, we will support the expansion of accessible and affordable personal financial services that are available through the post office. Eighthly, we will support the greater involvement of local authorities in planning and delivering local post office provision.

Ninthly, the Government fully share hon. Members’ laudable interest in ensuring a strong commercial relationship between Royal Mail and Post Office Ltd, but we do not share the view that legislating for a contract of between five and 20 years is the way to achieve our shared objective. To pick up on the point made by the hon. Member for Llanelli (Nia Griffith), it is not just that that would make Royal Mail less saleable—although it might—but that it would be legally challenged under competition law and possibly internationally, too. I agree that it is important that the arrangements between Royal Mail and the Post Office are as secure as they can be, and I will return to that point and the particular question that she raised in a moment.

Lastly, as the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), made clear last week, stamps will continue to be issued in the same way.

[Anne Marie Morris]

I am delighted to hear the Minister’s comments about stamps, but I am concerned about those wonderful red pillar boxes and the monogram. Will the Minister confirm that they will also be protected?

[Mr Hayes]

I was about to say that stamps will continue to bear the sovereign’s head, which is right and proper. I hear what my hon. Friend says, and I share her view; it is important that we retain the iconic pillar box with the Royal monogram on. That is something that the Government will consider. I can say no more at this stage, but I know that my hon. Friend will want to take up that point and see what can be done.

In evidence to the Postal Services Bill Committee over recent weeks, there has been strong backing for the separation of Royal Mail and Post Office Ltd. I noted that no one made a case against that today. As I said, it was, I think, accepted by most Members in this House. They are different businesses that will benefit from focusing on different challenges. In his evidence to the Committee, Richard Hooper of Consumer Focus and Postcomm supported the separation of the ownership of the businesses.

In her evidence to the Committee, Moya Greene, chief executive of Royal Mail, said that it would be unthinkable not always to have a strong relationship between the Post Office and Royal Mail. To underline that point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence that before any privatisation of Royal Mail could take place, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is legally permissible—a point that was picked up by the hon. Member for Argyll and Bute (Mr Reid). Such a pledge provides a reassurance about the marriage between the two, which is essential to maintaining the post office network that we all feel so strongly about. This is done not for sentimental reasons, but because it makes good commercial sense. The post office network has an unparalleled reach and a very strong brand. As my hon. Friend the Member for Newton Abbot (Anne Marie Morris) said, we can be optimistic about the relationship. A stronger Royal Mail is more likely to secure the future of many more post offices. If we do not take the necessary radical steps to support and invest in Royal Mail, post offices will be at risk. That is something that we can look to with confidence, based on the belief that post offices not only provide important services, but are at the hub of local communities. The post office in my own village of Moulton, which is run by Gary and Jane, does an excellent job not just providing postal services but as a centre for all kinds of activities in the village. It is a shop, too, and provides a valuable local service.

As a representative of a rural constituency, I understand some of the concerns expressed by other rural colleagues. We heard from the hon. Member for North Ayrshire and Arran that there are concerns about the spread of the network—the universality. Let me make it clear that in terms of universality, the Bill will create a fundamental duty at the heart of the legislation for a six-day per week collection and delivery of letters at uniform and affordable prices. To do that, we need a service that is spread across the whole nation and not a partial service; we are committed to that and I personally feel very strongly about it.

It is important to say that the future success of the post office network will depend on its providing a fuller and wider range of services. I hear what my hon. Friend the Member for Warrington South (David Mowat) says about cost and subsidy. We can deal with that by allowing post offices to do more, thus ensuring that they can be profitable businesses. We are looking at a range of additional services—both local government and national Government services—that post offices can provide. Post offices can act as a front line for those clients or users that need to do things in their community in a way that is accessible and convenient. We are piloting a range of services that post offices can provide and, as a result of this debate, we will look at other things that Government can do to make the post office network more viable, commercial and profitable. I know that my hon. Friend is anxious about that and I understand why.

However, there will always be small rural post offices, perhaps in more remote communities, that will find it very hard to operate without subsidy. I do not have a problem with that. Post offices are so culturally and socially important that we need to take that on board. Certainly, all those that can be profitable should be profitable.

[David Mowat]

After the modernisation programme, how many post offices does the Minister think will be self-sufficient?

[Mr Hayes]

As part of the recent £1.34 billion funding package, there is a legally binding commitment to a minimum number of post offices—the Post Office is required to provide a network of at least 11,500 branches. As I have said, there will be no closure programme under this Government. I am confident that many more post offices can be made profitable, but I will not speculate on which post offices will take up which services in which locations; my hon. Friend can hardly expect me to do that.

I have just time to say a word about demutualisation, which was raised by the hon. Member for Edinburgh East (Sheila Gilmore). Demutualisation is not something that we see happening; indeed it will be specifically prohibited.

A better future for Royal Mail means a brighter future for post offices. This Government seek that brighter future and will deliver it; nothing less will do.

[Mr Philip Hollobone (in the Chair)]

Order. I thank all the Members who took part in that most interesting debate and ask all those who are leaving to do so quickly and quietly.