Future of Postal Services

Kevin Hollinrake Excerpts

Tuesday 10th January 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

Sir Gary, could you clarify exactly what time I can speak until, if I am to give the hon. Member for Birmingham, Hall Green (Tahir Ali), two minutes in which to wind up?

[Sir Gary Streeter (in the Chair)]

Two minutes to six.

[Kevin Hollinrake]

Thank you. It is a pleasure to serve under your chairmanship, Sir Gary, and I congratulate the hon. Member for Birmingham, Hall Green, on securing today’s debate about the future of postal services, particularly given his experience and expertise. When somebody with that kind of experience and expertise speaks, we should all listen very carefully.

I agree with the hon. Gentleman that postal services are an integral part of the modern economy, allowing the smallest of businesses to connect with customers across the world and providing consumers with access to a vast range of products. The importance of the postal service to keeping people connected was never more apparent than during the coronavirus pandemic, and I am hugely grateful to the delivery workers who worked exceptionally hard to deliver letters and parcels in those very difficult circumstances. The post office network also plays a unique and vital role as part of the UK postal system, and I will address the points that were raised regarding that network shortly.

To deal first and foremost with the future of the universal postal service, which was raised by the hon. Member for Birmingham, Hall Green, the right hon. Members for Orkney and Shetland (Mr Carmichael) and for Islington North (Jeremy Corbyn), and others, the Government’s postal policy objective continues to be a financially sustainable and efficient universal service that meets the needs of users within an open and competitive postal market. That is why the six-day week, “one price goes anywhere” and the universal service remain at the heart of the regulatory regime, and why Ofcom has a primary duty to secure that provision.

To be completely clear, the Government currently have no plans to change the statutory minimum requirements of a universal postal service, which are set out in the Postal Services Act 2011. However, we accept that the universal postal service is facing challenges, particularly given the decline in letter volumes, which have halved since privatisation in 2013. That answers the question raised by the shadow Minister, the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), about why people are paying more for less. Part of the difficulty is that the volumes have fallen so much, which affects revenue.

[Chi Onwurah]

Will the Minister give way?

[Kevin Hollinrake]

Very briefly, as I have very little time.

[Chi Onwurah]

I thank him for giving way, but he has not answered my question at all. There is a decline in one part of the market, but another part is growing. My question was: what is the vision?

[Kevin Hollinrake]

That is a separate point that I will come to, if I may. I have yet to hear a convincing case for the need for change to meet users’ needs and ensure the financial sustainability of a universal postal service. I have met with both Ofcom and Royal Mail management to discuss that issue. I have made it clear to Royal Mail that it needs to make any case for change to Ofcom, and that I will fully consider any advice the regulator gives me on the future scope of the universal postal service.

The hon. Members for Chesham and Amersham (Sarah Green) and for Motherwell and Wishaw (Marion Fellows), who I have worked with closely on other matters regarding the Post Office, raised concerns about quality of service. I am aware that over the last few years the business has faced increased pressures on its operations for a variety of reasons. First, there was the covid pandemic and its lingering effects; secondly, operational revisions were required to modernise and transform the business; and, most recently, there was the industrial dispute with the Communication Workers Union. I do not accept the point made by the hon. Member for Leeds East (Richard Burgon) that this is union busting. The management has been clear that there will be no compulsory redundancies, but these issues impact both the business and users of postal services, particularly when important mail items are delayed.

[Richard Burgon]

The Minister rejects my allegation that the bosses of Royal Mail are engaged in union busting, but does he not think it is rather strange that over 100 trade union representatives have suddenly been suspended by Royal Mail bosses in the course of the dispute? Is that not rather odd? What conclusion does he draw from that?

[Kevin Hollinrake]

We do not get involved in negotiations, as Royal Mail is clearly a private company. I welcome the fact that the CWU and Royal Mail are now sitting down with ACAS and trying to resolve the dispute. We should give that process time to reach a resolution. I understand that any strikes have been suspended until the outcome of those negotiations. As I say, the Government are not involved in negotiations because Royal Mail is a private company, but we will monitor the dispute closely, and urge Royal Mail and the Communications Workers Union to reach a resolution as soon as possible.

To ensure that consumers receive an adequate service, Royal Mail is required by Ofcom regulation to, among other things, meet certain performance targets relating to the delivery of universal service products. The regulator has the power to investigate and take enforcement action. Indeed, in 2020 it fined Royal Mail £1.5 million for missing its 2018-19 first-class national delivery targets. Ofcom investigated Royal Mail’s service quality performance in 2021-22, and in doing so considered evidence submitted by Royal Mail of

“exceptional events, beyond the company’s control”

that may explain why targets were missed. In that instance, Ofcom accepted that there had been a continued impact of covid-19 on Royal Mail service delivery, and concluded that

“it was not appropriate to find Royal Mail in breach of its regulatory obligations”.

However, Ofcom was clear that it does not expect covid-19 to have a continuing significant impact on service going forwards. It stated:

“We are concerned by the fact that Royal Mail’s performance in the early part of 2022-23 fell well short of where it should be. We believe the company has had plenty of time to learn lessons from the pandemic, and we are unlikely to consider the factors outlined above as exceptional and beyond its control in future.”

When it comes to renationalisation, we probably part company with many of those on the Opposition Benches who expressed views on the subject, including the hon. Member for York Central (Rachael Maskell), the right hon. Member for Islington North, the hon. Member for Birmingham, Hall Green, who sponsored the debate, the hon. Member for Llanelli (Dame Nia Griffith), and the hon. Member for Motherwell and Wishaw. I do not believe that renationalisation is the answer. Although there are undoubtably challenges facing Royal Mail, the Government are clear that renationalising the business is not the answer.

One of primary reasons for the sale was to enable Royal Mail to access the capital it needed to invest in and grow the business. When Royal Mail was independently reviewed in 2008 under the last Labour Government, we were told that it was underfunded and had not kept pace with equivalents around the world, which were 40% more efficient. Compare this to the present day: Royal Mail has invested over £2 billion in the UK business since privatisation, including £900 million over the last three years and £441 million in the last financial year in areas such as electric vans, two new parcel hubs, automation and improving its poorest performing delivery offices.

The hon. Member for Birmingham, Hall Green, mentioned the £576 million pounds distributed to shareholders. I point out that there are good years and poor years in terms of financial performance. In the first half of this financial year, I think Royal Mail declared a £219 million loss. That is in the marketplace, so it is not breaching any confidentiality.

[Ian Lavery]

Royal Mail made a £758 million profit, gave £567 million to shareholders and then, shortly afterwards—weeks afterwards—it said that it was making a loss of £1 million a day. The hon. Gentleman is a successful businessman. Would he not be asking questions?

--- Later in debate ---

[Kevin Hollinrake]

We should always ask questions. I have asked questions of Royal Mail in the various discussions we have had. It is fair to say, though, that when shareholders invest, their money is locked up in that capital. Those shareholders rightly expect a return on that capital, as any Government should. I do not think it is wrong to distribute investment returns where they are fair and proportionate. The hon. Gentleman cannot simply say that money should not have been distributed to shareholders, but it should be fair. There also has to be a consideration of the context: it was probably an exceptional year. This year is clearly far more difficult.

The performance of other parcel carriers, including Evri, was raised. I have had correspondence with various Members present about Evri. It is frustrating when deliveries do not arrive on time or are damaged. Consumers should raise complaints about the delivery of items with the retailer. They can do so through Delivery Law UK or the Citizens Advice consumer service, but the key thing is to get back to the retailer. No retailer would want to carry on with a parcel carrier that was not meeting its obligations.

The post office network is hugely important to us, and we need to maintain 11,500 branches. Ninety-nine per cent. of people in the country expect to live within three miles of a post office. That will continue, and we continue to invest; there was £2.5 billion in funding over the past 10 years, and will be £335 million over the next three years.

To conclude, I have set out that the Government remain committed to securing a sustainable universal service for users throughout the UK. There are currently no plans to change the minimum requirements of the service.