Postal Services Bill

Lord Christopher Excerpts

Wednesday 16th February 2011 Lords Chamber

[Lord Christopher]

My Lords, I certainly do not come to this Bill with particular hostility: it is easier to consider than the previous one. I suspect that that is due largely to the passage of time, and perhaps some lessons were learnt. I apologise to the noble Baroness on the Front Bench. Due to the excitement this morning I missed the first six or seven minutes of her introductory speech.

My concern is the problem of unintended consequences. I am lucky enough to live next to a farm that is approached by a road which is about three-quarters of a mile long. The local farmer is constantly called out because people’s sat-navs have directed them up that road. Come rain or shine, they get caught in the mud and snow. I am anxious that the Bill should not be a sat-nav and that we should try to ensure that it produces what we and the electorate really want.

The trailblazer in the privatisation of post offices was the Netherlands—although I find it easier to say Holland. That process began in 1989 when that country’s Government began to sell its post office in tranches, and by 1995 they had lost their majority control. There have been several changes in name of the Netherlands post—all prefaced by “Royal”, of course. It was called PTT Post, TPG Post and is now called TNT Post. It is run by the multinational company TNT. What has happened since then? These are the problems that I want to ensure we avoid. One of the issues is minor in a sense, but I suspect that it is also quite a populist one. That country’s red post boxes have become orange. I do not recommend that we change the colour of ours. We should make sure that it does not happen here, but I am not sure that such a provision should be in the Bill. We have similar problems with telephone boxes.

In the Netherlands, 90 per cent of the post offices have closed. I shall return to that issue later; as a Member on the Cross Benches has already mentioned, it is a key issue in the Bill. Post boxes in the Netherlands are now emptied only once a day. Ours are emptied certainly twice and perhaps three times a day. In the Netherlands there are considerable complaints about lost post. To some extent, we have similar complaints here. TNT has not been prepared to recognise some of these problems in the way that we would expect. On lost post, TNT is quoted as saying, “As a company we are not in a position to deliver the post on time, particularly on Saturdays or Mondays”. The Netherlands allowed competition. New firms are paying low wages that have markedly impacted on TNT’s profits. TNT is proceeding with a policy of employing part-timers and franchisees in order to reduce the working hours of its staff to three days a week. If we want to proceed with a different service from that, we may have to provide some form of continuing subsidy.

The managing director of TNT, Peter Kunz, said that the universal service obligation—this may have been referred to earlier—was,

“a kind of Jurassic Park and we should get rid of it”.

Do we want this here? I do not think so and, as I said earlier, my concern is that the Bill and the Act should ensure that this sort of thing does not happen.

I am not sure that the noble Lord, Lord Razzall, who is not in his place, was correct to say that Royal Mail was still making losses. If he did not say that, I am happy to be corrected. It may be making net losses, but it is certainly making a gross profit and the difference, if there is one, is the cost of maintaining the pension fund, which we know is being dealt with in the Bill.

I have no faith in golden shares or any of these things. We must ensure that the universal service obligation is effectively protected in perpetuity, because that is what the British people wish.

On the issue of regulation, according to the Post Office—or rather, Royal Mail; like lots of people, I see them as one—an effective subsidy of £160 million is being given to competitors who are cherry-picking what they want and requiring Royal Mail to deliver the rest. We must meet the objective of a level playing field, especially on price and across all postal business—this is not limited to letters.

I turn to the issue of shares to employees. I saw this with BT which, with respect to the noble Lord, Lord Jenkin, was a significantly different case from this. As the chairman of a modest investment company, I was faced with a dilemma by the then investment manager, who asked, “What do we do about the BT share offer?”. It was opposed by the TUC and the union. There I was, with a different hat on and different responsibilities. I said, “You’d better buy them. The worst that can happen is that they sack me”. Of course, they did not. The shares opened the next day at a significant profit and within weeks or months, all the shares given to the employees of BT were sold. I hope that, when this happens, in whatever form, we will ensure that the shares are held in a trustee fashion to benefit the working people, and not individually, because I assure the House that they will not keep them. There will be a significant change in that respect.

I see this as a bit of a comparator for British Rail. I am not arguing about scale or making a political point; it is water under the bridge and one would not do it today in the way that it was done. People were skimming off profit. A good deal was sold off during the exercise, and significant sums were pocketed by the ex-employees who had acquired it. There is also a continuing subsidy to the railways. As I meant to say slightly earlier, I do not expect answers from the noble Baroness to all the points that I have raised today because, with respect, I would much prefer more considered answers. However, I would be grateful if the noble Earl, Lord Attlee, who has responsibility for the Department for Transport, would let us know what has been paid to the railways in the form of subsidy since they were privatised. I think that most of us would be very surprised at the scale of the figure. I hope that my point will become clear as I go on.

The Bill must include clarity on the arrangements for the sale, or whatever else it may be. It must state its nature and limitations. The Bill is negative; there is no indication that there are limitations. I find it much easier to say who may not buy it than who might. I do not think that the queue to buy it is any longer now than it was in the days of the noble Lord, Lord Mandelson.

We must ensure that no asset-stripping occurs. Reference was made by, I think, the noble Lord, Lord Razzall, to the investment by Deutsche Post. That investment has been made in the parcels business—the one thing that is clearly growing and making profits in Royal Mail. If you sold Royal Mail to me, I would want to see how much capital profit I could make out of selling the parcels side of the business. I believe that these things have to be preserved in the totality of the business. What is the timescale of the sale? I am worried about it being done with some urgency, as I do not see the need for that.

I understand, informally, that a valuation of the business has been made. I have not seen anything about it but it is essential that we do see it. The coalition is about openness. I believe that the public, never mind your Lordships’ House, are entitled to know the valuation of what the Government are seeking to sell. What are the scale and scope of the valuation? Does it, for example, include land and building assets? When was it done and who did it? We know none of these things. If a valuation is not needed for any other reason, one is needed if Royal Mail is seriously going to be split from the Post Office, because assets owned by Royal Mail will go to Post Office Ltd. Therefore, I hope that we shall have some openness on this and that the details will be published so that the world can know exactly what we are seeking to sell.

With regard to post offices, the Crown offices are a complication. They are already in the position of securing a significant benefit from the subsidy that the Government have made available to post offices. A table has been produced by Post Office Ltd in relation to the different sorts of post offices. One huge group—local post offices—could by no stretch of the imagination be continued, either because of the government subsidy required to maintain them as things stand, or because post masters and mistresses will be unable to make sufficient income from them. Many of us love and support our local post offices but a typical local post office could lose 65 to 75 per cent of its income as things stand under the Bill. Thirty-seven per cent of their business comes from Royal Mail. Notwithstanding the need for competition and profitability, it seems to me that somehow or other we need to sustain that sort of business. Therefore, what is the hurry?

I am unclear, as I am sure is the noble Baroness, exactly what mutualisation of the Post Office means in practice. It is one thing to set up a mutual to run a building society or whatever, but dealing with 50,000 post offices owned in different ways is very much more complex. I think that we should have clarity on that before we decide that it is a road to go down. I do not wish Ministers to come back here saying, “Our intentions were good. We meant to do it, but”. That would be unsatisfactory on an issue of this importance to Britain.

Mr Hooper has already answered one of the questions that appeared in his first report about the capacity of Royal Mail to provide the skilled management required. He said that that has been done with the appointment of Miss Moya Greene.

We are left with two inescapable issues, one of which is achieving capital. Questions have already been asked about how much they want, when they want it and how might it otherwise be obtained. A lot of questions need answering before we can comfortably go ahead with this Bill as it stands. I ask the Government to think carefully before Committee stage. It would be unfortunate if we were to face a raft of amendments when common sense tells us that some of these things should be dealt with beforehand.

The point of my question to the noble Earl, Lord Attlee, was about the social value of the Post Office and Royal Mail network—no one argues with this—which has been put at more than £2 billion. We either want to ensure that that continues or we want to throw up our hands and say that it has nothing to do with us. I echo the noble Lord, Lord Empey, in this. I thought that his contribution was most helpful. We must try to get this Bill right. If we do not get it right, another generation will say, “They got it wrong”. Looking back 10 or 20 years, we can see other privatisations which we would all have wished to see done a little differently. We must not have an early cheap sale, with people walking away with money.

Perhaps I may offer a blue-sky solution to this: take time to think hard about a Post Office bank. I draw your attention to Northern Rock, which is now a bank. It is ripe for something to happen to it. What would be better, what would be more popular in this country than converting Northern Rock into a Post Office bank with a sort of holder-trustee role for the Royal Mail and Post Office network? I hope that the Government will think about that.