Postal Services Bill

Lord Clarke of Hampstead Excerpts

Wednesday 16th March 2011 Lords Chamber

[Lord Cotter]

My Lords, in one sense I welcome the amendment. Speaking for these Benches and, I think, for the Government as well, I think there is no harm in the Postal Services Bill emphasising the importance of shared ownership. The issue has already been rehearsed, but I welcome the fact that it is being raised again. However, it is not necessary to say that 20 per cent or 25 per cent share ownership should be required. We on these Benches, and I think the Government as a whole, are determined to ensure that as many shares as possible are distributed.

Another issue that I feel strongly about, which I am glad is being rehearsed again—and on which I am sure the Minister will respond, as she has done previously—is that share ownership and the input of the employees into postal services are very important. I know that the Minister has accepted that already, and we on these Benches also think that it is very important.

There is no harm in having a discussion on these issues, but being specific about more than 10 per cent could be counterproductive. Much as we would hope that share ownership will be quite high, we want to ensure that a purchaser feels able to have a level of control of the company that the purchaser considers sufficient and appropriate. I would urge the Government to provide as many shares as possible for the postal services employees. In that sense I welcome the amendment, but we should not be prescriptive beyond the 10 per cent that we have said already. I look forward to the Minister’s response on the various questions when the time comes.

[Lord Clarke of Hampstead]

My Lords, I declare my usual interest as a former postman. As all Members of this House will know, I am bitterly opposed to the whole idea of selling off Royal Mail in part or whole. I have a dream; I live in hope that the Deputy Prime Minister will wake up one day, have a fit of conscience and resign from the Government, the coalition will fall and we will not have the Bill at all. However, being a realist, I suppose I have to accept that we have got past that stage and we now have to look at share ownership and the protection of employee shareholders. That is my interest.

If the Bill is to proceed, the shares have to be subject to a reasonable code of conduct that does not permit what happened to some members of my union when BT was privatised. I will come back to the vast quantities of shares and share options that were given to the people at the top of BT.

Issuing shares could be a beneficial move—notwithstanding my reservations about the whole thing—but it could have unintended consequences. Workers at Royal Mail will want to know that their shares are not allocated at the expense of their pay and conditions. Receiving shares does not constitute much of a choice if you cannot get a reasonable cost of living increase when circumstances allow. Employees will want to know that their shares will not cut across their other chosen and established means of engagement within the company. They will also want to know that the company is being put on a sound footing for the future. That depends on the regulatory and other frameworks that this Bill and the Government set for Royal Mail in the future. Employee shares would hold little attraction if they turned out to be merely an anvil around the neck of employees as the ship sinks slowly under the water. I hope that during these debates we will receive genuine assurances on these points.

In speaking in favour of Amendment 18, I put my noble friend’s mind at rest in that he will not hear me waxing on about the 25 per cent figure as I do not intend to move the relevant amendment. I will try very hard to convince the Committee that 20 per cent is the right figure. I support most of the points made by my noble friend who moved Amendment 18.

First, if there are to be employee shares, I support the case for employee shareholdings to be held in trust. That is very important. I hope that the Government will not dogmatically reject that idea. If the pattern of the past is followed, employee shares will disappear like ice in a Turkish bath—they will go. They will no longer be owned by employees but will be available on the market for people to buy up. If you have your basic pay and some shares and you are under pressure to pay a domestic bill, you are tempted to dispose of the shares. If that happens, I believe that they should be disposed of back into the employee shareholding trust. I hope that the Government will take that matter into account.

Secondly, I agree that it is quite wrong for the Bill to propose issuing the first employee share only when every single Crown share has been disposed of. That would be unfair and illogical. I understand that 10 per cent is not the maximum proportion of employee shares that have been permitted in a privatisation. A whole string of bus companies were sold 100 per cent to employees. I do not suggest that the 100 per cent figure should apply in this case, but why restrict it to 10 per cent? I believe that the noble Lord, Lord Cotter, talked about the widest possible issuing of shares to staff, or allowing them to purchase them. That is very important. Unfortunately, most of the companies to which I have referred went the same way as the other privatisations, with 10 per cent or fewer employee shares, and they tended to dwindle away over time. What is the case for a bigger share? I do not pretend to be an expert on anything, but we should listen to people such as Carole Leslie, policy director at the Employee Ownership Association, who told the Public Bill Committee in the other place:

“I am a bit disappointed at 10%, because 10% to me is small, which means that you have to put more effort into giving employees that real voice in the company”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/2010; col. 71.]

We have not yet dealt with the representation of employee shareholders, although I am sure we will do so later in our consideration of the Bill.

The general secretary of the National Federation of Sub-Postmasters told the same committee that if Royal Mail Group was privatised, there was a case for its employees to own 20 per cent of the group. That assertion supports the amendment of my noble friend.

Peter Stocks, managing director of the Baxi Partnership, which grew out of a manufacturing company and now advises on employee ownership, also gave evidence to the same Committee. He stated:

“I think that 10% is quite low and I think that there is a danger that if it is just shares and there isn’t a participation culture that goes with it, it won’t change a lot. We see real results in companies where the whole of the company feel that they have a sense of ownership. They feel that they participate in decisions. They discuss decisions and when they make a decision they stick with it. It was interesting watching some of our members through the recession. Employee-owned companies are affected the same as everybody else. They would have gone through an awful lot of agony about how you manage through different times but, because those decisions were made in a very participative way”—

by staff and management looking at the issue together—

“once the decisions were made they were stuck to, and bought into, by everybody. Our members have gone through the recession in a very resilient way and I think that is down to the way you manage the company”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; cols. 71-72.]

Let us hope that when the Government get their way with the sale there will be a company with a similar philosophy on these issues.

The staff of Royal Mail—who are mainly postmen and postwomen, but there are many others also—are dedicated people. That has been proved throughout its 350-year history. If those who remain, following the loss of 60,000 jobs in the past couple of years, are to experience the anxiety of a traumatic change of ownership of their company—I cannot get my mind around “company”, because the Post Office is the Post Office and Royal Mail is Royal Mail—and if they are to be invited to take a shareholding in their company, it should be done in a way that is fair and reasonable to them and that gives them the prospect of a real say in the success of their company.

Immediate employment is not the only issue at stake for Royal Mail staff; they also need a final guarantee that they will be able to pay their rent or mortgage. They have a big stake. Working for Royal Mail is the means whereby their children can be educated and have better prospects in life, and they use their hard-earned income for a better life. As I said on Monday, postal workers may not always see eye to eye with management, but they are always acutely aware that a viable and successful Royal Mail is in their own interests.

Employee shareholdings have been encouraged by tax allowances; £900 million a year is spent on tax relief for employee share schemes, according to the Employee Ownership Association. However, 50 per cent of that tax relief is on discretionary rather than all-employee schemes. Therefore, 50 per cent of the tax relief is going to 3 per cent of employee shareholders. The EOA says that this is poorly directed tax relief. I should add that it is grossly unfair.

When British Telecom was sold, and it was promised that a golden share would be retained by the Government, those at the top of BT held thousands of share options, although I do not know the exact figure. Any examination of BT’s annual accounts will show how many share options were given to them.

We should be very careful how we treat this exercise, and there is a good case for equality. A 20 per cent shareholding should be distributed on an equal basis to all employees. This would turn the Government’s plan from a progressive proposal to a truly radical one. It would give employees a real sense that they had a say in the direction of the company and a stake in its success. It would stand a better chance of realising the worthy aspirations that Ministers have expressed in stating the case for employee shares. I look forward to hearing the Minister’s reply. In the mean time, I support the amendment.

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[Lord Clarke of Hampstead]

My Lords, when the Government consider the arguments we have heard about what should or should not be on the face of the Bill, will they take time to look back in history at the industrial democracy experiment that put Post Office workers—it was the Post Office then and not just Royal Mail—on local, regional and national boards? Representatives, for instance from London as in my own experience, were a conduit in decision making on very important issues like modification or improvement of services and the early days of mechanisation. That gave comfort to people. At regional level the situation was even better, but at national level not only were there two representatives—I will not name them now—on the board, but they were accountable to the rest of the workforce. The point I am making is that those people gave their time as board members—and they included women—without any share ownership. They were pleased to be part of the decision making and the understanding of why certain decisions had to be made. This was introduced in 1975, and that is why I am advising my friends on the other side to look at the history. It was only a matter of weeks after the change of Government in 1979 that the then Prime Minister—the noble Baroness who is a member of this House—decided that the scheme should be abandoned. We got the feeling then that boards were not the place for working people. I think what we have heard today shows that there are places for working people on boards.

I understand the complexities about putting things on the face of the Bill, but I believe it could be done and any prospective owner would welcome the chance of getting people in the position where they could be that vital link between the people doing the work and those who get the profit at the end of it.

[Lord Brooke of Alverthorpe]

I understand why the noble Viscount, Lord Eccles, should be concerned about the uncertainty, but the one thing we know is that whoever buys this company will know perfectly well—it will be on the face of the Bill—that 10 per cent of the shares will be owned by the employees. That is definite, and similarly—I will be speaking later in subsequent amendments about how this might be handled—if a trust fund is established, the most appropriate way in which that would be contained within the new structure of the company would be to put an employee representing the trust directly on the board.

I see no great difficulty in drafting words to that effect, which should be considered in the light of previous experience. When we dealt with the campaign against NATS being formed back in 2001—I will also speak about that later—it would have been highly advantageous and beneficial had there been more on the face of the Bill than proved to be the case at that time. I am sure that would have convinced many of the employees about what was going to happen and the way things would go.

The success or failure of this venture, whoever buys it, is going to depend primarily on the employees’ contribution to the way the company will operate—and, yes, on capital too. That means that the new owners will have to manage the company in a way that, up to the last two years, we have not seen for a good many years within the Royal Mail. They will know broadly what they are taking on board, and I am sure that they would be very anxious to motivate and involve the employees as far as they can. Therefore, I do not see any great problem in finding a form of words to ensure that we have at least one representative.

Times are a-changing and I am surprised that there is a lack of radical approach, particularly from my noble friends on the Lib Dem Benches, on these issues. We have a recently commissioned report from my noble friend Lord Davies of Abersoch about the desperate need for more women non-executive directors on boards. There is also a desperate need to have the workforce better represented in many companies than we currently have, particularly people who are low paid by comparison with those on the board with substantial incomes accruing from companies. These changes will come as night follows day, so I hope that the Government will be bold and will be prepared to look at this proposal very favourably.

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[Baroness Kramer]

My Lords, I have long been a fan of the equivalent of a post bank—as you know, it was Liberal Democrat policy. All of the arguments were made very strongly about the advantages that a post bank would bring to the financially excluded and those who are looking more for vanilla banking as well as to improving access for small businesses. It is hard to do anything other than come up with a list of absolute positives for a post bank.

Obviously, my colleagues in the other place were very eager to seize the opportunity for a post bank as part of the restructuring of Royal Mail, but then they came across the contract between the Post Office and the Bank of Ireland—although I do not know how much they know about it because obviously the contract will be confidential. However, I notice that the three names down on this amendment are those of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, and—I am sorry if I get their histories slightly wrong—I think it must have been on their watch that the contract with the Bank of Ireland was signed. That contract hidebounds the Post Office and makes it virtually impossible for it to provide the kind of comprehensive service and range of financial services without buying out that contract. Without breaching any confidentiality, perhaps they could tell us how many hundreds of millions of pounds would have to be paid to Bank of Ireland to buy out the contract so that a post bank could be put in place. I do not have access to that information, but perhaps, having been on the watch when that contract was originally put in place, they could give us a sensible estimate of what that amount of money could be. I am rather afraid it is such a large sum that it would have been difficult even in a time of prosperity and exceedingly difficult in a time of deficit. I greatly regret that.

I am glad that we had some discussion—there will be other opportunities—about bringing on board the credit unions. This House will be well aware that the Minister, Ed Davey, and others are committed to financing the technical platform that would make it possible for the post office to be used as the face of the credit unions. Credit unions are far more fragmented than a coherent bank would be, but at least that would open up the opportunity. I will also have a few words later to say about at least providing access to current accounts in the various high street banks. I wonder if they would give us an indication of what they think the cost would be for the Government to buy out that Bank of Ireland contract to make this very attractive proposition possible.

[Lord Clarke of Hampstead]

The noble Lord, Lord Stevenson, said he had “a cunning plan”. Well, I wish it was cunning—it is not original. In fact, it was the Conservative Government of the 1970s that abandoned National Girobank. I was one of those who agitated for many years for the creation of Girobank. By copying the arrangements in the Netherlands, it was possible to introduce a simple banking system that brought cheque books and bank accounts to many thousands of people who never thought they would have a bank account. I mention National Girobank because one day, when I get enough money, I am going to ask a student or someone to do the proper research on what happened to our people’s bank, as it was in those days.

As I said in the debates on the previous Postal Services Bill a couple of years ago, only one paper in this country covered the story of what I considered the give-away of a national asset. Reference has been made to the shock that you get when you find you have got to buy out a contract, but if you had the figures on what happened at Girobank, you would start to worry even more. I know this because when it was announced that it was going to be abolished—and it was really abolished because it was so successful—Co-operative Bank, Unity Trust and a consortium of trade unions got together to try to buy the bank when it was put up for sale. First, they were told, “You need £200 million to buy Girobank”. That was the easy bit, because that was gathered together. Then the rules were changed, and Girobank was to be sold only to an established finance house—which the consortium was not—but the consortium established itself as a finance house. Then they were told, “You cannot buy it unless you have an alternative computer system that will be there if this system goes down”. So the dice were quite loaded from the start. The £200 million that was mentioned at the time of the sale of Girobank actually paled into insignificance, because the actual figure—I am quoting from memory as I have no notes here—was £118 million when it was sold to the Alliance & Leicester. The Alliance & Leicester obviously grabbed it because, at the time, there were thousands of people waiting to open an account with National Girobank. Political dogma said, “This has got to stop. It’s too successful and we’re going to do away with it”.

What has happened since? Alliance & Leicester of course has been swallowed up by Santander. If anybody thinks that the service they are getting from Santander is anything like what they got from National Giro in the beginning, and to some extent with the Alliance & Leicester, they are dreaming, because the rapacious way in which these banks work frightens me.

There is a demand for a people’s bank, so I welcome the comments from the noble Baroness, Lady Kramer. I ought to declare another interest: I am a member of the St Albans District Credit Union. During my years as a councillor in Camden, I saw what happened when people were at the mercy of loan-sharks, when people were threatened on their doorsteps with an extortionate amount of interest week on week. Of course there is a chance to get a link between the growth of credit unions and a people’s bank—or post bank, post office bank or Royal Mail or whatever—but the important thing to is to have a simple banking system, which allows people to have confidence in where they are putting their money. At the back of it all, despite all my criticism of what has gone on in the last few years, I still believe in the brand name of the Post Office. The Post Office has a good reputation and I hope that the Minister and her colleagues will go into one of those dusty offices, pick up the box file that says National Girobank and check what I have said about the way it was virtually given away. Incidentally, the punchline was that, within two years of trading, Alliance & Leicester cleared the amount that it paid for the bank.

[Lord Young of Norwood Green]

My Lords, I shall respond to the noble Baroness’s request for information. It was a substantial sum. I am not saying that to be evasive; I cannot remember the precise amount. The only thing that I would say about our arrangement with the Bank of Ireland was that it enabled a large amount of business to be generated. We should not forget that aspect of it. As an original member of Girobank when it was first formed, I concur absolutely with the regretful history of its sad demise that my noble friend Lord Clarke has recounted. For a period we had a successful people’s bank, which unfortunately disappeared as the result of another privatisation.