Postal Services Bill

Lord Clarke of Hampstead Excerpts

Wednesday 6th April 2011 Lords Chamber

Moved by

[Lord Clarke of Hampstead]

24GD: Clause 28, page 15, line 15, leave out “financially sustainable” and insert “profitable”

[Lord Clarke of Hampstead]

I start by declaring my usual interests. From the age of 14, as a telegraph boy, I have been directly associated with the Post Office and am very proud to have that association.

In the past 24 hours, I have given a lot of care to the idea of moving this amendment separately, upsetting some of my friends, who wanted me to leave it in the group. The purpose of taking it out of the group is to focus on one of the most important things that the new Royal Mail will have to face, which was mentioned in the last debate at length. Incidentally, the last debate has given me some comfort because, after 10 years of criticising Postcomm with very little or no support from my own Government and my own friends, I heard an analysis from the noble Viscount, Lord Eccles, who put his finger right on it. It has been a con from the start, and those of us who said so 10 years ago can feel a little bit comforted that after a decade people have come round to realise that what we were saying about cherry-pickers has come true. I welcome the new approach, whoever the owners are of the new Royal Mail.

I will not be too long. Given the timing of this debate and its wide and, I think, unwieldy groupings, I know that there is a desire among noble Lords to get off for the Recess in good time, so I will not go over the history too much, but I will say one or two things. However, some people will find it difficult to understand why, with all this complexity that we have just been dealing with, we are proposing legislation at the fag-end of a term, when people are going off. I find that a little bit trying—but never mind, it has happened.

I would be failing in my responsibilities as a human being and my conscience if I did not stand up and speak about this question of profitability of the new Royal Mail. A number of friends have said that it is not necessary, but what is at issue here is the regulator and the criteria that Ofcom will have to apply to looking at things like tariffs and at what surrounds the making up of a price structure for competitors and for access agreements to work. Of course they are necessary to make sure that we have the universal service. I think every Member who has spoken would agree that it is an important part of the fabric of our society to maintain the principles not only of Rowland Hill but of the 300 years of Post Office service since Queen Anne’s time.

I have every confidence that Ofcom will do a good job, although it would not take much to do better than Postcomm. In fact, this is not a new thought. On 9 February two years ago I wrote to Mr Brown, the chief executive of Postcomm, who had written a nice letter to me asking a couple of things. I told him,

“Postcomm is an organisation that gives me little confidence that its existence was ever necessary. I may be the only person who believes that the transfer of postal regulation to Ofcom is a step in the right direction”.

I welcomed the change then and I welcome it now, providing that Ofcom is given the right tools to do the job that it is going to be charged with. Part of that is dealt with in my amendment, which says that the question of profitability must be in the minds of the people considering these things. It is no good expecting Royal Mail to do the work contained in the universal service obligation if it is not able to price things the right way. The price structure must allow profitability. I spent too long in my job trying to get the Post Office to pay its dues to the pension fund. There was a 12-year holiday, when it did not pay anything into the pension fund—and we wonder why it got into a state in the end—but that is another story.

There was ill conceived regulation at that time. I sat over there and listened to the Statement from a chap from down the other end, Stephen Byers, telling us that this liberalisation and new deal would bring in an era of a tremendous new Post Office for the 21st century. I stood up and said that it was a load of nonsense, because if you do not have something to stop people creaming off the work of Royal Mail, as has happened, you will find yourself in trouble. Yet nobody listened, least of all from my own Government’s side. That followed through to the ill fated 2009 Bill, which has been mentioned, and the product of that ill conceived regulation has been that people in the industry have paid a heavy price. Billions of pounds have been lost because of how Postcomm works.

I said that I would be brief and I will. We will be entering a new era in the long and well respected history of the Post Office. I am not used to begging for things but I beg the Government on this point: not to make another mistake by allowing the anomalous situation whereby an outside body is able to hamstring the business. I have had to come to terms with the idea that the Royal Mail will never be the same once it is privatised. As I said last time we were in Committee, it hurts but it is happening. Nevertheless a new Royal Mail, invigorated by new and competent management, gives us a new chance. That is not to say that Post Office managements were not competent in the past but they were never allowed to do the job because of political interference over decades. The 1960s, 1970s and 1980s were dominated by political interference. Ever since the Post Office became a corporation in 1969, politicians had their fingers on the service being provided.

With that new and competent management, together with the historic agreements that have been mentioned about going forward with modernisation, the staff and people who run Royal Mail deserve to be given fair and just regulation, to quote the noble Lord, Lord Jenkin. It has to be fair and just. I hope that the Government will recognise that the regulator has to be fair. I believe that requiring that the service be “profitable”, instead of “financial sustainable”, will help. I look forward to the Minister telling me that the Government agree that the Royal Mail will be entitled to be profitable.

[Baroness Kramer]

My Lords, I had not expected to speak on this amendment at all. Having looked at the language, I thought that “financially sustainable” looked pretty adequate. Why shift it to “profitable” and set the bar higher? However, listening to the noble Lord, Lord Clarke, I found myself convinced on this so I felt I should get to my feet. It would be a positive for this Bill if we came out knowing that we would not have to revisit the future of Royal Mail, the universal service provider, and that it had been moved on to a basis where it would thrive in future and deliver the services that we all want and that our community and economy need, so that we do not have to keep coming back to patch it. Constant salami slicing is quite often the tradition as we make change. As I look at that, the requirement for profitability has some real appeal because financial sustainability can be achieved in many ways; you could talk about additional subsidy, or whatever else. It seems to me that there is a far more secure future. The noble Lord, Lord Clarke, has convinced me and I hope that he will have some success in convincing the Government.

--- Later in debate ---

[Lord De Mauley]

My Lords, Amendment 24GD, moved by the noble Lord, Lord Clarke of Hampstead, seeks to delete “financially sustainable” from Clause 28(3), and replace those words with “profitable”. If I may say so, he makes an important point, as do my noble friend Lady Kramer and the noble Lords, Lord Christopher and Lord Young. There was a long discussion in Committee in the other place over whether financially sustainable meant “profitable”. The Minister for Postal Affairs put it on the parliamentary record, and I would like to do the same today, that this Government absolutely seek for Royal Mail to be a profitable company. Part of the problem and the threat to the universal postal service is that, under the way in which the previous Government managed the postal services sector, Royal Mail has not been making profits and has been a drain on the taxpayer, so at the heart of this concept is the belief that to be sustainable the universal service must make a return for its provider. The only alternative, after all, is perpetual taxpayer subsidy, which is not a realistic, acceptable solution.

Importantly, in addition, “financially sustainable” is a broader concept than simply “profitable”. A company can be profitable in the short term but not necessarily financially sustainable; equally, it can make losses in the short term but have a sustainable future. As I have said, it will be for Ofcom to determine what needs to be taken into consideration when having regard to financial sustainability: the ability to earn a rate of return on investment; profitability; the setting of prices; long-term market volumes, and so on.

As I said in response to the previous group of amendments, the arguments that have already been made on Clause 28 and Ofcom’s duties, both in your Lordships’ House and the other place, have persuaded me to revisit Ofcom’s regulatory duties. The protection of the universal service is of paramount importance and we understand that we must get this absolutely right. That is the very reason why we are taking action and why we brought the Bill forward.

The noble Lord, Lord Clarke, in particular has unrivalled experience of the postal sector and I am always grateful for his contributions to our debates. He made some excellent and important points and I will reflect on them further when considering this issue. Given my commitment to look again at the issue and to bring forward proposals on Report, I hope that the noble Lord will feel able to withdraw Amendment 24GD.

[Lord Clarke of Hampstead]

My Lords, I thank the noble Baroness, Lady Kramer, the noble Lord, Lord Christopher, and my noble friend Lord Young for their contributions. I did not do this as a perverse way of having a voice today. I simply believe that we have a chance to look at history and not make the same mistake again. That is why I am particularly pleased to hear what the Minister has just said about revisiting the whole question of the regulatory responsibilities of Ofcom. In those circumstances, I beg leave to withdraw the amendment.

Amendment 24GD withdrawn.

--- Later in debate ---

[Lord Christopher]

My Lords, I am slightly nonplussed to see two of these amendments grouped together as they are entirely at one, but we will live with that. As the Committee knows from what I have said previously, I am not sure that we are likely to get a buyer for Royal Mail that we shall come to love as much as we love Royal Mail. However, one has only to express some surprise that Cadbury chocolate is now made by an American cheese firm to realise that these difficult things happen.

We seek to achieve that, whatever may happen, the Queen’s head will appear on stamps. I hope that the Government will have no difficulty accepting this strengthening of the Bill. My noble friend Lord Clarke and I are slightly nonplussed because he has a print of the Bill that already includes the word “must”, and I have a print of the Bill that says “may”. I am happy with his print and I hope that the Minister will not contradict it.

I wish that I could speak as briefly on the other amendment that I wish to address, but I do not think I can. The reason for that is quite simple; I was wholly ignorant of the existence of a post office museum on such a scale as the one that exists. Ministers have tended to talk about an archive, and I always think of dungeons and cellars when in fact it is a very substantial museum. It was established as an independent charity and the principal and significant funder is Royal Mail. The museum has post office and Royal Mail records dating from the 17th century and is designated as an outstanding collection, which I do not believe is gained easily. It has statues and an archive that matches any that you might find at Kew, and illustrates the history of the postal system. I shall list some, at any rate, of its artefacts. It has stamps and their artwork; photographs, posters and design; records relating to the birth of mass communication; and technological reform in the Victorian era and the Penny Black stamp. It also has material relating to war and emergencies; material relating to films, broadcasting, censorship and politics; maps; and records of staff, finance and buildings essential to local and family history. Ten other things are also listed.

The museum is of great significance to the history of this country and to some degree the world, because we led the way in postal service. It has 36 full-time staff and 20 regular volunteers. It was part of the London Festival of Stamps in January this year. It accepts visits from schools and staff make visits to schools. There are around 1 million public visits, either on the net or in person. What is at stake is the money that keeps it going. One had better be frank about this; it receives £725,000 a year in cash from Royal Mail for its archive services and nearly £750,000 of items in kind. It has a donation—for which I trust Royal Mail gets tax relief—of £1,280,000 a year. The total is nearly £2,750,000. The amendment proposes that whoever takes on Royal Mail shall take on responsibility for the archive of the history of 400 years which it has inherited.

[Lord Clarke of Hampstead]

My Lords, obviously I completely support my noble friend. I do not intend to delay the Committee any longer than I have to, except to say that many years ago I went to the then postal museum in Bruce Castle in Tottenham—I hope noble Lords will forgive me for mentioning Tottenham, the day after its problems. It was also the home of Rowland Hill and the City of London Middlesex Regiment. I remember asking the curator of the museum, “Are you a philatelist? Do you collect stamps?”. As a postman, I never collected stamps because they lay all over the floor and you did not want to get involved with what was then called the investigation branch. Miss Flint turned to me and said, “Mr Clarke, stamps are just a bagatelle. I collect the waybills for the livery and the hay for the horses that fell off the stagecoaches between the various cities”. So I was put in my place about postal history.

I am concerned about the memorials to the fallen from two world wars in a number of Post Office buildings. I am concerned that the many works of art should be preserved, and I wholeheartedly agree with my noble friend Lord Christopher that we must provide the wherewithal.

Above all, my reason for speaking is to ask the Minister, who knows that I have this interest, what has happened to the Post Office railway. Do we still own it? I know that it is in mothballs. We used to get mail conveyed under the ground using an efficient post office railway system rather than having trucks rumbling around the streets, filling the air with fumes. I am just curious. Has it been sold already by the Post Office or is it an asset that will be taken into account in the valuation, which I hope will happen before too long?

I fully support the three amendments, and am anxious to know what has happened to that train. Some nasty people put me in one of the carriages when I was 15 years of age and sent me from Mount Pleasant up to Oxford Street, and I had to find my own way back. That was a punishment in those days for cheeky boys. It was a terrifying experience, but I want to know what has happened to the railway.