Lord Hoyle
Main Page: Lord Hoyle (Labour - Life peer)Postal Services Bill
Lord Hoyle Excerpts
Lord Hunt of Wirral
My Lords, what a remarkable performance. I enjoyed the 14-minute speech by the noble Lord, Lord Young of Norwood Green, for a number of reasons, but first, I join him in paying tribute to Richard Hooper and say what a remarkable job he has done for Royal Mail. We were all thrilled when he was present at the Oscar ceremony when his son Tom won the best director award, one of the many awards for “The King’s Speech”.
The noble Lord made a remarkable presentation arguing in favour of a sunset clause when, thanks to the noble Lord when he was in Government, we are still awaiting sunrise. The great period of massive uncertainty that he described is wholly as a result of the previous Government’s inability to take the previous Bill through the other place after we had spent many hours improving it. I also heard him say that we must not have the Royal Mail engaging in some strange limbo-land. All I will say is that that is exactly what we had. The great thing now is that we have a Government determined to realise the ambitions of all those of us who care deeply about the Royal Mail and make it a great success. I share the noble Lord’s four principles, but I say to him that when he makes the first principle “timely”, I wish that he might have expressed some regret about the fact that the previous Bill did not proceed any further when it should have done. Of course he is right to say that we have to look for value for money, clarity and a secure footing. The great thing I have learnt from that remarkable lady, Moya Greene, is that she is determined to make Royal Mail the most respected institution in the UK. That is something she achieved with Canada Post, and I am a great admirer. Please, whatever the arguments for or against sunset clauses, let us have sunrise, let us get on with it.
Lord Hoyle
I was not going to rise, but I am going to rise and there may be other occasions when I rise when we hear the eloquence of the noble Lord opposite. I notice that he did not reply to the argument being put forward here about the uncertainty that would rest with Royal Mail unless there is a conclusion date. The question that was being asked was, “Are they going to give it away?”. I know that the Minister is a more reasonable person, and I expect that she will deal with the arguments rather than going round the periphery and talking about what might or might not have been. The pair of us had a little discussion. We did not always agree, although on other subjects in the past we have agreed, so we have something in common, but not on this. I hope the noble Lord will not rise again unless he is going to deal with the arguments in a constructive way and say why we should not have it. The reason is that we cannot allow uncertainty to continue. That will happen. How can management plan ahead if it has to keep asking itself: When will we be selling it off? How will we sell it off? Where are we going to go? No planning can take place in such circumstances. It not only affects the Royal Mail; it affects the Post Office network as well. We need to know what the Government are thinking. They have said, and I completely agree with them, that it will not be a giveaway. They are trying to get the right price with the right company that will serve the interest. I, of course, am totally against that, as is known. The point is that we are where we are in discussing this Bill, and it is reasonable to put a limit on this. After all, we are only at the beginning of 2011 and we are talking about the end of 2012. What is wrong with that? I do hope that we get a more constructive reply from the Minister.
Baroness Kramer
My Lords, I should, I suppose, confess to something of a wicked past. Back when I was a banker in the United States, part of my work was advising companies that were making purchases and selling off subsidiaries. If I was advising a potential buyer of Royal Mail, I would be hoping very much that this amendment would pass, because, frankly, nothing would give more leverage to a potential purchaser than what in effect is being described here as a drop-dead date.
We have seen government in the past sell assets at far below their appropriate value. I was very involved from the other side when I was on the board of Transport for London and the Government insisted on the Tube public/private partnership. TfL set itself internal deadlines. I do not believe that they were externally set, although I would have to check that. The ability to negotiate in effect collapsed in the final days as those deadlines approached and were very much exploited by the private partners and the banks on the other side, so I beg this House not to fall back into that trap.
The noble Lord discussed uncertainty, but what greater uncertainty could there be than the knowledge that the Government might find themselves coming back to this House at the time of a sunset clause for leave to continue with a sales programme. That maximises uncertainty for Royal Mail and for the other parts of the group that will, we hope, go on to their new future.
Baroness Turner of Camden
I support my noble friend who introduced this amendment. He is quite right: we are talking about a major public institution which—despite what some noble Lords have said—has a great deal of public respect and support. It is always assumed by the present Government that if there is anything wrong you have to privatise. Privatisation is supposed to produce greater efficiency and more investment. That is not always true. I speak as a consumer of several recently privatised services. The first thing that a privatised company does is usually to economise in order to increase the share price for shareholders. That often involves decreasing the number of staff so that when you phone them, instead of talking to a human being, you talk to an automated voice, which says, “If you want this press 1, if you want the other press 2, if you want something else press 3, or hang on to talk to an adviser”. Twenty minutes later, you are still hanging on. That has been my experience of a good many privatised companies. I would not like that to happen to the Royal Mail.
We are talking, as I said, about an organisation that has a lot of public support. I very much hope that the full statement which my noble friend made from the Front Bench will receive intense investigation from the Government, because it is worth considering. This is an important issue and a major one for this Bill.
Lord Hoyle
Does my noble friend not press all the right buttons when she addresses the House? I cannot understand why the Government are going down this road. My noble friend Lord Young remarked on the ability of the new chief executive. She comes with a highly successful track record. Why do we not give her an opportunity to develop the Royal Mail, rather than going down the avenue of selling it off to any Tom, Dick or Harry?
The Government have said that they will try to get an adequate price for Royal Mail. That does not seem to me to be a good reason for what they are doing. Agreement has been reached between the unions and the management on the way forward, and they are willing to co-operate. We do not need to go over the past, as the noble Lord who spoke from the Cross Benches has suggested. We know where we are going. The capital is there. The important difference is that the Government have undertaken to underwrite the pension liability which will lift a great burden from the back of the Post Office.
I come back to the point that we have achieved an awful lot. The capital is available and the unions and management are co-operating. Everybody on both sides admits that we have a new chief executive who is very forward looking and will do all that she can to make the Royal Mail a success, so why are the Government kicking away the ground again? They do not appear to have much idea who will make a bid for Royal Mail. We certainly know that, given the recession, they will not get a good price for it. It seems to me that we are going down the wrong avenue. We on this side certainly support the amendment. My noble friend who spoke from the Front Bench made a very intelligent speech in which he outlined why we want the measure to go ahead. I hope that the Government are listening to what we are saying. I would like them to give the new management of Royal Mail the opportunity to carry out the modernisation. If they do so, I see no reason at all why the privatisation should go ahead.
Lord Lea of Crondall
My Lords, following on the same theme as my noble friend Lord Hoyle, it is pertinent to point out that the Minister did not accept the importance of the question posed by my noble friend Lord Christopher on the previous amendment. We have had a broad sweep of what a marvellous idea private capital is. However, we have no idea about guarantees relating to asset-stripping or about country of ownership, sovereign funds and all the other items on the long list. Does that not dent the picture that we are expected to believe in, given that the picture could be this one, that one or another? Would it not be more relevant to mention the interests of the British people, as we are here to represent the interests of society as a whole? They are interested in such things as the universal service, obviously, and in not selling off public assets. It is said that a big profit will not be made from selling the Royal Mail to private business. Is it not relevant to remind noble Lords that in the great wave of privatisations in the 1980s, the undervaluation of British Airways, British Gas and British Telecom alone on the first day of trading amounted to more than £2 billion? That will happen again prima facie unless the noble Baroness can say how the Bill will ensure that that will not occur.
Baroness Wilcox
Amendment 2 seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009, although it never completed its passage through the other place and on to the statute book.
I reassure the noble Baroness, Lady Turner, that I have great respect for the noble Lord, Lord Young. I take what he says most seriously. I always listen to him and will be doing so throughout the Bill. I say to the noble Lord, Lord Hoyle, that we are listening and will continue to do so.
I should say first that I am pleased that the amendment indicates that the Opposition continue to accept that the sale of shares in Royal Mail is the right way to secure the future of the universal service and that, as Richard Hooper recommended, an injection of private capital into the company is necessary. My noble friend Lord Cotter supported that also.
The noble Lord, Lord Young, suggested that the Government had not consulted appropriately. The Bill actually draws heavily of the year-long independent review of the universal postal service chaired by Richard Hooper, as did the previous Government’s Bill in 2009. The Bill also draws on the subsequent update by Richard Hooper published in September last year, which was commissioned by the Secretary of State. The original review and the update took evidence from hundreds of organisations and individuals with an interest in the future of the postal sector. For the original report, there were some 200 meetings and 70 written submissions. All major stakeholders in the sector made an input into the review. We feel that that constitutes consultation.
However, the difference between the positions of this Government and the previous Government is that we do not believe that it is necessary for government to retain overall ownership of Royal Mail. The noble Lord, Lord Young, argued that there is no public mandate for this privatisation. The Liberal Democrat manifesto was explicit about the need for private-sector investment and employee shares. The coalition agreement also was explicit. It stated:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill is doing exactly what we said we would do.
Indeed, we believe that the Government are the wrong shareholders for Royal Mail, especially at a time when the postal market is undergoing significant change and Royal Mail has to respond to that change. We are not alone in thinking this. Moya Greene, the chief executive officer of Royal Mail, who has been complimented from all sides of the House today, made this clear to the Public Bill Committee in the other place. As I said during the Second Reading of the Bill, public ownership has failed Royal Mail and has not helped it to move with the times and make the changes which it needs to succeed. That is why we need a different approach if we are to safeguard the universal postal service.
Government cannot provide capital fast enough and, as the House knows, every investment that we make has to be cleared by the European Union under state aid rules. With so many competing calls on the public finances, we cannot guarantee that Royal Mail will always have access to the capital that it needs. In addition, we believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. For example, private investors are likely to find it more attractive to invest in Royal Mail if there are no barriers to owning a majority of shares and they can therefore have real control to ensure the future success of the company. I suspect that this was one of the reasons why a buyer could not be found in 2009.
The noble Lord, Lord Lea of Crondall, asked what specific protections against asset-stripping are in the Bill. A number of protections are in place if asset-stripping or other shareholders’ actions become a concern. The protections are contained in the Bill and in other legislation. Ofcom has the power in Clause 35 to imposed designated USP conditions, akin to condition 16 in Royal Mail’s existing licence, that do not allow it to do anything such as asset disposal or make a dividend payment that,
“creates any significant risk that necessary resources will not be available to”,
continue its business. If Royal Mail is found to be breach of its regulatory obligations—
Lord Hoyle
I am listening intently to the Minister, but there is a whining noise and I cannot hear clearly what is being said.
Baroness Wilcox
I think that it was someone's hearing aid that they have now switched off. I will return to the specific protections in the Bill against asset-stripping that could affect the universal service. A number of protections are in place in case asset-stripping or other shareholder actions become a concern. These protections are contained both in the Bill and in other legislation. Ofcom has the power to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. If Royal Mail is found to be in breach of its regulatory obligations, Ofcom could fine it up to 10 per cent of the annual turnover of its postal business. On current turnover, this would be more than £650 million.
Directors of a company must act in the way that they consider most likely to promote the success of the company for the benefit of its members as a whole. If an asset disposal or dividend payment did not meet that test, they would be in breach of that obligation. Royal Mail's debt is secured on its assets, so it is simply not possible to transfer assets away from the business and its debts. The Pensions Regulator may also not allow such behaviour, as it would weaken Royal Mail's covenant to its pensioners. I hope that the noble Lord, Lord Lea of Crondall, will find that helpful.
Baroness Kramer
Internally, due diligence is critical. The specifications and the instructions to the investment bankers, accountants and others engaged in the valuation have to be tough and in the monitoring and examination rigour should be applied to the response that they come back with. However, it still has to be in an internal setting, not a public setting. People will have many opinions across this House, but this will be a highly complex process with a great deal of detail. While this House has the ability to understand all that, there may be a subset of people who might be interested in being part of the consultation process by taking a look at that on behalf of the House. However, to me, it certainly would not be possible to do it in a public setting without giving the buyer the most impossible leverage.
Lord Hoyle
The noble Baroness said that if we value it, we will not get a penny more. In past privatisations, it was not that we got the value for the business, but that we sold it at a loss, at a low price. That is what we are asking her to deal with.
Baroness Kramer
I fully understand what the noble Lord is saying. In the past, privatisations have been naive. We have to use pressure to make sure that the Government do not go through that naive process once again. I suggest that the remedy being proposed here—that the value is discussed in detail out in the public arena—does not achieve the purpose. It simply has the effect of making sure that in the end there is a cap on the sale price and creates another set of problems without necessarily disposing of the first set. We need to be pressing to make sure that the internal work is up to standard, but to my mind—and that is one person’s opinion—bringing it into the public arena does not achieve that.
Lord Myners
My Lords, I add my support to the amendment and endorse the views expressed by my noble friend Lord Brooke and the noble Lord, Lord Cotter, on the Liberal Democrat Benches.
There are two issues involved here. First, in a conventional private sector situation where another company or body of investors has a large shareholding, it is quite customary for it to seek board representation, recognising that when it sits on the board it shares the responsibilities of other directors to the company as a unitary board. I note the presence of the noble Lord, Lord St John of Fawsley, in his place on the government Benches and it immediately reminds me that News International, as a particularly large shareholder, has always had its interests represented on the board of BSkyB. It is entirely logical and consistent with good private sector practice for the workers in the Post Office to have such representation on the board of directors until such time as they cease to be significant shareholders.
However, on my second point, I have regard to the fact that the Minister not only brings considerable business experience to her position but also speaks on issues of corporate governance. There is a bigger issue at heart here: the shareholders in a privatised Post Office—whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors—will nevertheless individually have a very modest interest in the company. If it is bought by a Dutch company and that company is floated, the ultimate shareholders will be institutions spread across the world, few of whom will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money invested in a single share and all their employment in one place of work. It is surely right that people who exhibit such a high conviction to a company should have some voice in the leadership and management of the business. Some of the malfunctioning of companies over recent years might not have happened had there been a voice around the board table reflecting the views, knowledge and insights of the employees of the company, as opposed to executives who sit in executive suites at the top of the tower building or non-executives who turn up for two or three hours a month. There is a broader issue here and I hope that the Minister, given her responsibilities for corporate governance, will speak to that broader issue in addition to giving us some welcoming encouragement on this amendment.
Lord Hoyle
I agree with those who have spoken in support of the amendment, and particularly with the comments of my noble friend Lord Myners. Although some people can walk away from a company if it is not successful, those who are employed there cannot; it is their—and their family’s—livelihood. I know that the Minister will take into account all that we have said when making her reply, and I hope that it will be a positive and constructive reply. I agree with my noble friend Lord Brooke that one representative is a modest request. I would have asked for at least two—but here we are, with a suggestion that everyone who has spoken agrees is both modest and important.
I am glad that it is recognised that employees matter. Speaking of his own, small company, the noble Lord, Lord Cotter, said that he tried wherever possible to take his staff with him. If staff feel that the company they work for is being sold from underneath them, they can have no loyalty to the new group that comes in. Staff have to be won over, and is there a better way of doing that than by making them part of the decision-making? As employees of the company, they will be able to reflect back. Rather than having somebody external—who could do a job for the employers, as my noble friend Lord Brooke said—would it not be better to have these staff representing the company so that they could take the views at the highest level on why certain decisions are being made to achieve what one hopes will be their future prosperity? I totally agree, and repeat again, that this is a modest suggestion.
Viscount Eccles
Employee participation is indeed a big subject, and I have no quarrel or difficulty with many of the views that have been expressed. However, as I read this amendment, it would be satisfied if the successor company asked Moya Greene to sit on the board. She is directly employed by Royal Mail and it is likely that the successor company would want her on the board. After all, she is extremely well qualified to be on the board of any mail company. If noble Lords opposite really wish to pursue this, they might need to do so in a rather different way.
Lord Hoyle
I am sure that the Minister will accept the amendment because it makes sense to have a report before any sale takes place. What is the point of reporting to us if the sale has already been completed? There is no point whatever to that. I am certain that she will agree to the amendment with a view to the application of democracy. It might be the first success that we have had this Session. I notice the noble Lord, Lord Hunt, shaking his head behind her. I know that he is the Minister’s mentor, but I ask her to disregard him. Why not be a democrat and accept this?
Viscount Eccles
I must say that the noble Lord, Lord Hoyle, said that with great charm. However, what will we do in Parliament if the bidder says that he will not make his bid unconditional if the matter is to be submitted to Parliament?