Postal Services Bill

Lord Mandelson Excerpts

Wednesday 16th February 2011 Lords Chamber

[Lord Mandelson]

My Lords, first, I extend my welcome to the noble Lord, Lord Empey. I knew him well. We worked closely together when I was Secretary of State for Northern Ireland. Judging by his maiden speech this afternoon, I believe he will make a very distinctive contribution to this House. I am also looking forward to the maiden speech of the noble Lord, Lord Dobbs. I was just talking to him outside the Chamber when a colleague of his came up and hailed us both as “the men of fiction”. I am not quite sure what he meant by that.

Some things never change. This Bill is a bit like the repeat of a bad dream with its unhappy ending. The noble Lord, Lord Razzall, who is not in his place, referred to the scars that I bear. I can assure the House that I bear them fairly lightly, but it is noteworthy that the scars, such as they are, were inflicted not by this House but by another.

Yet again we are debating the Royal Mail and the structure and regulation needed to secure the universal postal service which the public demand but which—this is the crucial factor—we all depend on much less because of digitalisation. We are debating the same, broadly unchanged, Royal Mail which can and should perform like a modern logistics company but which retains too many of the characteristics of a government department. There is nothing wrong with government departments—I miss them greatly—but they are not commercial organisations, which the Royal Mail needs to be.

The Royal Mail needs a settled existence, which is why I cannot go along with my noble friend Lord Christopher in suggesting that we should drag our feet for a longer indefinite time. To create such uncertainty for the Royal Mail would be a tremendous disservice to it as an organisation and to its customers. No, it needs a settled existence, but one different from the structure and the regulatory framework in which it is currently operating. That is why the previous Labour Government introduced their legislation, which shared the same aims and objectives as the Bill—indeed, I notice that many of the clauses are similar—albeit with one significant difference: we proposed to keep the Royal Mail in overall public ownership.

Others before me have described how digital communications have transformed the Royal Mail's world and its market. That does not need further elaboration from me. That means that the Royal Mail has to reinvent itself. It must rationalise and modernise, as almost every other postal service among developed countries has done. It must harness all the new technology available to it to adjust its cost base and show real enterprise and innovation in the services it provides.

The Royal Mail has started to do that, but is it really capable in its present form of changing in the way, to the extent and at the speed that is needed? My answer to that is no; the answer of the coalition Government is no; and the answer of the previous Labour Government was also no. It is just too unprepared, too unfit. It does not have the right commercial structure to operate it. It has a single company union, which is, frankly, too remote from the wider world. It has relations between management and workforce that must be further substantially improved to enable change to take place at a faster pace. The company has a single client regulator that is not only overly constraining, in my view—I will come back to that—but insufficiently versed in the wider digital world. It is dependent on state aid, which is, frankly, slow and inadequate for what it needs to do.

For all those reasons, the Government have no alternative—just as we found when we were in office—but to bring forward a Bill that enables a fresh start to be made. I am very sorry that Labour MPs came under considerable union pressure to derail the previous Bill. The CWU succeeded in its aim, which was regrettable for this reason above all. In defeating our Bill, the CWU paved the way for the Bill that we are debating today. Quite literally, the CWU has, through its actions, become the midwife of the Royal Mail's privatisation.

[Lord Brookman]

I thank the noble Lord for allowing me to make a comment. I know the leadership of the post office workers’ union—I have worked with them at the TUC for many years—and I do not acknowledge the picture that the noble Lord has painted of the Luddite trade unionists who work on behalf of Post Office and Royal Mail workers. They are good people doing their best for ordinary working people.

[Lord Mandelson]

I rather regret that my noble friend used the word Luddite in relation to the employees of the Royal Mail. I did not use that term, and I very much regret that it should be so misapplied, as he has misapplied it, to the overwhelming mass of employees of the Royal Mail who know that they need to embrace change but, I fear, did not and do not have the leadership of the union to enable them to do so in the way that they need and wish to.

The task now is to make sure that the new Bill secures the Royal Mail's future and the viability of its business model, underpins the universal letter delivery service that the public require and rely on and sustains the relationship between the Royal Mail and the nationwide post office network. This needs to be got right in this Bill. These goals are chiefly dependent not on the Royal Mail's ownership but on the new legislative framework of regulation which the company will operate within. I have no doubt this needs extensive rethinking. I say this frankly: Labour did not get the Royal Mail's regulatory regime right early on when we introduced legislation, and that is why we proposed extensive reform in our Bill.

In my view, the priority for debate and amendment in this House should concern chiefly the clauses of the new Bill concerning future regulation. This is the nub of the issue and where the greatest and most detailed examination needs to take place because we need regulation that enables Royal Mail to compete without both hands tied behind its back. This means regulation which recognises the unique role of the Royal Mail as the universal service provider and its need to be profitable in delivering the service. It must also provide the basis for attracting much-needed new capital to the company and experienced management who can provide skill and expertise.

I accept that it is at least arguable that under Labour's original legislative proposal for a strategic partner in a minority position in the company, it might have been hard to attract the required capital and management strength, and that, from this minority position, it might have been too difficult to bring about the necessary change to turn round the company. In any case, this is history. What I cannot accept, though, is that a so-called foreign presence in the ownership of the Royal Mail is somehow treacherous or bound to lead to disaster, as we have heard expressed again and again in the other House. Deutsche Post and TNT in the Netherlands have shareholders from across the world, including Britain, and international alliances between Europe's postal operators will be widespread in the future. We do not have a nationality test for investment in Britain. The previous Labour Government were implacably opposed to such a thing, notwithstanding the wider review of takeover rules that I initiated. We are successful in Britain at attracting inward investment. In former utilities, we now have EDF, RWE and E.On, for example, and many people's jobs in Britain depend on that investment and that ownership. So let us not have false, little-Englander sentiments injected into the debate.

Our examination of the Bill should focus instead on the detail of the new system of regulation, on which I hope the Government will be open to argument and persuasion. However, we cannot let this moment, an opportunity for reform, end in failure again. Royal Mail, once reformed, will then need stability and to be allowed to get on with its job, and in that context I welcome the fact that from Labour's Front Bench we have not heard a commitment to renationalise the Royal Mail should it pass out of state ownership. This is sensible. As with gas, water and electricity in the 1980s and 1990s, Labour moved from a position of flat-out opposition to change, to a decision not to renationalise, to an embrace of these utilities performing well in the commercial sector. I suspect that history will repeat itself should privatisation be achieved.

My last observation is only that there is probably a wider moral to the Royal Mail saga: that when difficult issues come along, we cannot just run away from them. There is a Labour way to change things, and for us that meant bringing in a new partner but in minority ownership. When that Labour way does not happen or is stopped, the issue does not go away. It comes back, sometimes with a solution in a less palatable form than we originally wanted. That is exactly what has happened here, just as the then Prime Minister and I warned would happen if our reform and our Bill did not go ahead. I am only sorry that our warnings fell on deaf ears at the time.

--- Later in debate ---

[Baroness Kennedy of The Shaws]

My Lords, I, too, add my warm congratulations to our two maiden speakers, the noble Lords, Lord Empey and Lord Dobbs, who undoubtedly will add to the riches of this House. It is wonderful to have them here.

The Post Office plays a special role in our society. It is one of the best known and respected institutions and is vital not only to our economic life but to our social and community life. It regularly delivers to every address in this country—on average 75 million letters every working day of the year—and the nationwide network of post offices is visited each week by the equivalent of half the population. If noble Lords are reeling at the statistics, so did I.

I applaud efforts to modernise a resource which is so precious. I, too, want it to work ever more efficiently and effectively in our contemporary world, where there is an increasing reliance on electronic communications, on the one hand, and, on the other, a burgeoning of online shopping which increases package delivery. The Post Office needs to evolve new ways of working; it needs to be better at business. Technological advances should be absorbed and the local post office should be strengthened as a source of community cohesion.

I say immediately that there are pluses in the Bill. I, too, support the way in which the Government seek to deal with the pension deficit. I, too, am in favour of the transfer of regulation to Ofcom, although I would like to play a part in the detail of the regulations. I also welcome the idea of employee share ownership, as long as it is not just icing to make palatable a privatisation which may, in many ways, be distasteful.

However, I am alarmed at the route the Government are taking, and I am not alone. Polling has shown that the public do not want to see the privatisation of Royal Mail. They see it as the turning of a public service into a private monopoly. This is regardless of political party—it was interesting to see from the polling that members of the Conservative Party were just as concerned as members of other parties. A majority see this policy as a threat to the six-day delivery service and they suspect that private providers will not want to subsidise unprofitable parts of the universal delivery system. They believe that privatisation will lead to higher prices. The experience of the privatisation of other services, from rail to gas, supports their suspicion.

The noble Lord, Lord Empey, made an important point that, to the public, the Post Office and the Royal Mail are all one—the public fear that, despite promises that are being made by the Government, their local post office will be put at risk of closure. I know the Government have promised that there will be few closures of major post offices and they have made a commitment to maintaining 4,000 large post offices and 2,000 smaller outlets operating out of local shops. However, analysts have shown that the restructuring of the post office network through setting up mutuals will probably deprive post offices of, certainly, at least a third of their income unless other ways are found of filling that. I am very happy at the idea of mutuals—I like the John Lewis Partnership idea—but sub-postmasters who run sub-post offices out of retail shops, after discussion among retailers, have expressed concern that, without new business, the mutual concept will not make economic sense.

It was very entertaining to listen to the noble Lord, Lord Mandelson, rebuke the unions, Labour MPs and others who rejected his own Bill. However, what he seemed to forget was that a much more imaginative, radical and exciting proposal was made around the same time by the think tank Compass, which proposed that the Royal Mail be turned into an independent company, based on the structure that was created ultimately for Network Rail. A restructured Royal Mail and Post Office, operating as a not-for-profit company, would have the ability to borrow and to invest in new technology without affecting government borrowing limits. Creating such a not-for-profit company would have also put a halt to the ridiculous business of separating out the Royal Mail from the Post Office. However, as the noble Lord, Lord Tunnicliffe, has said, this is a classic case of selling off that which is profitable to the private sector but holding in national ownership that which is non-profitable. You privatise the money-making element and let the taxpayer carry the cost of that which is risky.

I did not hear the noble Lord, Lord Mandelson, mention the inadequacy of the management of the Post Office when he was criticising the current regime. The managers are, in many ways, lacking in entrepreneurial spirit, overpaid and part of the problem. I hope that the new man who is coming in to lead will make the changes necessary—

[Lord Mandelson]

It is a woman.

[Baroness Kennedy of The Shaws]

It is a woman, is it? Well I am sure that will be better. If it is a woman then it is bound to be an improvement.

All I can say is that, while there has been criticism of the unions, there seems to have been insignificant criticism of those who managed. When Compass came up with the proposals for a not-for-profit company, it was argued that the unions would have to come on board; that they would have to be willing to enter into a new and real partnership with new management, with the public and with Government; and that they would have to agree to new technology and abandon old practices in sorting offices. I am sure they could have been won round to that proposal, but sadly the Government opted for the sell-off that is in this Bill.

I have sat through many debates in this House in which noble Lords have expressed concerns about the destruction of communities and I have listened as they talked about the glue that holds society together. The social value of post offices cannot be underestimated, yet here we are with an opportunity to modernise the Post Office and Royal Mail in ways that strengthen those ties but we have baulked at taking that more radical way forward. A sense of community is reinforced by citizens in an area sharing certain resources whatever their social background—the local library, the primary school and the post office. A modern post office should be reinvented, as we have heard others say, as the shop window of local and central government as well as the provider of postal services.

When I chaired the Power report, one recommendation that we made was that there should be the creation of local democracy hubs as centres of information and advice about the working of our polity. Those hubs provide the public with the right channels for complaint or provide an opportunity to contribute ideas to good governance; they are a place to find out about local initiatives, and are where voter registration could take place. There is no reason why the Post Office could not take on that kind of role. It would also be the locus for passport and licence application and the local centre for pension and other social entitlements. All this could be added to the remit of large post offices, making them the interface between government and the citizen. They could house offshoots of Citizens Advice, providing advice on debt and advice on small legal problems. If communication is your raison d’être, why not introduce some computer terminals so that those who have no computers at home, including the elderly and disadvantaged, can send e-mails. With the assistance of someone in the post office, they would be able to use the new technology for which they do not yet have the skills. Post offices should be the centre of high street community life, as well as fulfilling the functions mentioned by the noble Lord, Lord Dobbs, in outreaching rural areas.

The big disappointment in this Bill is the failure to use the post office as the site of the people’s bank. I heard laughter when that point was made by the noble Lord, Lord Christopher, but whole sections of the public want only simple high street banking, with none of the high-risk casino components that put savings and mortgages at risk. They want banks like the old Trustee Savings Bank and the National Girobank, which were put out of business by the banking industry. A people’s bank could be all that many citizens want and, in addition, could lend like credit unions to poor but prudent citizens in need of small loans to keep them from the loan sharks. Those people’s banks could even be a way of exploring micro-financing in some communities, so that small groups of neighbours can come together to support each other’s borrowing to establish small, self-sustaining businesses. We see it working in other parts of the world and, in fact, being tried out in my home city, where the Grameen banking system is being used to help people set up in businesses that do such things as hairdressing, laundry systems, ironing services and clothing alterations. Those are small things that keep families together and help to sustain them.

If the big society has meaning, this Bill should really be rethought to encompass some of the ideas that are around, of which the Government have taken no account. I know that they have put a lot on their own plate, but this piece of policy could benefit from a great deal further thinking. I know that I will be going into battle with the coalition Government on the privatisation aspect of the Bill but, on the reinvention of the post offices, I hope that with others around this House I can make a more constructive contribution and help to see ways in which to revitalise the post office system.