Lord Razzall
Main Page: Lord Razzall (Liberal Democrat - Life peer)Postal Services Bill
Lord Razzall Excerpts
Lord Brooke of Alverthorpe
My Lords, I shall speak also to Amendment 21ZB. They are tabled in the name of my noble friend Lady Dean of Thornton-le-Fylde, who regrettably and unavoidably cannot be here today. She sends her apologies. My noble friend is currently a partnership director of National Air Traffic Services. Had she been here, she would have been able to give us the benefit of her current experience and no doubt update us on the prospects facing NATS employees, who may be moving towards 100 per cent privatisation in due course. As many noble Lords know, I was previously a partnership director of NATS, so both of us have some experience of a reasonably successfully scheme for handling employee share ownership.
There are a variety of ways in which shares can end up in the hands of employees when privatisations take place. Since the first in 1982, when 90 per cent of the shares in British Aerospace eventually went to employees, there has been a range of offerings—nine or 10 privatisations. The majority were done through institutional public offerings in which employees picked up individual shares and as owners of shares were no different from people in the market. In 2001, when the public/private partnership for NATS was formed, we saw a novel approach adopted. It involved only 5 per cent of the shares. As is often the case when we come to legislation, there is an untold story. It is that had the unions been more willing to participate in planning for the change in 2001, they would have ended up with 10 per cent of the shares rather than the 5 per cent that was eventually the case. When reference is made to the Labour Government not offering shares in the Bill introduced by my noble friend Lord Mandelson, I suspect that had it had a different reception in the other place there is a distinct possibility that shares would have been on offer to the employees, probably in excess of the 10 per cent currently being considered by the Government. I hope that when we look at the 10 per cent and the way the offering is structured we use those untold stories usefully.
These amendments are, to a degree, based on the experience that the noble Baroness, Lady Dean, and I have had in running the trust scheme within NATS. A direct offering to employees could happen with an IPO, so that the shares disappear all over the place afterwards. It is difficult to conclude that employees have been greatly motivated by what has happened with previous share offerings, although I would not deny that entirely. This amendment seeks to engage the employees more with the company. Paragraph (a) proposes that all shares should be held for the benefit of employees in a trust. I know that this may not be entirely acceptable to all the employees. Some of them might want to get their hands on the shares and to dispose of them at the appropriate point. However, I believe that in the best interests of the company and its employees it would be far better if they are retained in a trust holding, so that while employees are working with Royal Mail they get a return on the investment of those shares during the period they hold them.
Paragraph (b) states that,
“a dividend of equal amount shall be paid in respect of each share held by or for the benefit of any employee”.
The argument behind this is that all employees should be treated the same whether they are a postman or the CEO. There should not be differentiation in the way that shares are allocated. An equal dividend should be paid out in equal shares on an equal footing.
We then move on to Paragraph (d). In the NATS scheme, the shares are evaluated each year by an independent company because they are not on the market. The shares have changed in value over the years while they are being held by an individual. When employees then come up to retirement, they know what the value of their share is at the end point, and they then get the money in lieu of their shares, which then go back into the trust. The 5 per cent stake that the employees have within NATS is maintained at 5 per cent on a continuing basis, and the employees maintain their continuing interest in the company. Similarly, this amendment is seeking to establish an arrangement whereby they would not cash them in and sell them to other people but the shares would be retained within the company. When they left the company, the shares would then go back into the trust and be reallocated to new employees who would be joining the company in subsequent years.
The Government already have plenty of experience with such a model in the light of what has happened since 2001 with NATS. I hope, as I mentioned earlier, that we might reach a better arrangement, whereby a representative or representatives of those employees with the shares would find their way to have more influence in the company than they might under the present arrangement with NATS, but that is not covered in this part of the amendment. I hope that the Government are going to be prepared—in the light of the experience with NATS—to look at this very favourably indeed. The amendments are intended to be constructive, not destructive. I hope we might find ways in which we could put more in the Bill than we did when we dealt with the NATS PPP float, where it would have given greater confidence to the employees about the way in which it was going. I believe it would be helpful to anybody who is prospectively looking to purchase the company.
As an aside, for those people concerned—and I am one of them—that Royal Mail may eventually end up in foreign ownership, in the way that so many of our privatised utilities have over the years, this in a sense could be seen as a form of a golden share in retaining a significant British interest in it too, as the employees would be based in Britain. I see the noble Lord, Lord De Mauley, is going to respond—he responded with great comforts on Amendments 18 and 19, although a little less so on Amendment 20. I hope when he comes to respond to Amendments 21ZA and 21ZB he will revert back to what he did previously and be very comforting.
Lord Razzall
My Lords, the amendment is extremely constructive. However, I have a concern, which is the one echoed by my noble friend Lady Kramer. For those of us who argued long and hard during the last Bill for an employee share structure—which was resisted by the then Government—I am worried that we should be too prescriptive at present as to the form that the employee share scheme should take. Those of us who have had experience in the private sector in employee share schemes know that there are a lot of ways to skin that particular cat—this may well be one of them, but, having fought and won the battle to get at least 10 per cent held by an employee share scheme, I am worried that we will overcomplicate the Bill.
Lord Young of Norwood Green
My Lords, a number of noble Lords have drawn attention to the umpteen privatisations of the 1980s and 1990s which contained an element of employee shareholding. However, time after time, the shares held initially by employees found their way into the hands of institutional or speculative shareholders. They may have started out as employee shares but they did not stay as employee shares for long. What can be done about this? I do not intend to reiterate the very cogent points made by my noble friend Lord Brooke in relation to the experience of the National Air Traffic Services scheme. However, I will respond to the point made by the noble Lord, Lord Razzall, about being too prescriptive. If there are viable alternatives, no doubt the Minister will deal with that in his reply, and I await it with interest.
The amendment proposes that all shares held for the benefit of employees would be held in trust. That may be difficult to accept for some employees who would rather be able to cash in the shares; I speak from my BT experience. I will not go into the details of that, but certainly a lot of cashing in went on at the time.
Lord Young of Norwood Green
No. Sorry to disappoint the noble Lord; I see that he is returning to his previous night’s form. There needs to be some return on the investment that the employee can anticipate.
The amendment proposes that a dividend of equal amount would be paid in respect of each share held by or for the benefit of any employee. When paying a dividend, it is important that all shares are equal and everyone is on an even footing, regardless of where they are in the company. That is an important principle.
The amendment proposes that no employee eligible to receive shares under the scheme would be permitted under the rules of the scheme to dispose of those shares to any other person. If we are serious about a stake in the company being held by employees, that is an important point. To prevent seepage turning into a flood of shares out of the scheme, as we have seen in the past, it is important to ring-fence the shares in the proposed scheme.
The amendment proposes that, on leaving employment, shares held by employees could be disposed of only by way of a transfer for consideration to the trust. It is fair that employees who leave employment and leave the scheme would be able to capitalise on their shareholding—that is one of the incentives of the scheme. To maintain the integrity of the scheme, though, they should dispose of the share back into the scheme.
The amendment proposes that the consideration payable under paragraph (d) would be an amount equal to what the market value of the shares would have been. To achieve a fair result for departing employees, a fair price for the share would be established in the absence of an open market. That would not be very difficult if other shares in the company were being traded. If this is not the perfect formulation of our ideas or improvements could be made, I hope that the Minister will take this away, give it serious thought and come back with an improved proposal to meet the same objectives.
It is a shame that the noble Lord, Lord Hunt, is not in his seat. In a wistful diversion down memory lane last week he reminded us of the “Tell Sid” campaign, conducted to boost interest in the privatisation of British Gas. We were told that Sid was the name of an uncle of the late Lord Walker of Worcester, who was the Secretary of State responsible for the sale. It is a bit ironic that the British Gas share advertisements featured a series of people so anxious to alert Sid to the share flotation that one of them was a postman who got knocked off his bike in the excitement. The mind boggles. If the postmen or postwomen of Britain are to be induced to fall over in the excitement at 100 per cent privatisation of Royal Mail—somehow I doubt it—perhaps the Government should address some of the questions raised in this amendment. They are serious; they make a constructive contribution and improvements so that a good idea becomes a very good scheme. I support the amendment.
Lord Razzall
The noble Lords, Lord Whitty, Lord Cameron and Lord Young, have raised some extremely relevant and interesting points on this important issue, and I find myself very split. The noble Lord, Lord Whitty, confined his remarks primarily to Amendment 21A, and I find that difficult to accept as somebody who, as the noble Baroness will be aware, has argued strongly for the mutualisation of the Post Office. I am concerned that we should put in the Bill—it is exactly the same argument we had on the previous provisions—restrictions that would be likely to slow down the mutualisation of the Post Office. I am sure the noble Baroness will deal with that in her remarks.
Everything that the noble Lord, Lord Cameron, says is entirely correct. I know, as does the noble Baroness, that the Ministers in her department are convinced that they will have a package that will provide financial security for the Post Office. Whether there is a constraint of coming out with detail before the Budget or before it is finalised I do not know, but I think that before this Bill is passed, it would be extremely helpful if noble Lords could be made aware in more detail of the exact package that the Minister’s colleagues in the department are confident could secure the future of the Post Office.
I hope that the Minister will reflect on the remarks of the noble Lord, Lord Young, because these are extremely important issues. Having made the point endlessly in debates on Bills in opposition about the importance of Parliament sanctioning important decisions, I think the principle is important that, before any significant mutualisation of the Post Office takes place, Parliament needs to have a final say. I hope the noble Baroness will take that point back for consideration.
Baroness Howe of Idlicote
My Lords, I sympathise with these amendments. They reflect a number of concerns that those of us who spoke at Second Reading raised. I was certainly one of those as far as mutualisation was concerned. I had a great deal of sympathy, too, for the concept of banking in local post offices, but that has clearly been firmly ruled out by the Government. That does not mean, however, that they should not be thinking of ways in which they could satisfy the concerns. There should be some return to Parliament for an assurance that the route down which the Government are going will be in the best interests of those concerned. I thought the comments made by my noble friend Lord Cameron about rural areas were extremely important. The post offices are important for the sustainability of those local areas.
I hope that when the Minister replies she will feel able to give more assurance than we have had so far on this issue. I commend the amount of money available and the way in which the Government have thought through this Bill in order for it to be sustainable for the future. However, despite all the money—we will no doubt hear details after the Budget of other ways in which the Post Office and postal services will be helped—it would be in everyone’s interest if the Minister could say that there will be a hard look at reassurance on some of the many important points that have been made in this group of amendments.