Lord Skelmersdale
Main Page: Lord Skelmersdale (Conservative - Excepted Hereditary)Postal Services Bill
Lord Skelmersdale Excerpts
Lord Skelmersdale
My Lords, as the Committee knows, I look at the Bill from a totally different perspective from that of the noble Lord, Lord Clarke of Hampstead. I look at it from the perspective of a user of Royal Mail and of the universal postal service that is contained within that contract. Wrapped up in the Second Reading speech that we have just heard, the noble Lord, Lord Clarke, makes a very valuable point about the continuation of the universal postal service. I fail to find in the Bill sufficient words to give me confidence that, post the sale, that will continue.
On the other point raised by the noble Lord, Lord Clarke, about the Royal Mail company’s modernisation budget—the second provision in his amendment—the noble Lord caused me to pause and think. When you sell a business, any money that is contained within that business, such as in its bank account, is sold with the business and the price of the business reflects that. Therefore, to whom will the money that remains unspent in the modernisation budget belong? Will it belong to the Post Office or to the Government? Is it a draw-down facility or is it a cash amount? It would be helpful to know. However, if the modernisation goals had been achieved we would not be in this sorry situation, but I am afraid we are.
Lord Hoyle
I pay tribute to my noble friend Lord Clarke of Hampstead. No one else has more knowledge of the Royal Mail and the postal service than him, as he displayed. He may have gone wide of the amendment—he was right to do so—in exposing the history that has led us to this sorry state of affairs. Indeed, he will recall that I was one who supported him and warned of the dangers of going down the road of selling up to 49 per cent—I asked why it would remain there.
Turning to the amendment, I agree that we need to know more about what will happen to the universal postal service. Will it be maintained and in what form will it be maintained? It would be quite easy to destroy the universal service by pricing it out of the market, which is one thing I am afraid could happen as a result of the Bill. Perhaps the Minister could reassure us both on whether the universal service will continue and on whether it will still remain attractive to users of the service, which is equally important. We have had two points of view: one from the person who has been in the service and the other from the person using the service. Perhaps the Minister could provide some clarity. What provision is being made, will the universal service be maintained and will it be prohibitive to use? If it is prohibitive, it will be destroyed.
My noble friend was also right to ask how far the modernisation programme will have gone and how much will have been spent on it. It is a pity that we are where we are because there is agreement between the Royal Mail and all the unions on the need to achieve modernisation; they want it carried forward and the money is available to do it. We need these kinds of assurances. We also need to know what progress has been made towards modernisation and what has developed in the relationship between the present Royal Mail and the unions in achieving that.
It is usual to ask such questions and I know that the Minister has tried to provide us with the answers. I hope she will be forthcoming in this regard. It is not only those who have been involved in the Royal Mail as currently constituted but those who use the service who are asking questions, and they need reassurance. I look forward to the Minister's reply.
Baroness Wilcox
My Lords, we have had a great debate across the Committee, which has been provoked by the noble Lord, Lord Clarke, whose credentials are immaculate in this area. I missed hearing him in the debate on Second Reading because he was not able to be here for it, so we have been able to listen to him today, when he has had the opportunity to put his words on the record. It is a great occasion for us to listen to him. I may not agree with everything that he says, but I believe in the absolute sincerity of what he says, given the background from which he comes.
I share the noble Lord’s desire to ensure that the universal postal service is maintained throughout the United Kingdom and I suggest that that is what binds us all together today. Given that we all want to see the universal service maintained, I suggest that we have no time to waste in getting the finances that we need to ensure that that is possible. It is the overriding purpose of the package of measures set out in the Bill. We need to ensure that the universal service is maintained both for the deliverers of that service and, as we heard, for the customers who need to use it. My noble friend Lord Razzall quite rightly referred to Part 3 of the Bill, which we will discuss in detail in future Committee sessions. It confers on Ofcom a primary duty to protect the universal postal service and gives it the powers to deliver that duty. A disposal of shares in Royal Mail may mean a change in ownership from the public to the private sector, but the obligation on Ofcom to ensure the provision of a universal service will remain.
Lord Skelmersdale
My Lords, perhaps I may briefly interrupt my noble friend. Does that mean that the original purchaser of Royal Mail will be bound by the UPS?
Baroness Wilcox
I think that the answer to that question is yes. In fact I am sure that the answer is yes. The universal postal service is protected by Parliament throughout this regulatory framework, not by the Government’s ownership of Royal Mail. I hope that that gives some comfort to my noble friend Lord Skelmersdale and, if he has the stamina to stay with this Bill through all its stages, I hope that by the end he will feel that he has a lot more comfort than obviously is the case now.
As part of its duties, Ofcom will ensure that the minimum requirements of the universal service as set out in the Bill are upheld. As we know, the minimum requirements are above those set out in the European postal services directive in terms of the requirement to deliver letters six days a week and for a uniform tariff and service to apply. Ofcom is required to report annually to the Secretary of State on its activities, which in future will include how it has performed against its primary duty to ensure the provision of the universal service. The Secretary of State is required to lay that report before each House of Parliament. Therefore, I do not believe that Parliament would be served by an additional report on the future of the universal service at the time of sale.
The noble Lord, Lord Brooke of Alverthorpe, asked what will happen if a privatised Royal Mail no longer wants to provide a universal service. Royal Mail is rightly proud of providing a universal postal service and there is no reason to expect that to change, but in the unlikely event that Royal Mail no longer wishes to provide it, the regulator, Ofcom, will have a primary statutory duty to secure the provision of the universal service and has been provided with the regulatory tools to ensure that the service is maintained. In the first instance, Ofcom would do this by imposing regulatory conditions on Royal Mail that would oblige it to deliver a universal service. Ofcom will also have the power to impose penalties on companies found in breach of the regulatory conditions.
The noble Lord was also concerned that foreign owners could run down Royal Mail. Whoever owns the Royal Mail, as the universal service provider, will still be required to provide that universal postal service. The regulatory regime set out in Part 3 will ensure that. Ofcom, the proposed new regulator, has confirmed that it is satisfied that the powers in Part 3 are sufficient to protect the universal service. We will not let nationalist criteria stand in the way of the right deal for Royal Mail and the taxpayer. Investment is a global business nowadays. For example, around a third of the listed shares in Deutsche Post are owned by UK investors.
The noble Lord, Lord Young, was concerned that a future owner of Royal Mail might lobby Ofcom to reduce the minimum requirements of the universal service. As he will be aware from Clause 33, there can be no such change without an affirmative resolution both in this House and in the other place. This Government have been clear that they have no intention of supporting any such resolution. As we will discuss in later sessions, Clause 33 is a vital new safeguard for Parliament.
Modernisation of Royal Mail is also not directly related to ownership. The company has to modernise whether it is in the public sector or in private ownership. Modernisation does not end with the current transformation plan. If Royal Mail is to succeed and provide our universal service, ongoing modernisation will need to be an integral part of its DNA, so while the current modernisation plan is fully funded, it is clear that Royal Mail will need to go further and faster. Royal Mail therefore requires ongoing capital investment over a long period. Despite the good progress that is being made on the current transformation plans—and here I praise the management and the CWU on that progress—Royal Mail needs upfront cash, which it simply cannot generate for itself at the moment. It needs access to flexible capital, which, given the EU state aid requirements, the Government cannot provide.
Baroness Drake
My Lords, the Minister in the other place, the honourable Ed Davey, has tried on several occasions to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. In Committee, he said:
“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.—[Official Report, Commons, Postal Services Bill Committee; 11/11/10; cols. 121-22.]
Those are wonderful and fine sentiments. The only trouble is that the current board cannot bind a wholly privatised Royal Mail board. Noble friends have said that Moya Greene is a very impressive figure and a great asset to Royal Mail. Having met her, I wholly agree. However, she cannot speak for the board of a new owner whose identity we do not yet know. It is wonderfully reassuring that the existing CEO and the chairman have such positive sentiments, but they are not necessarily translatable into what will effectively be an agreement between the Post Office and any new owner.
If one looks at the Bill and the statements that the Government have made, one sees that, as things currently stand, a privatised Royal Mail has little obligation, nor is it required as part of any terms of sale, in principle or in detail, to be bound to any obligation towards the Post Office beyond the current inter-business agreement.
Many people are anxious to extend the agreement significantly beyond the current five years because there is no firm confirmation that it will be so extended. At the point of sale—because one has no idea how long it will take to negotiate and confirm the details of a purchase—there may be only two to three years left on the existing agreement. The situation could be even more insecure, therefore, because at the point of confirming the sale the Post Office may discover that its fortunes are not well favoured and have only a limited time to deal with that.
As far as I can see—I am sure that the Minister will correct me if I am wrong—the Government have to date refused any amendment that would guarantee a continued relationship between the two businesses. They have suggested that there are legal difficulties in legislating on an inter-business agreement, but they have neither detailed why such legislation would be illegal nor defined what is the longest legally permissible period for any inter-business agreement. More to the point of the noble Baroness, Lady Kramer, who said that we should not get into the detail but take command of principles, nor have the Government said anything about whether a renewed agreement or a sustained relationship with Post Office Counters beyond the five years of the current agreement would be a condition of sale, or whether there would be an expectation that any bidders would make submissions as to the relationship with the Post Office.
In reality, there are very few safeguards for keeping the Post Office contract for the long term. As things stand, it is entirely conceivable that, just a few years down the line, there will be a post office network where you cannot undertake mail transactions. That is simply a proposition of possibility under the terms of the Bill. A privatised Royal Mail will be free to cherry-pick, as my noble friend Lord Clarke said. It could select a supermarket chain to meet its requirement in urban areas, with the Post Office picking up, if it was able to, the slack in rural areas where no one else wanted to compete to deliver the service. That would have serious implications for the viability and integrity of the network.
I refer to the very appropriate comments of the noble Lord, Lord Dobbs, in his maiden speech at Second Reading, who captured the point far better than I could. He said:
“In many rural areas, far from the post office subsidising the shopkeeper, it is the shopkeeper who is now subsidising the post office”.—[Official Report, 16/2/11; col. 732.]
This is not careless speculation on my part, because I think that it is highly possible that a private owner would take such an approach. No access criteria are laid down to which a privatised Royal Mail would need to adhere specifically in relation to post offices. This is important for the small business community, which makes an important economic contribution in sustaining employment in key areas. Fifty-nine per cent of small businesses use post offices at least once a week and 77 per cent use them to send their parcels. Perhaps I may therefore put two questions to the Minister. First, what exactly are the legal constraints on extending the five-year inter-business agreement? I may be able to speculate on the legal restraints on an unlimited extension, but I am not at all sure what they are on extending it. Secondly, why are the Government not confirming that maintaining a business agreement with the Post Office for at least a further five years beyond the existing agreement is a defined provision within the terms-of-sale agreement or invitation to tender that potential bidders would have to address? It strikes me that if everyone is saying that they are so committed to Post Office Counters, one would welcome such a commitment to that being in any documentation prepared, or terms set, for potential bidders.
My noble friend Lord Whitty expressed concern about who owns the assets and how they will be allocated. If the Post Office has to compete in a world where the Royal Mail is privately owned, its ability to do so will be heavily influenced by the assets on its balance sheet at the point of separation of the businesses within the post offices.
I noted that in the Second Reading debate in the other place, the honourable Mr Ed Davey, the Parliamentary Under-Secretary of State in the Department for Business, Innovation and Skills, argued that,
“a privately owned Royal Mail will not act against its own commercial interests. It will not give up valued retail space in the heart of communities the length and breadth of Britain”.—[Official Report, Commons, 27/10/10; cols. 426-27.]
He is no doubt correct that a privatised Royal Mail will not act against its own commercial interests and that it will not give up valuable retail space, but he could be incorrect in supposing that its commercial interests will necessarily lie with the Post Office. When the honourable gentleman says,
“It will not give up valued retail space”,
one has to ask whether he has taken a view as to whose retail space it is to give up. If the Crown Office estate is to be with the Post Office, it is not the Royal Mail’s to give up but Post Office Counters Limited’s to sell. My noble friend Lord Whitty is quite right to be concerned that there should be visibility as to who owns which assets at the point of sale.
Lord Skelmersdale
My Lords, I tend to agree with my noble friend Lady Kramer on this. Although what comes out of the discussion on this amendment will be valuable to our future discussions, as it is it rather puts the cart before the horse. As far as the noble Baroness, Lady Drake, is concerned, I will ask my noble friend one question, if she will deign to answer it. Quite clearly, from what she said in our last exchanges, she has as high an opinion of me as I do of her. The Government have a policy of supporting post offices and it is quite clear that this is what they intend. The inter-business agreement—currently lasting five years, as the noble Baroness, Lady Drake, has just said—is one of the ways in which post offices are supported. Should her worst fears be realised and there is no future inter-business agreement at the end of the five years, does my noble friend think that the policy of supporting the post offices will continue to be self-sustaining?
Lord Stevenson of Balmacara
My Lords, I support the amendment in the name of my noble friend Lord Whitty. A couple of noble Lords have suggested that these discussions, particularly in relation to the assets, are putting carts before horses but I am not sure about that. We are really talking about the transfer schemes that are referred to in Clause 8 and Schedule 1. Those are clearly mammoth undertakings, which will take a lot of time, so while I understand the points being made that they should not be in a position to hold back the main purpose of this Bill, they really do underpin it.
The Post Office is a massive enterprise. The business has revenue of £838 million with a profit of £72 million and employs more than 8,000 staff. There are nearly 12,000 post offices, of which 500 are outreach services and 10,000 are sub-post offices. That network, taken together, is bigger than all the bank and building society branches put together so we know that its scale will require a lot of attention. It would be rather surprising if some work was not already being done in that way. First, it is necessary to identify the assets, then to get into the complicated task of disaggregating the parts of those assets which have to go to Royal Mail and the parts which have to go to Post Office Ltd.
It is, of course, not just a question of assets. I am sure that the Minister will want to refer to this; quite a lot of the Royal Mail’s outstanding loans, including the modernisation loan from the Government, are secured against the assets. What effect will the splitting of the assets have on that and how will that be moderated as we move forward? Then there are the normal activities that one would expect in this sort of process about headquarter costs and shared administrative functions, which will be hard to disentangle—particularly where premises and the supervision of Royal Mail activities take place on Post Office premises.