Lord Stevenson of Balmacara
Main Page: Lord Stevenson of Balmacara (Labour - Life peer)Postal Services Bill
Lord Stevenson of Balmacara Excerpts“( ) that the receipts of the sale will be used exclusively for the purpose of investment in the Post Office network of branches and future investment in the delivery of the universal postal service by a Royal Mail company in so far as permitted by applicable competition and state aid regulations.”
Lord Stevenson of Balmacara
My Lords, the purpose of this amendment is to ensure that the proceeds of any sale of Royal Mail are invested in the post office network and the delivery of the universal postal service. In our debate in this House at Second Reading, the Minister explained what would happen to the assets of the pension scheme at transfer. She said:
“The cash transferred to Government will be transferred to the Consolidated Fund, gilts to the Debt Management Office and the remaining assets—stocks, property, et cetera—will be transferred to a newly created government fund. They will then be sold in a measured fashion, with cash proceeds from disposals going to the Consolidated Fund”.
Do you not love that “measured fashion”? It summons up an honourable Dickensian clerk selling fusty bills of exchange for gold coin. Measured fashion—what are they talking about? What century are they in? The Minister promised the Government,
“will be entirely transparent about the effect of these transfers throughout the government accounts”.—[Official Report, 16/2/11; col. 776.]
Despite the words and despite my rather wild fantasy, the proceeds are going back directly or indirectly to the Treasury. There is no doubt about that at all.
There is always a presumption that the Treasury will be the beneficiary of privatisations, but surely this should not happen to the proceeds of the sale of shares in Royal Mail. In 2009, the previous Secretary of State stated to this House that,
“the Government intend to use the money received from the minority share sale to benefit Royal Mail Group, including Post Office Ltd”.—[Official Report, 31/3/09; col. 970.]
In answer to the Business Select Committee, the previous Government also made it clear that the proceeds of any partial sale would be ploughed back into the postal business and used to fund modernisation. The Liberal Democrat manifesto was quite clear in proposing that the proceeds of the sale should be invested in the post office network. Royal Mail itself has stressed the need for investment in the post office network. Moya Greene has estimated the need to have £2 billion of investment over the next few years. As for the post office network, there is a great deal to be done to bring many post offices up to date and ready to survive in a fast-changing world.
We would all agree that the post office network is a suitable candidate for investment within the Royal Mail group. To the extent that they have provided £1.34 billion for the network, the Government seem to agree. However, if it emerges that the Government do not intend to reinvest the proceeds of the sale back into the business, that sheds a different light on the claims that they have made about the £1.34 billion. We know that half of this is fulfilling the programme of social network payments introduced by the last Government to support loss-making but socially valuable post offices such as those in rural areas. Surely we would all agree with this. The rest is set aside for investment in the post office network, including converting 2,000 sub-post offices into post office essentials or post office locals.
Noble Lords may be aware that such provision is itself becoming an area of controversy. There are certainly concerns among sub-postmasters, who have been drawing to our attention that some of this money is being set aside for temporary compensation payments to smooth the transition of sub-postmasters into either into the new model or out of the business altogether. This is associated with what they fear may mean a substantial fall in guaranteed or actual income, according to what we have heard from sub-postmasters. Be that as it may, if the receipts from the sale of Royal Mail are handed over to the Treasury rather than reinvested in the business, it will be a sad day for our post office network and all those working in them. We ask that the proceeds of any sale should be reinvested in the postal business. Insofar as this requires European state aid approval, it should be cleared in parallel with the pension fund deficit action.
The Minister has reminded us of the stark future facing postal services as letter writing declines and electronic communications grow. Royal Mail may be able to manage these changes under new ownership, presumably through economies of scale and what is called “managed decline” to match reducing turnover in the core business. But the issues facing the Post office in the future are of a different category altogether, and they will get worse if there is no long-term interbusiness agreement with Royal Mail and if the Government do not commit to use the Post Office for face-to-face transactions wherever possible in their business. We of course understand the pressure on Ministers in relation to this issue from the Treasury, but our point is that there is also a case for investment in our post office network. This probing amendment will allow the Minister to place on the record the Government's intentions regarding the proceeds of any sale of Royal Mail.
The post office network has been umbilically linked to Royal Mail for so long, that it is hard to envisage how it will transform itself when it is separated. Mutuality is mentioned in the Bill, but although we welcome that idea, mutuality of its own does not materially affect the question of how many thousand small businesses are to rethink and re-engineer their shops and businesses. How will they up their footfall, redesign their product lines, introduce efficiencies and harness the new technologies? All this will take money—far in excess of the £1.34 billion already provided—so the post offices need the proceeds from the sale of Royal Mail. I beg to move.
Baroness Wilcox
My Lords, Amendment 12 wishes to direct any proceeds received from a sale of shares to investment in the post office network and the universal postal service. I certainly agree that the both the Post Office and the universal service require long-term funding certainty if we are to secure both their futures, but I cannot agree at this stage that the proceeds of a sale should be used for either of these purposes. For a start, it is too early to estimate the potential proceeds from a sale, and too early to estimate where the proceeds should most sensibly be used. But the Government will, of course, look to use the proceeds that they receive to part-compensate the taxpayer for taking on the £8 billion deficit in the Royal Mail pension plan.
The Government absolutely recognise that investment is required in the post office network. That is why, as noble Lords will know, we announced last November a funding package of £1.34 billion for the post office network over the spending review period—a package that will be used to put the network on a sustainable footing, not to fund a programme of closures as the previous Government chose to do. We made this upfront commitment to fund the post office network precisely because we recognise its importance to communities across the UK. Funding for the network should not be dependent on the sale of shares in Royal Mail.
The primary purpose of the package of measures in this Bill is to secure the future of the universal postal service. This package will give Royal Mail access to the flexible capital that it needs to modernise and adapt to a changing postal market on a continuous basis. It will reform the regulatory regime with an increased emphasis on the protection of the universal service and remove the burden of Royal Mail’s historic pension fund deficit.
We will come on to discuss the detail of Part 3 in later sessions, but I draw the attention of noble Lords to Clause 28(3)(a), which requires Ofcom, in performing its duties under this Bill, to have regard to the need for the provision of the universal service to be financially sustainable. This is a vital new requirement on Ofcom, which was not in the 2009 Bill. The Government therefore believe that securing the future of Royal Mail by giving it access to private capital and establishing the right regulatory framework is the best way to support the universal postal service.
During the passage of the 2009 Bill, the previous Government resisted an amendment that would have required the Secretary of State to report on the Government’s intentions for the proceeds from a disposal of shares. In rejecting the amendment, the noble Lord, Lord Mandelson, undertook to inform both Houses how the payment for shares would be distributed. I am happy today to give the same undertaking for this Government. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response, which is rather depressing in its rejection of our proposal.
My reference to the pension deficit fund dealt with the assets. Tagged on to the end of that discussion was a comment that, in return for obtaining the assets, the Government were also acquiring the liabilities. I am not sure that that is an exact parallel. As I understand it, the assets are real and, even if sold in a measured way, will generate cash for the country which will go to HM Treasury, but the liabilities are ongoing. If I am right, the main pension responsibilities will be met on a pay-as-you-go basis. We are comparing apples with pears. One is a substantial reduction in our deficit position; the other is admittedly a long-term commitment but does not need to be capitalised on the resource accounts. Although I accept that £8 billion is a substantial sum of money, it does not really come into the question of whether the funds from the sale of Royal Mail should go back into the Post Office.
Secondly, the £1.34 billion package—which, as I mentioned, is both a continuation of work started under the previous Government and a commitment on behalf of the present Government to ensure that the Post Office is retained on a sustainable footing—is also a mixture. As I tried to say, the evidence is that it seems to result in a reduction in the number of post offices and certainly a change in the nature of post office services very similar to that which was available before.
My third point is that, without a proper package of business activities, there is no way that the Post Office can survive, however it is organised. It is depressing to read that the latest contract for services which could have gone to the Post Office from government has been given to Citigroup to operate. I suspect that that is only the first of a number of difficulties facing the network in future.
However, this was a probing amendment. The Minister has been kind enough to share her answer with us. I beg leave to withdraw my amendment.
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.