Postal Services Bill

Lord Whitty Excerpts

Wednesday 16th February 2011 Lords Chamber

[Lord Whitty]

My Lords, I start by declaring a past interest. When the last Bill was before us—indeed, until last December—I was chair of Consumer Focus, the statutory representative of domestic and small business consumers of postal services. Its role is threatened by another piece of legislation before this House, namely the Public Bodies Bill. However, I am now free to speak without that encumbrance.

I fear that, as the debate has shown, the Bill raises more questions than it fully answers. I constructed my speech in the form of questions. I realise that, as I am the last speaker, this is a little unfair on the Minister. Nevertheless, I will proceed and assume that she will reply in writing to things that she cannot pick up immediately.

First, I will make it clear where I stand on the main points. I welcome the strong determination to defend the USO through the process, although I am slightly concerned about its long-term future. I welcome the change of regulator, but again I have some questions about that. I accept the inevitability of sorting out the pensions issue in the way that is proposed, and I broadly welcome the unravelling of the Post Office network from that of Royal Mail—although that, too, raises a number of questions.

On the issue of privatisation, I will be honest with the House, as ever. My former organisation retains a neutral stance. I was always intellectually sceptical and emotionally opposed. However, it is probably going to happen. I have some questions about ownership. What will be the impact and what kind of privatisation are we engaging in? What kind of owner do we envisage for the Royal Mail in a few years’ time?

I will start with the Post Office network, which is dear to many of our communities, rural and suburban. It is vital that the Post Office continues to exist. Individuals see it as part of the universal service provision and we need to continue to guarantee a postal service on the Royal Mail side that is the same in the further reaches of County Fermanagh or the remotest bay of the Western Isles as it is in the centre of London or Birmingham. However, the Post Office network also needs to fulfil a role for all sorts of communities.

Disentangling the Post Office and the Royal Mail may give greater clarity to their roles, but we need some indication from the Government of what they intend to do with the network. There are 11,500 branches at present. As the noble Lord, Lord Cope, has just said, the intention to reduce some of those branches to Post Office Local, together with the severe restrictions, makes the commitment to maintaining the network at roughly its present size not quite what it seems. In any case, that commitment is for the short term, and we need to know what the Government intend for the Post Office network in the longer term.

A number of questions arise in addition to that. Is the Crown network to be treated differently from the sub-post office network? What happens after the £1.4 million subsidy over the next few years disappears from the network? Do the Government envisage a continuation of any subsidy for the Post Office network or are they going to leave it entirely to the market? What moves are afoot—others have made this point—to redirect or encourage other government departments to provide their services via the Post Office network? Many of them, from the DWP to the Inland Revenue and the DVLA, have been withdrawn over the past few decades. If the commitment of the Minister’s colleague, Ed Davey, to make the Post Office network the front office of government is to be fulfilled, then all government departments, as well as local government, need to be encouraged to put more of their business through that front office.

I ask the Minister, as others have done, why the Government have apparently abandoned the proposals, which were some way down the line under the previous Government, to develop some sort of post office-based banking system. As the noble Baroness, Lady Kramer, underlined, it would do much to help the problem of financial exclusion in this country—a cause of very real deprivation for a large number of people. I think that such a banking system could be made commercially viable, as the noble Lord, Lord Cotter, implied.

In terms of representation of consumers, will Consumer Focus, or its successor in the citizens advice bureaux, and the Consumer Council for Northern Ireland remain spokespeople for the network as well as for consumer interests in Royal Mail?

I am not against mutualisation of the Post Office network, although it is very complicated. For employees and the franchisees—the sub-postmasters—it may hold an attraction but the Government are also talking about wider interests being represented in a mutual set-up. I think that it will be some time down the line before we can translate the whole of the Post Office network into a viable mutual organisation. Nevertheless, I think that we should provide for it and I agree that those provisions should be in the Bill.

The key questions regarding the network are: what is its relationship with Royal Mail as we go down the line and what is the future of the interbusiness agreement? More than a third of the Post Office network’s business is tied up with Royal Mail. If that were to be withdrawn or substantially modified, the economic pressures would mean that the network at its present size, and probably at significantly less than its present size, would no longer be viable. Therefore, we need greater clarification on the future of the interbusiness agreement and on the Government’s claim that they can sustain the principles of that agreement only for a short period because of the legal situation. I have never seen that legal situation completely spelled out; nor have I seen an explanation of why the interbank agreement or some modification of it cannot be committed to for some considerable time. If that were guaranteed and if the Post Office network were able to provide more government services and develop new services itself, then a Post Office network with a thriving business in every corner of the land would be a possibility.

I move on to the regulatory framework. I support the transfer to Ofcom, partly because the old system was daft, as my noble friend Lord Mandelson effectively said. A single technology regulator was always a bit of an oddity. The minutiae of the regulatory approach by Postcomm made it the wrong approach, and it is certainly the wrong approach in the world into which we are now moving. Ofcom has a number of advantages. It has experience as a regulator in multiple industries and, in particular, it has experience of the communications industry, which is a far bigger competitor to the Post Office than are the other postal services.

The Bill leaves a lot for Ofcom to sort out. In some ways I have faith in Ofcom doing that in a sensible way, but I think that more needs to be on the face of the Bill in the form of benchmarks.

One of my concerns is that much of the present regulation of Royal Mail is, in effect, delivered via the conditions of the licensing system. If the licensing system is removed, as it will be, more traditional forms of regulation will have to cover this. The Bill says only that Ofcom may do many of these things, whereas, under the licensing condition, the Royal Mail had to do these things. There are arguments about whether it should be only the Royal Mail or whether there are some issues that we could take out of regulation entirely. Some of those are currently specified, and Ofcom’s new rules will have to cover them as a requirement rather than as an option. They include issues of consumer protection and complaints-handling services, which are still pretty bad in the Royal Mail. More than 13 per cent of small businesses have a complaint about the Royal Mail, and at the end of the complaints process three-quarters of them are still unsatisfied. It is not a great record. We need to lean more heavily on them, and as a result we probably need to provide, in a stipulating statute or regulation, for access to the ADR system via the ombudsman.

We also need to recognise the role of Consumer Focus—or, eventually, of citizens advice and the Consumer Council for Northern Ireland—as the voice of consumers. That role will require some financing. Standards of mail integrity and reliability are also important. Many of the complaints and problems relate to lost or tampered-with parcels. By and large, Royal Mail has a good, positive reputation in this area. However, that needs to be retained, and we need to require the Royal Mail to provide information to the regulator and consumer interests.

Other aspects of regulation need to be considered, including the claim by the Royal Mail and the union that subsidies to their competitors effectively amount to £160 million a year. Do the Government intend that those requirements should disappear? As for the USO in total, perhaps the Minister can explain why the designation of the Royal Mail as the USO provider appears to last for only a very short time, particularly given that the Government presumably intend that, within that time, the ownership should change. The uncertainty about the future requirements of the USO will undoubtedly have an effect on the enthusiasm of any potential buyer to pick it up. The USO is clearly important. I am not saying that the terms of the USO are absolutely set in stone and should never change, but I agree with my noble friend Lady Drake that if there is to be a significant change in the terms of the USO, either in the products covered or the level of service required, then that should come back in some form to Parliament before it is agreed, simply as a regulatory matter. Those are the kinds of questions that I would like the Minister to answer, if not tonight then at a future date.

I have a couple of things to say on the ownership issue. The modernisation programme needs both money and more effective management than we have seen. We are in a more benign era in the sense that the business transformation agreement has been reached between the union and the management and the modernisation programme seems to be more under way now than it appeared to be a couple of years ago. On the money side, however, it is not entirely clear why we are looking for substantial sums from the private sector; or, more accurately, it is not clear whether we are looking for substantial sums or for an improvement in the management side. It was clearer in the previous Bill, and clear in the Hooper report, that the main aim of bringing private capital into the Royal Mail was to improve the management and to bring in people with logistical expertise. That is why it went for a strategic partnership as the preferred option.

It is not so clear here. When we move from 80-odd per cent to 100 per cent, we change the nature of the ownership in any case. It is not clear whether the Government envisage a sovereign fund, a hedge fund or an international competitor, as has been suggested, taking over the lot; whether we will have a range of people investing in Royal Mail; or whether we are primarily concerned with a strategic partnership with someone who knows something about the business and its competitor businesses, which the logic of the previous Government's approach demanded.

Royal Mail will have some more money available, but it still needs substantially more money from the market. I accept that. Is the motivation for privatisation to maximise the money, or is it to maximise the expertise and management improvement? I am not clear on that, and I do not think that the British public are clear. Their attitude to the privatisation process will vary if, in a few years’ time, Royal Mail is owned by the Sheikh of Abu Dhabi, some hedge fund—or has gone to a share option on the Stock Exchange, in the light of previous privatisations, such as that of British Gas, which was quite popular—or whether it will be run by TNT or DHL. There will be a difference of attitude among the workers, the consumers and competitor businesses to Royal Mail once we know the answer to that.

Those may be my prejudices on privatisation, but I counsel the Government that they need a clear answer to that. When the Bill gets through the House and they engage in the process of seeking buyers, they need to be clear what they are doing; and they need to communicate it to the British people.