Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Postal Services Bill
Lord Whitty Excerpts
Lord Whitty
“( ) a schedule of assets held by Royal Mail Holdings plc and used for the provision of directly managed Post Office branches which also details—(i) a schedule of those assets which will be transferred to the Royal Mail company;(ii) a schedule of those assets which will be transferred to the Post Office company; and( ) the terms and duration of the Inter-Business Agreement between the Royal Mail company and the Post Office company.”
Lord Whitty
My Lords, this is a fairly straightforward amendment, and I am sure that the Government will have no great difficulty in accepting it.
The noble Baroness will know that I have expressed some scepticism about the changes of ownership proposed by the Government. However, I have supported the proposals by both the previous Government and this one to unravel the status of Post Office Ltd from that of Royal Mail. It is important that we do that on a basis which is transparent and clear and which can therefore be the basis for future financial arrangements and effective and robust services to consumers of Post Office services, on the one hand, and Royal Mail logistics on the other.
Both new paragraphs to subsection (3) relate to the requirement on the Secretary of State to produce a report, as set out in subsection (2). The first, which would be new paragraph (c), requires transparency on the allocation of assets. My concern is that, because of the slightly blurred position between Post Office Ltd, Royal Mail Group and Royal Mail itself, the assets of Post Office Ltd are not as clearly recorded but must be at the point of transfer and unravelling the two parts of the business. I am particularly concerned because Post Office Ltd’s property portfolio consists mainly of Crown post offices, directly administered branches, mostly located in city centres and prime locations. That is the reason for my suspicion.
Before Parliament endorses any report from the Secretary of State, it must know that the full range of assets from Post Office Ltd is to pass across to the new sector—which, initially at least, will remain a publicly owned body. Therefore, that list of assets must be complete and where there is doubt—because some sorting offices are attached to Crown post offices; and there are other complications—the assets of Post Office Ltd must be clearly delineated and not by stealth handed over or promised to any potential investor in the Royal Mail side of the business. My suspicions may be entirely groundless, but there can surely be no argument that the schedule of assets should be clear to Parliament before it makes such a decision.
The second paragraph of my amendment is probably more substantial. If we are to unravel the two businesses, it is important that the relationship between them is understood by Parliament before it gives its decision in principle. That is complicated. The inter-business agreement between Royal Mail and the Post Office is long-standing and there are a lot of inferred obligations on both sides. It is important that the Government commit to the maintenance of an inter-business agreement. The Government have previously indicated that a renegotiated inter-business agreement will take effect prior to separation coming into force. Before that, Parliament must understand what the principles of that agreement will be and whether they will reflect the current relationship between Royal Mail and Post Office Ltd or whether they are to be modified.
Some within the Post Office would argue that Post Office Ltd has hitherto been a rather junior partner in that relationship and we want to ensure that both parties to this division, this partial divorce, are on a robust basis. It is therefore important that Parliament should understand that; that the principles should be set out in the report; and that the duration that the Government are requiring the parties to stick to is clear. There are different conclusions between a short IBA and one which lasts a number of years. Clearly, there needs to be some process for modification as times change, but we also need some certainty about the nature of the relationship.
Those are not unreasonable requirements to include in the report, and I therefore hope that the Government will at least accept the principle of the amendments. I beg to move.
Baroness Wilcox
My Lords, Amendment 12A seeks to require the Secretary of State to include in his report to Parliament details of the assets held by Royal Mail Holdings plc and asset transfers between Royal Mail and Post Office Ltd. It also requires the Secretary of State to report on the terms and duration of the inter-business agreement between Royal Mail and Post Office Ltd. Currently, Royal Mail Group Ltd and Post Office Ltd each already own the vast majority of the assets they require to carry out their own business. However, it is likely that some residual asset transfers will need to be carried out before any disposal of Royal Mail shares is completed. That is why the Bill contains the transfer scheme powers set out in Clause 8 and Schedule 1. These powers give the Secretary of State ultimate control over which assets sit with what company.
However, there is no set timetable for the transfer of these assets. That may be taken forward before a decision has been made to undertake a disposal of shares in Royal Mail, or it may happen after. If the latter is the case, the Secretary of State would clearly not be in a position to provide details in his report to Parliament as required by Clause 2. Relevant information relating to a transfer of assets will, however, be set out in the transfer scheme or schemes made under Schedule 1. Transfer schemes may impact on third-party contracts and agreements with Royal Mail and Post Office Ltd. I therefore assure the Committee that details of the schemes should and will be made publicly available.
On the ongoing commercial relationship between Royal Mail and the Post Office, there was significant debate in the other place about the inter-business agreement—the IBA—particularly about its duration. The Government’s view is that legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. Contractual negotiations between these businesses will involve a complex interaction of many different factors—such as pricing, volume, service levels and duration—and such negotiations would not be improved by government intervention.
The noble Baroness, Lady Drake, was concerned that the current board of the Royal Mail cannot bind the actions of a future, privately owned Royal Mail. I am afraid that I take a different view on that. Any legal agreement entered into by Royal Mail will remain legally enforceable for its duration whoever owns the company. The Government have been clear that we will ensure that the chairman of Royal Mail fulfils his commitment to Parliament to conclude the longest legally permissible agreement with the Post Office before the two companies are separated.
The noble Baroness, Lady Drake, also asked about the legal barriers to including an inter-business agreement of 10 years in the Bill. Legislation requiring an exclusive arrangement between Royal Mail and Post Office Ltd for, say, 10 years would face significant risk of legal challenge for being incompatible with competition law. Guaranteeing a revenue stream to the Post Office would also face the risk of a successful state aid challenge. It is important to note that a successful state aid or competition law challenge to the Post Office’s commercial relationship with Royal Mail that struck down the contract would present a serious threat to the Post Office network.
My noble friend Lord Skelmersdale asked whether the Post Office would be self-sustaining if the inter-business agreement ended. As I said, the chairman of Royal Mail has been clear that he has no intention of letting it end.
I am well aware that the House, like the other place, is in need of reassurance regarding the ongoing relationship between the two companies and the future of the post office network. I note the comments of my noble friend Lady Kramer, who voiced her concerns in that area. I hope that I will be able to provide further reassurance on those issues when we discuss Clauses 4 to 7, which relate to the future ownership of the Post Office. If the noble Lord is content, I therefore ask that he withdraw his amendment so that I can give the matter further consideration after all the issues have been discussed in full.
Lord Whitty
My Lords, I thank the noble Baroness, particularly for her last few sentences; clearly we may well come back to the matter on Clause 4. However, I did not find the rest of what she said very reassuring.
I am grateful to the noble Baroness for referring to the legal difficulties on the inter-business arrangement. However, there are different legal opinions on it. If it is primarily the Government’s view that an ongoing agreement would run up against both state aid and competition laws, before we complete consideration of the Bill it would be helpful to have an opinion that spells that out in writing. The question asked by the noble Lord, Lord Skelmersdale, is absolutely pertinent to this. If a legally defensible agreement between Royal Mail and Post Office Ltd could not be sustained in law, how can that be compatible with the Government’s very clear—and, frankly, very political and public—commitment to maintaining a post office network of roughly this size? I do not think it is possible to square that circle, which raises deeper alarms than I had when I tabled the amendment. I am certainly not arguing that the inter-business agreement in its present form should last for ever, but both Houses of Parliament will need to be reassured as to which principles of that agreement the Government will see sustained through the ongoing relationship between the two parts of what is currently the Royal Mail Group. I hope that we get greater clarification when we move further into the Bill but, if anything, this short debate has alarmed me more.
I have also been alarmed more on the assets; I am not sure that the Minister alarmed me, but the noble Baroness, Lady Kramer, definitely did. She effectively said, “We can’t set out in the report to Parliament”—the trigger for giving the go-ahead to the Secretary of State—“what assets we are and are not privatising”. In previous privatisations, on occasions there have been huge schedules about that. We do not have such a schedule attached to the Bill, and I do not propose that we do. There may be some obscurities attached to that schedule, in which case some footnotes may be needed.
Baroness Kramer
I fear that the noble Lord, Lord Whitty, may have misunderstood me; I obviously was not clear. If I remember correctly, the report comes after the Minister has taken the decision but before the actual disposal. After the fact of the disposal—that is what the noble Lord is now discussing—a clear schedule would be available. However, we are talking about a report to Parliament, which most of this House welcomes, coming at a far earlier stage than is normal.
Lord Whitty
But, my Lords, the report to Parliament provided for in Clause 2 is a necessary stage for the Secretary of State to go through before the disposal actually takes place. I agree about the decision in principle; I do not seek to delay that or take things out of sequence, but when Parliament discusses the report it needs to know what is and is not being privatised, at least in broad terms. The reasons for not saying so that the noble Baroness adduced—that we could not do so until we saw the final details of the negotiation—really alarmed me; as I said in my opening speech, there are some pretty good assets here. If a negotiation went on whereby the decision of the putative buyer was rather marginal as to whether it went ahead, and someone said to it, “Okay, we’ll throw in a couple of dozen prime-site Crown post offices in our major city centres. Does that make it any better?”, that would cause all parliamentarians a degree of alarm. Therefore, if the register of assets is dependent on the negotiations, we have something to worry about. I would have thought that the Government ought to know pretty clearly which assets go on one side of the line and which are on the other already, although they may have to sort out one or two things. If it is subject to negotiations, and if any premises that have a faint double usage by the two parts of the business could go into the bundle offered to the incoming investor taking over the Royal Mail side in whole or in part, the viability, the effectiveness and the asset base of the Post Office Ltd side of the business come into question again.
I hope that we return to those issues. I come out of the debate somewhat more alarmed than I went into it.