Postal Services Bill

Lord Young of Norwood Green Excerpts

Wednesday 16th February 2011 Lords Chamber

[Lord Young of Norwood Green]

My Lords, first, I thank the Minister for her contribution in introducing the Bill. As my noble friend Lord Whitty said, it may raise more questions than it answers; it certainly raises several questions, which I shall endeavour to go through.

Before I commence on that, I congratulate the noble Lords, Lord Dobbs and Lord Empey, on their maiden speeches. I shall make some comments on the content later. I declare a lifelong interest as someone who was initially employed in 1958 by the GPO, as it was known in those days, and went on eventually to become the joint general-secretary of what is now the Communication Workers Union, with an esteemed colleague of mine in the other place—to whit, one Alan Johnson—and my noble friend Lady Drake, who spent many a happy hour with me negotiating with British Telecom and the Government of the day on privatisation.

We probably experienced every aspect of privatisation in all its phases, in all its successes and failures. It did not always go as well as the noble Lord, Lord Jenkin, tells us. I cannot resist saying that BT was a company that went from being totally self-financing to, in less than 10 years, attracting a debt of £30 billion. That is quite an achievement. Perhaps if the company had listened to the union in 1989, it might have invested its money more wisely. Why do I say that? Because we recommended that it fibre-up every household in the country in a programme which we called Network of the Future. It told us that that was overly ambitious and that it would cost £15 billion. If we tot up how much it has spent on the network since then, I think that it would have been a good investment. Instead of talking about superfast broadband everywhere, we would have had it.

I want to focus on what is fundamentally important in the Bill. Several noble Lords have referred to the huge history of Royal Mail, so I do not need to go into that. Everybody in this House recognises that Royal Mail and the Post Office face a huge challenge in today’s technological environment. That challenge will not go away, so we need to look at ways of ensuring that we can preserve the essential nature of these organisations. Clearly, that lies in, first, the universal service obligation, which everybody seems to value, and the post office network. Along with challenge, there are some growth areas, such as fulfilment mail and internet shopping deliveries. We recognise that Royal Mail as a business needs fundamental modernisation if we are to keep the universal service obligation and the six-days-a-week delivery service that lies at the foundation of our postal system.

There are some areas with which we can agree. The Minister attempted to say that the Bill is much the same as the one proposed by the previous Government, but in one specific area it clearly is not because it contrasts with Labour’s Bill in 2009, which would have kept a majority stake in public ownership. Clause 3 of our Bill explicitly stated that:

“Each Royal Mail company must at all times be publicly owned”.

Labour envisaged that any private partner would be looking at ownership of something like a third, and on no account would more than 49 per cent go into private ownership. I refute the idea that this is just a small change in legislation. A lot of the concerns and questions that have arisen during this fascinating debate are because we are talking about a privatised environment which starts to throw up uncertainties about the continuation of the universal service obligation as we know it and the relationship between the Post Office business and Royal Mail.

I could not help smiling when I listened to the noble Lord, Lord Razzall, because an opinion poll from YouGov showed that 56 per cent of Lib Dems were opposed to privatisation, 50 per cent think the service will deteriorate and 74 per cent think that prices will go up. That does not seem an overwhelming mandate. That was reflected at the last Lib Dem conference, where there was a lot of questioning about privatisation. Dr Pugh, the Lib Dem MP for Southport, said that there was a distinct danger that what they were presenting could look a bit like privatising the profits and nationalising the losses, which would be even more acute if the end result failed to be a Royal Mail system that the country was comfortable with for the next 20 to 30 years. There does not seem to be an overwhelming endorsement by the public at large, and the figures for Conservative voters show that they do not show any great enthusiasm for privatisation per se.

There are definitely some areas that we have in common and that we support in the Bill, such as the Government taking on the historic pension deficit. Similarly, it is right to move regulation from Postcomm, which does not have a sparkling record in its regulatory decisions, to Ofcom and to regulate mail services in the wider context of communication technologies. However, regulation is about more than the heading on the notepaper or the address of the building. It is also right to put it at the heart of the regulatory system for the maintenance of the universal service obligation. This Bill, like Labour’s Bill, has a reserve power for a levy to support the universal service. Interestingly, in his report Richard Hooper was sceptical about the need for this, seeing it, perhaps, as an excuse for modernisation not to proceed. We felt it was right to take such a power to ensure the maintenance of the universal service in the future. The concern goes much wider than us. The National Federation of Sub-Postmasters believes that if Royal Mail is to be privatised, as a strategic UK company it should, interestingly, remain in British ownership. It has a lot more concern about ensuring that its businesses stay viable in the future.

There are areas of agreement, and I will comment on the employee share ownership scheme. We proposed something similar, so it would be surprising if we suddenly performed a volte face on this. It contains a provision, which we welcome, to hold at least 10 per cent of equity in Royal Mail in the future. That is, we have to acknowledge, one of the largest holdings, but we will probe a lot more how the shares will be distributed, what employees will be able to do with them, and what real benefits share ownership in the scheme will bring. There have been plenty of other comments on share ownership throughout this debate.

I will focus a bit on the threat to the link between Royal Mail and Post Office Ltd, which has exercised so many noble Lords throughout this debate. Currently, Royal Mail and Post Office Ltd are linked to part of the same state-owned business, and as a result of the internal business agreement Royal Mail is required to take all its post office services from Post Office Ltd. The Government imply that a privatised Royal Mail would still use Post Office Ltd to provide its counter services, and it has been suggested that the post offices might be protected by the terms of the internal business agreement until 2014-15. However, as it is not a commercially binding agreement, this is not necessarily the case, and in selling off Royal Mail the Minister’s priority understandably will be the sale price.

Potential purchasers will want to reduce the number of outlets that they are required to use so that they can reduce costs. They will be looking for terms that might require as few post offices as possible. Once the internal business agreement ceases to apply to Royal Mail, Royal Mail will be free to use any partner to supply post offices. A third of Post Office Limited revenue comes from Royal Mail. Without this revenue, Post Office Limited will be unable to keep many post offices open.

Again, not only opposition Front-Benchers are expressing this concern. This concern has been echoed in all parties in this House, and I hope that the Minister will address it. I think it was the noble Baroness, Lady Wheatcroft, who interestingly said that despite the Minister’s assurances the chairman of Royal Mail was absolutely determined that this inter-business agreement should remain. I heard exactly the same kind of comments from Moya Greene. That might well be, but chairmen come and go, and so do CEOs, so that is by no means a sufficient guarantee. The House certainly needs more than that if it is going to feel satisfied in that respect. The Government need to answer questions about how they can make a privatised Royal Mail honour that current business agreement, how they will respond to potential purchasers who do not want to be tied to this agreement, and how they can influence what happens to the agreement after 2014.

An obligation to provide fewer access points for counter services would make Royal Mail more attractive for prospective purchasers. Some might say that more post office closures might make a better sale price for Royal Mail. A number of noble Lords have commented on mutualisation and on the need to have more detail and clarity about whether mutualisation would be a successful formula. I congratulate my noble friend Lord Tunnicliffe on raising a number of key issues—for instance, what happens to the proceeds of the sale or the Ofcom review of the universal service obligation after only 18 months. I do not need to repeat those.

I pay tribute to the contribution of the noble Lord, Lord Empey. He made the point about the public not distinguishing between Royal Mail and the Post Office, saying that he saw this as important as broadband. That was an important and interesting assessment. He also referred to the 18 month review of the universal service obligation and— I hope I am not paraphrasing—the undercurrent of uncertainty and cherry-picking by competition.

I also pay tribute to the noble Lord, Lord Low, who always gives us something to think about in his contributions. He talked about the current impact of competition on Royal Mail; the subsidy of 2.5 pence per item and the £160 million loss. He, again, referred to the review of the universal service obligation. I hope that the Minister is going to address his comments on the use of the post offices by the disabled community and the 9 million items for the Articles for the Blind Scheme. If she cannot pick up all these questions in her contribution, I hope that she will certainly return to them.

I am limited by time so I will not be able to pick up all the comments that were made by noble Lords. I have a slight disagreement with my noble friend Lord Mandelson, my previous boss when he was Secretary of State. I think this is a fundamentally different Bill to the one that we introduced, for the arguments that I have previously put forward.

I know that my union has not always been the most co-operative. My attitude towards the union—which has got me into a significant amount of trouble over the years—is not necessarily to agree with everything that it says, but to try to give it honest, candid advice about what I feel is in the best interests of the industry and, eventually, the long-term interests of the members. Since we came through that long and difficult strike and the transformation agreement was reached with Royal Mail, there has been a change. The modernisation programme is now going ahead. I remind people, including the noble Lord, Lord Hunt of Wirral, who talked about the union in certain terms, that the Hooper report was just as critical of management as it was of the unions. Sometimes the assessment is not balanced. I am trying to be impartial; I am not saying that it was all management’s fault, but it has not had the greatest track record. The current management seems to be getting off to a much better start.

The union’s co-operation with modernisation is something we should acknowledge. It has enabled that programme to go forward. And, in relation to my noble friend Lord Sawyer, the best example I have seen of Royal Mail management is its World Class Mail which you can see if you go to Gatwick. It is an interesting example of management and the work force working together very well.

I am conscious of time, so I am going to bring my contribution to a close. I must compliment my noble friend Lady Drake, who gave in her usual manner a very penetrating and forensic analysis of the impact of regulation and some of the questions that need answering—instead of just expecting that Ofcom will necessarily do the right thing—and pointing out the impact of not getting regulation right.

Privatisation of itself will not necessarily be the magic cure-all or answer to this. The organisation is complex and needs to carry out a huge amount of further modernisation. I think that it was my noble friend Lord Sawyer who pointed out the importance of cultural change and ensuring trust between management and the workforce. When things go wrong in privatisation, usually the people at the top seem to escape quite well financially provided for; it is the workers—to use the phrase that emanated from the First World War, the poor bloody infantry—who suffer. I hope that we can look forward to continuing a probing and penetrating analysis in Committee of what we see as the shortcomings of the Bill, and I look forward to the response from the Minister.