Lord Young of Norwood Green
Main Page: Lord Young of Norwood Green (Labour - Life peer)Postal Services Bill
Lord Young of Norwood Green Excerpts“( ) the principal objectives intended to be achieved by any disposal,( ) the extent to which the Secretary of State considers that the disposal will achieve those objectives, and( ) the expected time-scale for undertaking the disposal.”
Lord Young of Norwood Green
My Lords, I shall also speak to Amendment 11. These amendments concern the report that the Secretary of State will be required to lay before Parliament after deciding to dispose of Royal Mail, whether through a trade sale or an IPO share sale. We have already put on record the Opposition’s disagreement with the principle of privatising 100 per cent of Royal Mail and that we believe that it should be kept in overall public control. However, in this Committee we are seeking to improve the Bill by casting a critical eye over the detail before us. The Bill might enable Ministers to conduct a sale of Royal Mail, but how they set about that task is important; it can be done well or badly.
We have pointed out some of the dangers that lie before Royal Mail and the country if the Government set about this disposal in the wrong way. So much can go wrong. It could be sold to an owner with short-term horizons who cherry-picks the most valuable parts and breaks up the company, perhaps, heaven forbid, on the road to administration—hence the need for Part 4 of the Bill. The Bill could create a Royal Mail that, against the wishes of Ministers and the current management of the company, decided to break the historic link with the post offices of this country. Either case would be catastrophic for our post office network, and there is nothing in the Bill to prevent them from happening. The company could be sold off cheaply, with a few individuals getting rich at the expense of the country’s taxpayers at a time of public austerity, with taxes going up, public services being curbed, wages being frozen, the retirement age receding and jobs being lost. I hope that Ministers are aware of the public anger that would be unleashed if that happened due to a lack of care and attention by Ministers and civil servants.
We know that in the past many privatisations have resulted in the sale price on the day of sale being dwarfed by the trading price on the first day of trading. The track record of trade sales is not much better. I well recall the Select Committee investigations that ensued when the Royal Ordnance factories in this country were sold, apparently over cocktails between the Minister and a businessman, for the princely sum of £1. The site of the old Enfield rifles establishment and the associated site on either side of the M25 must have been worth a pretty sum on their own. This sort of sale did not instil confidence that the long-term future of the company and its staff would be foremost in the mind of the new owner.
We want to avoid these disasters, as I am sure do the Ministers, and that is why we are bringing forward amendments that might help to make the process safer and more successful. These amendments therefore seek two simple improvements in the report to Parliament: first, to set out clear objectives for the disposal of Royal Mail, not just the process itself but the sort of Royal Mail that we want to emerge at the end of the sale and a clear timetable for action; and, secondly, clear criteria in deciding whether to undertake the disposal. Ministers have made it clear that they would sell to almost anyone. Well, I hope that they will not and that they will show some discretion. They say that they would not sell at any price but give the impression that they would not even obtain an independent valuation, so they will have no benchmark against which to judge whether any offer is too low to accept.
The wording of the amendments might have a familiar ring, but I hope that they will not send the noble Lord, Lord Hunt, racing off to his doctor complaining of another Groundhog Day moment. He need not worry; these are the self-same provisions which the noble Lords, Lord Hunt and Lord Razzall, sought to insert into the 2009 Bill—this is certainly déjà vu—and that were agreed on Third Reading. They were therefore incorporated into that Bill. Imagine our surprise to see them omitted from this Bill, no doubt through some oversight. We simply thought that we would ask why these measures have been omitted and, given their provenance, I am sure that the noble Baroness will have no trouble in accepting the amendment.
The Government have allocated £1.34 billion of funding for the post office network over the next four years of the comprehensive spending review. Fifty per cent is above the social network payments. That is welcome, but what happens in 2015? What happens if a privatised Royal Mail wants to reduce its use of the post office network? After all, we have already witnessed the awarding of one significant contract—the green giro contract—going not to the Post Office but to Citigroup. What happens if there is compulsory competitive tendering for a substantive contract which the Post Office fails to win?
Once again, there are so many unanswered questions. If the Government do not know what the assets of Royal Mail and the Post Office are before moving on to sell Royal Mail or to hand over the Post Office to mutual ownership, they might well sell the people of this country short. That will increase the risk of asset-stripping and of selling at too low a price. That could change the nature of who owns the company and how they run it. Amendment 12A, in the name of my noble friend Lord Whitty, at least seeks to establish a proper record of Royal Mail’s assets in the division between Royal Mail and the Post Office. It also draws attention to the vital inter-business agreement, a subject to which we will return later in the Committee’s deliberations.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I thank the noble Lord, Lord Young, for his most helpful opening words. Telling me that his intention is to enable those on these Benches to make a better Bill is welcome.
The amendments seek to insert additional reporting requirements into the Bill on the Government’s objectives for a disposal and the principal criteria used for deciding to make a disposal. I believe that the Government have already been very clear about why we wish to dispose of shares and the objectives for such a sale. Like the previous Government, we believe that Royal Mail needs an injection of private capital and disciplines. In addition, we also wish to give the employees the opportunity to own shares in the company. We believe that this, along with the other measures in the Bill, is the best way to ensure that the universal postal service is maintained in the United Kingdom.
When making a disposal, we have already stated clear objectives. These are to secure the future of Royal Mail and to ensure that we achieve value for money for the taxpayer. Clause 2 requires the Secretary of State’s report to state the type of disposal that would be made. Quite broadly, this is likely to be either through a sale by auction or through a flotation. It also requires that the timescale for undertaking a disposal be included in the report.
The Secretary of State would not, especially for the first sale of shares, lay a report before Parliament that had two lines stating, for example, that there will be a trade sale and that it will take place in 2012. We know that Parliament would expect more than this. Indeed, we believe that on the occasion of the first significant sale of shares an Oral Statement is likely to be appropriate. As arrangements have to be made for an employee share scheme before any shares can be sold, the report would also include information on how and when the employee share scheme would be set up.
On the suggestion that criteria for deciding whether to sell Royal Mail should be included in the report, at one level we have already set out those criteria—that Royal Mail is poorly served by the Government as its sole shareholder and needs urgent access to private capital and disciplines to secure the future of the universal services. I have doubts, however, about the inclusion of detailed criteria for a sale in a report before a sale is made. The previous Government’s Postal Services Bill 2009 required information to be provided to Parliament on the criteria for a sale of Royal Mail. However, the report in the 2009 Bill would have been presented to Parliament after an agreement had been entered into to sell shares to a third party. Clause 2 of this Bill requires a report to Parliament before a sale. I hope that noble Lords on all sides of this House will welcome this earlier provision of information to Parliament.
As I have said in response to other amendments that we have debated, it would not make commercial sense for the Government to lay all their cards on the table when entering a commercial negotiation. We will have criteria for a sale, but I see no logic in revealing this before a transaction has taken place. Therefore, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I cannot say that we are completely satisfied with the noble Baroness’s response. Nevertheless, we shall reflect on it between now and Report. In those circumstances, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I support this amendment. At this juncture, I am happy to share the same analysis, if not completely then certainly key parts of it, with my noble friends Lord Clarke and Lord Hoyle. Like the noble Lord, Lord Brooke, I confess that I was not on the side of the angels or the angels as defined by my noble friend Lord Clarke on the previous occasion, but on this occasion I share his analysis.
We and fellow Peers of several party affiliations and of no party affiliation, as we have seen in this interesting debate, have submitted amendments that seek to ensure that the sale of Royal Mail meets four main objectives if it goes ahead. First, it should be done in a timely fashion, which does not present the prospect of an endless cloud of doubt hanging over the future of the company. Secondly, proper measures should be taken to ensure that value for money is gained for the taxpayer and that the company is not sold at too low a price. Thirdly, there should be greater clarity and accountability than the Bill currently provides. Certainly, a number of speakers in this debate have expressed that concern. Fourthly, a privatised Royal Mail should be put on a secure footing and not be subject to the ravages of asset stripping or disintegration, or be doomed to failure because of the circumstances which this Bill creates.
The proposed 100 per cent privatisation is at the heart of our concerns about the future of the universal postal service. At Second Reading, I think that I declared my interests as a former employee of the GPO, albeit at the time when it reigned over telecom as well as postal, and a significant involvement in the union as the company changed from a nationalised company on the telecom side to a privatised company. We are concerned about the future of the universal postal service. I share the points made by the noble Lord, Lord Skelmersdale, on the future of the nation’s post office network.
Private shareholders are more likely to argue that it is unsustainable and too costly, which will undermine the universality of the service. Many rural, distant or sparsely populated areas are costly to reach. I did not agree with every part of the analysis given by the noble Viscount, Lord Eccles, but he rightly reminded us that the final mile is rather a metaphorical term, given that it can be sometimes 10 miles or more. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of such a service.
My noble friend Lord Clarke was absolutely right to remind us that one potential buyer has already commented in very blunt terms. Noble Lords might recall that the managing director of TNT, Pieter Kunz, said that the universal service obligation was,
“a kind of Jurassic Park and we should get rid of it”.
We are not indulging in a sort of fantasy or paranoia when we draw to the Minister’s attention the view that some potential buyers have of a universal service obligation. The noble Lord, Lord Swinfen, drew to our intention the importance of making this Bill absolutely clear and his concern that it is not clear in its current state.
I was interested in the point made by the noble Viscount, Lord Eccles, about the way in which the regulator functioned in the past in relation to competition being more important than the universal service obligation. He is right. I think that we got that wrong, although it is not fashionable to admit that. While I did not agree with the conclusion made by the noble Baroness, Lady Kramer, that it needed private capital first, I certainly could not help but acknowledge her point about regulation and the way in which it was introduced and functioned.