Lord Young of Norwood Green
Main Page: Lord Young of Norwood Green (Labour - Life peer)Postal Services Bill
Lord Young of Norwood Green Excerpts
Lord Razzall
My Lords, the amendment is extremely constructive. However, I have a concern, which is the one echoed by my noble friend Lady Kramer. For those of us who argued long and hard during the last Bill for an employee share structure—which was resisted by the then Government—I am worried that we should be too prescriptive at present as to the form that the employee share scheme should take. Those of us who have had experience in the private sector in employee share schemes know that there are a lot of ways to skin that particular cat—this may well be one of them, but, having fought and won the battle to get at least 10 per cent held by an employee share scheme, I am worried that we will overcomplicate the Bill.
Lord Young of Norwood Green
My Lords, a number of noble Lords have drawn attention to the umpteen privatisations of the 1980s and 1990s which contained an element of employee shareholding. However, time after time, the shares held initially by employees found their way into the hands of institutional or speculative shareholders. They may have started out as employee shares but they did not stay as employee shares for long. What can be done about this? I do not intend to reiterate the very cogent points made by my noble friend Lord Brooke in relation to the experience of the National Air Traffic Services scheme. However, I will respond to the point made by the noble Lord, Lord Razzall, about being too prescriptive. If there are viable alternatives, no doubt the Minister will deal with that in his reply, and I await it with interest.
The amendment proposes that all shares held for the benefit of employees would be held in trust. That may be difficult to accept for some employees who would rather be able to cash in the shares; I speak from my BT experience. I will not go into the details of that, but certainly a lot of cashing in went on at the time.
Lord Young of Norwood Green
No. Sorry to disappoint the noble Lord; I see that he is returning to his previous night’s form. There needs to be some return on the investment that the employee can anticipate.
The amendment proposes that a dividend of equal amount would be paid in respect of each share held by or for the benefit of any employee. When paying a dividend, it is important that all shares are equal and everyone is on an even footing, regardless of where they are in the company. That is an important principle.
The amendment proposes that no employee eligible to receive shares under the scheme would be permitted under the rules of the scheme to dispose of those shares to any other person. If we are serious about a stake in the company being held by employees, that is an important point. To prevent seepage turning into a flood of shares out of the scheme, as we have seen in the past, it is important to ring-fence the shares in the proposed scheme.
The amendment proposes that, on leaving employment, shares held by employees could be disposed of only by way of a transfer for consideration to the trust. It is fair that employees who leave employment and leave the scheme would be able to capitalise on their shareholding—that is one of the incentives of the scheme. To maintain the integrity of the scheme, though, they should dispose of the share back into the scheme.
The amendment proposes that the consideration payable under paragraph (d) would be an amount equal to what the market value of the shares would have been. To achieve a fair result for departing employees, a fair price for the share would be established in the absence of an open market. That would not be very difficult if other shares in the company were being traded. If this is not the perfect formulation of our ideas or improvements could be made, I hope that the Minister will take this away, give it serious thought and come back with an improved proposal to meet the same objectives.
It is a shame that the noble Lord, Lord Hunt, is not in his seat. In a wistful diversion down memory lane last week he reminded us of the “Tell Sid” campaign, conducted to boost interest in the privatisation of British Gas. We were told that Sid was the name of an uncle of the late Lord Walker of Worcester, who was the Secretary of State responsible for the sale. It is a bit ironic that the British Gas share advertisements featured a series of people so anxious to alert Sid to the share flotation that one of them was a postman who got knocked off his bike in the excitement. The mind boggles. If the postmen or postwomen of Britain are to be induced to fall over in the excitement at 100 per cent privatisation of Royal Mail—somehow I doubt it—perhaps the Government should address some of the questions raised in this amendment. They are serious; they make a constructive contribution and improvements so that a good idea becomes a very good scheme. I support the amendment.
Lord Christopher
My Lords, I apologise for having been diverted to another meeting. There are two issues that concern me on which I would be grateful if there were some comment. There is an assumption that there will be a market in these shares, and I am not at all clear that that will necessarily be the case. If there is not, how is it proposed to deal with that situation?
I may have missed the point on the other issue. Assuming that something like the amendment goes through, we have an employee share scheme of this nature and shares are sold back, will we reach a position where all the shares are in the hands of this trust, or whatever it may be called? How will we deal with that situation?
Lord Young of Norwood Green
My Lords, I shall speak to Amendments 21C and 22ZA to 22ZD, and comment on the other amendments in the group, Amendments 21A and 22. This is a large group of amendments and I ask the Committee to bear with me.
Generally, this Bill pumps questions on issues of accountability, considering the enormous step that it proposes for one of our most cherished institutions and the number of vague answers that we have to questions about the sale of Royal Mail and the future of the post office network. With proposals relating to the disposal of shares in Royal Mail, to the nationalisation of the pension scheme, to the regulatory regime and to the mutualisation of Post Office Ltd, greater accountability to Parliament should be built into the Bill before it receives Royal Assent.
The Bill instructs the Secretary of State to lay a report before Parliament once he has taken a final decision on the transfer of the Post Office Counters business to a mutual body. Once again, there is no promise of an oral Statement, no debate, no chance to amend and no vote. These amendments offer the House an opportunity to scrutinise the Government’s later proposals in detail, including their plans for mutualisation. Several years may elapse between the Bill receiving Royal Assent and the transfer to a mutual organisation, but it is important that Parliament is able to scrutinise and approve the proposal when it comes into effect. Are we being denied the opportunity to scrutinise fully because to do so might cause real difficulties for the Government, or will the cold forensic light of parliamentary scrutiny undermine the foundations on which this Bill was laid?
We will not know the answer to that unless Parliament is able to consider future important actions and their implications more fully. So many questions remain unanswered. We are asked to take a leap in the dark about how Royal Mail will be sold, about what sort of Royal Mail will emerge in the private sector, and about what obligation a privatised Royal Mail will be under to utilise the post office network. A great deal of concern has already been expressed about the nature and continuity of an inter-business agreement. In the case before us, of Post Office Ltd, we are also asked to take a leap in the dark about the type of mutual body or range of mutual bodies that might end up owning our post office network.
What will the rules be? What will be the extent of the mutual? Who will be eligible to be a member? Are all to be equal or will some be more equal than others? How will the board be constituted? Could the mutual sell off assets? Could the owner sell on to another mutual, such as a building society, store group or a mutual set up for that purpose? Could mutualisation end in disintegration? How will a mutually owned Post Office ensure that it is on a sound commercial footing? What tests would a potential owner have to pass?
It might be far fetched, but what is to stop Rupert Murdoch’s family or someone else associated with a communications company setting up a mutual body as a vehicle for running the Post Office? Is the Minister setting a timescale by which the Government intend to complete the mutualisation process, or is this an open-ended process? Who will be accountable for the success of the Post Office when it is in mutual hands? There is a provision for an annual report, but what about a Secretary of State annual report? I hope that the Minister will take the opportunity to make clear whether the Secretary of State will be responsible. If he will not be, who will be? What are the safeguards to prevent a mutually owned Post Office Ltd from suffering commercial decline or even catastrophic financial collapse?
Lord Clarke of Hampstead
The noble Lord, Lord Stevenson, said he had “a cunning plan”. Well, I wish it was cunning—it is not original. In fact, it was the Conservative Government of the 1970s that abandoned National Girobank. I was one of those who agitated for many years for the creation of Girobank. By copying the arrangements in the Netherlands, it was possible to introduce a simple banking system that brought cheque books and bank accounts to many thousands of people who never thought they would have a bank account. I mention National Girobank because one day, when I get enough money, I am going to ask a student or someone to do the proper research on what happened to our people’s bank, as it was in those days.
As I said in the debates on the previous Postal Services Bill a couple of years ago, only one paper in this country covered the story of what I considered the give-away of a national asset. Reference has been made to the shock that you get when you find you have got to buy out a contract, but if you had the figures on what happened at Girobank, you would start to worry even more. I know this because when it was announced that it was going to be abolished—and it was really abolished because it was so successful—Co-operative Bank, Unity Trust and a consortium of trade unions got together to try to buy the bank when it was put up for sale. First, they were told, “You need £200 million to buy Girobank”. That was the easy bit, because that was gathered together. Then the rules were changed, and Girobank was to be sold only to an established finance house—which the consortium was not—but the consortium established itself as a finance house. Then they were told, “You cannot buy it unless you have an alternative computer system that will be there if this system goes down”. So the dice were quite loaded from the start. The £200 million that was mentioned at the time of the sale of Girobank actually paled into insignificance, because the actual figure—I am quoting from memory as I have no notes here—was £118 million when it was sold to the Alliance & Leicester. The Alliance & Leicester obviously grabbed it because, at the time, there were thousands of people waiting to open an account with National Girobank. Political dogma said, “This has got to stop. It’s too successful and we’re going to do away with it”.
What has happened since? Alliance & Leicester of course has been swallowed up by Santander. If anybody thinks that the service they are getting from Santander is anything like what they got from National Giro in the beginning, and to some extent with the Alliance & Leicester, they are dreaming, because the rapacious way in which these banks work frightens me.
There is a demand for a people’s bank, so I welcome the comments from the noble Baroness, Lady Kramer. I ought to declare another interest: I am a member of the St Albans District Credit Union. During my years as a councillor in Camden, I saw what happened when people were at the mercy of loan-sharks, when people were threatened on their doorsteps with an extortionate amount of interest week on week. Of course there is a chance to get a link between the growth of credit unions and a people’s bank—or post bank, post office bank or Royal Mail or whatever—but the important thing to is to have a simple banking system, which allows people to have confidence in where they are putting their money. At the back of it all, despite all my criticism of what has gone on in the last few years, I still believe in the brand name of the Post Office. The Post Office has a good reputation and I hope that the Minister and her colleagues will go into one of those dusty offices, pick up the box file that says National Girobank and check what I have said about the way it was virtually given away. Incidentally, the punchline was that, within two years of trading, Alliance & Leicester cleared the amount that it paid for the bank.
Lord Young of Norwood Green
My Lords, I shall respond to the noble Baroness’s request for information. It was a substantial sum. I am not saying that to be evasive; I cannot remember the precise amount. The only thing that I would say about our arrangement with the Bank of Ireland was that it enabled a large amount of business to be generated. We should not forget that aspect of it. As an original member of Girobank when it was first formed, I concur absolutely with the regretful history of its sad demise that my noble friend Lord Clarke has recounted. For a period we had a successful people’s bank, which unfortunately disappeared as the result of another privatisation.
Lord Young of Norwood Green
My Lords, I shall also speak to Amendment 21E. By nature these are somewhat technical probing amendments to see whether there is a loophole in the disposal of “any part”. That is the basis of those amendments. I am trying to set the world record for brevity in moving an amendment. I look forward to the Minister’s reply.
Baroness Wilcox
My Lords, Amendments 21D and 21E refer to the circumstances in which a relevant mutual could dispose of its interest in the Post Office. I understand that these are probing amendments.
Clause 4(4) makes clear that the only people who can own an interest in the Post Office are relevant mutuals, the Secretary of State, the Treasury, a nominee of either the Secretary of State or the Treasury or a company that is wholly owned by the Crown. The clarification envisaged by Amendment 21D is not required to achieve this.
Amendment 21E seeks to ensure that any disposal made by a relevant mutual would be a disposal of its entire interest in the Post Office. While in practice we would expect only one relevant mutual to own the Post Office at any one time, we believe this amendment to be unnecessarily restrictive. For example, there may be circumstances in which different stakeholder groups form separate corporate bodies, each taking an interest in the Post Office. Provided the Secretary of State was satisfied that each body met the conditions set by Clause 7, it would seem overly restrictive to rule out the possibility.
We will debate Clause 7 shortly, but I shall briefly summarise the strict safeguards that are put in place under it. The Secretary of State must be satisfied that the conditions in Clause 7(2) to 7(4) will continue to be met before there can be any transfer to a Post Office mutual. Those conditions ensure that the Post Office mutual must continue to act for the public benefit by promoting the use by the public of Post Office services, that its members have a clear interest in it so doing, and that disposals that might jeopardise that will be prevented.
I hope that I have sufficiently reassured the noble Lord, and I ask him to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I thank the Minister for her reply. I will certainly reflect on those measured words. In those circumstances, I beg leave to withdraw the amendment.
Lord Whitty
My Lords, we have reached this amendment slightly quicker than I had thought we would. Although the amendment looks complicated, it is, in essence, an amendment to probe how the Government intend to fulfil the commitment made in the paper to which I previously referred—and to which the noble Baroness referred twice—that they will maintain a network of approximately the present size. The noble Baroness stated that even more precisely in her reply to my noble friend Lord Lea.
I have tabled the amendment from the perspective that my previous organisation, Consumer Focus, and its predecessor, Postwatch, have been through two alleged rationalisations of the post office network, the first of which was based on no objective criteria at all. It worked from where sub-postmasters were finding it difficult to maintain a post office, were retiring, or had some other reason for not wanting to continue. The second round of rationalisation worked on substantial and clear issues of access that were specified in crude distance terms, but nevertheless gave rationality to the assessment of whether one post office or another should change.
I must say, having inherited this situation at three-quarters of the way through, that I found it difficult for a consumer organisation to be forced to choose between the post offices in any particular town. Nevertheless, the criteria against which we operated— access to post offices among different populations, distance to travel to a post office, and so on—are reproduced in the paper from which I quoted earlier, but which I unfortunately gave to Hansard for verification. However, the document includes a table that sets out the current criteria.
My concerns are twofold. Those criteria would arithmetically allow for a network that is significantly smaller, particularly in towns and suburbs, than the current network, and I therefore need to square the assurance given by the Government that they are looking for and are in effect subsidising for the next few years a network at its current size, with the fact that theoretically, using the same criteria, they could reduce it to a size of between 7,000 and 8,000. I hope that the Government reaffirm their commitment to retaining a network of the current size.
The calculations in proposed new subsection (1) in the amendment, according to my former colleagues in Consumer Focus—I did not do the arithmetic—would sustain a network of roughly the present size. In other words, the first four criteria are considerably more stringent than those used in the previous round of rationalisation and specified in the Government’s document on the future of the network. This would not mean that every post office would need to remain open. There would obviously be temporary closures and what the Post Office somewhat euphemistically calls business-as-usual closures. There would also be movements of sites within particular areas. However, one would arrive at roughly the same number of post offices, were these criteria to be followed.
It would be interesting to know whether the Government intend to tighten up the criteria or to add different criteria that would produce figures similar to those in the amendment, or whether their commitment to the current size of the network is irrespective of particular criteria because they envisage that the moves they claim to be making to improve the volume of post offices’ business—to sustain and inculcate a different sense of purpose through mutualisation—will mean that we will end up with a network of roughly the current size.
I see that the noble Lord, Lord Skelmersdale, is once more in his place. When we were discussing the IBA, he raised a pertinent question as to whether any failure to commit to the IBA—and, I would add, to direct other government work to the post office network; an earlier debate today demonstrated that we were moving away from that—threatens the Government’s commitment to the size of the network. There is a circle to be squared, and I am not entirely clear how the Government intend to square it.
One option would be to reassure consumers, sub-postmasters and the staff of the post office network that the criteria would be tighter. Another option would be a more detailed way of reassessing those criteria. In fact, proposed new subsections (3) to (6) in the amendment would allow the Government systematically to assess the criteria of access and the nature of services provided.
Another dimension that has been mentioned is that part of Post Office Ltd’s plan is to reduce the range of services provided in some post offices. There was the experiment of Post Office essentials outlets that provided a reduced range of services. Some have worked and some have not. That is not necessarily entirely consistent with the government commitment to maintain the network broadly as it is, but it may mean that different gradations of post office outlets appear within the total. It would also be useful to know about that.
Although I do not expect the Government to accept the amendment, it gives them options in adopting criteria that would sustain more or less the present network or having a process whereby they redefined the criteria for access and the services provided. It would be useful to know what the Government’s strategy was in this respect. Obviously, we take great heart from the reassurance that the present network will remain in place, but the question of how that will happen and how we square that with certain other developments that were referred to earlier remains. I will be interested to hear the Minister’s comments. I beg to move.
Lord Young of Norwood Green
My Lords, I speak to my noble friend Lord Whitty’s “omnibus” amendment and to Amendments 22C and 22E.
They all seek to introduce new clauses to strengthen access criteria to prevent the further erosion of the post office network, to ensure the provision of a wide range of services at all post office branches, and to ensure a fair distribution of the Post Office's proposed new main post offices.
Amendment 22A writes into the Bill the current level of access to post offices in the UK. As part of the 2007 changes to the post office network that included an investment of £1.7 billion and incorporated the Network Change Programme, resulting in the closure of 2,500 post offices, the Government introduced a series of distance-based access criteria. These remain applicable but are not included in Royal Mail's licence and are not set out in law. The minimum access criteria introduced by the previous Government state that 99 per cent of the total UK population should be within three miles of their nearest post office; 90 per cent of the population should be within one mile; 99 per cent of the total population in deprived urban areas across the UK should be within one mile; 95 per cent of the total urban population across the UK should be within one mile; 95 per cent of the total rural population across the UK should be within three miles; and 95 per cent of the population of the postcode district should be within six miles.
“Closure of post offices
(1) Where any company or any other person proposes to close a post office, it shall at the earliest opportunity begin consulting representatives of the employees affected and community and other groups with an interest in the proposed closure, including consultation on that company or person’s plans for alternative provision of services provided by the post office.
(2) No decision to close may be made within the period of six weeks from the start of the consultation required by subsection (1).
(3) No decision to close a post office in a rural or a deprived urban area or an outreach service shall be taken within 16 weeks of the start of the consultation required by subsection (1).”
Lord Young of Norwood Green
My Lords, as all noble Lords will be aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas not only through access to postal services, but also as the shopfront for government services, as a means of benefit collection, and often as the only source of cash withdrawal in an area.
Amendment 22B aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen the opportunity for stakeholders to have input into the consultation process. It also provides for a longer consultation process for potential closures in rural and urban deprived areas. Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced.
Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is, in large part, due to two major closure programmes, the Urban Network Reinvention programme from 2003 to 2005 and the Network Change programme from 2007 to 2009. Between them, these programmes resulted in the closure of 4,854 post offices. That means that more than 1,000 post offices have closed outside of those programmes as sub-postmasters leave, often because their post offices have ceased to be viable, and the Post Office is unable or unwilling to provide a replacement.
Approximately 11 per cent of the post office network is in urban-deprived areas. As Consumer Focus clearly states:
“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.
The 2003-04 Urban Network Reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so far unplanned decline in network size that was arising from sub-postmasters' decisions to close their businesses. At the time of the programme, there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile or unless there were exceptional circumstances to justify the closure.
The Post Office was heavily criticised at the time due to its lack of adequate consultation. As the then Trade and Industry Committee concluded in its report on the programme:
“Post Office Ltd and Postwatch paid insufficient attention to the need to ensure that adequate consultation procedures were in place before the network reinvention programme began. Although improvements have subsequently been made, and while we understand that sub-postmasters could appreciate a speedy conclusion to consultations over the future of their branches, we think that it is vital that all stakeholders should be given the time and opportunity to present their views on closure proposals. A twelve week consultation period would have satisfied this requirement. It was inconsistent of the Government to allow a company of which it is the sole shareholder to ignore guidelines for consultation which it encourages other organisations to follow”.
Equally, the 2007-09 Network Change programme was an attempt to reduce the size of the network with a view to making it economically viable. Over an 18-month period, more than 2,500 post offices were closed and a further 500 were replaced by outreach services. Outreach services provide postal services to communities where a post office is not deemed to be viable. These are often in the form of a mobile post office, a van which visits communities at certain designated times each week and provides a core range of post office services. There are now 772 outreach services in the UK, making up 6 per cent of the post office network.
The Network Change programme was also heavily criticised due to the difficulty stakeholders had in influencing closure decisions. Research into the programme by Consumer Focus found that,
“consumers were not convinced by the UK Government’s reasons for the closure programme. Furthermore, they were very unhappy with the nature of area consultations on closures, as there was little scope to alter decisions and Post Office Ltd had not been seen to respond to concerns raised”.
The Post Office's code of practice for the Network Change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was, in large part, because the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.
Post offices are still closing every week. More than 150 post offices closed on a long-term temporary basis in 2010 alone. There is no guarantee that they will reopen and many are likely to stay closed indefinitely. As Consumer Focus has said:
“Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches”.
According to the National Federation of Sub-Postmasters, 900 post offices, an unusually high number, are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated in sub-post offices and the Post Office is struggling to find alternative premises and service providers.
It is vital that adequate protections are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 22B which ensures consultation ahead of any post office closure, planned or unplanned, and provides additional protection to rural and urban deprived post offices. I beg to move.
Baroness Wilcox
My Lords, I thank the noble Lord, Lord Young, for his Amendment 22B. An annual report on the Post Office network laid before Parliament is an important means of achieving transparency around the Post Office network. The statutory requirement in Clause 11 to lay such a report before Parliament already goes further than the current requirement in the Postal Services Act 2000, which requires only information about the number and location of post offices and their accessibility. Neither Government nor Post Office Ltd can ensure that no post offices close during the reporting period, nor can they ensure that there is always time to carry out a consultation before an office closes. For example, a sub-postmaster or sub-postmistress may retire or move away, or the premises may be damaged by fire or flooding. After all, 97 per cent of post offices are privately owned and privately operated businesses.
Lord Young of Norwood Green
My Lords, I welcome some of the assurances that the Minister gave. Unless I missed it, she did not address the period of consultation but perhaps she can address that in writing. There may also be an opportunity in a further contribution. In the circumstances, I will obviously take into account what she has said and, for the time being, I beg leave to withdraw the amendment.