Royal Mail

Lord Young of Norwood Green Excerpts

Wednesday 10th July 2013 Lords Chamber

[Lord Young of Norwood Green]

My Lords, I thank the Minister for repeating the Statement. I should declare an interest as a former joint general secretary of the Communication Workers Union and, many moons ago, an apprentice in Royal Mail when it was called the GPO.

We opposed the Government’s privatisation of Royal Mail during the passage of the Postal Services Act 2011, and we oppose it today. Maintaining Royal Mail in public ownership gives the taxpayer an ongoing direct interest in the maintenance of universal postal services in this country; helps to safeguard Royal Mail’s vital link with the Post Office; and ensures that the taxpayer can share in the upside of modernisation and the increased profits that Royal Mail delivers. Despite that, the Government have pressed on regardless with this sale and they have failed adequately to justify why they must sell now.

On one side, there is an unusual coalition against this move: the Opposition; the Conservative-supporting Bow Group, which described this move as “poisonous”; the Royal Mail's employees, who are represented by the CWU; and the National Federation of SubPostmasters. The right honourable Michael Fallon, Member for Sevenoaks and Minister for Business and Enterprise, wrote to a constituent in 2009 saying that he, too, was opposed.

On the other side, there is the Government, which now includes the Minister of State. The Government are ignoring the huge changes that they acknowledge have taken place since the passage of the Act. Chief among them is the more than doubling of Royal Mail's profits to £403 million and the significant progress on the modernisation programme, which calls into question the assertions that there is no prospect of Royal Mail being self-financing in the future.

I noted carefully the Minister’s reference to the package that Hooper recommended; it is true that Ofcom and the pensions arrangements were part of that package. However, he did not recommend full-scale privatisation, but an injection of private capital.

We have a number of concerns. The Government are rushing to sell the business without making the case as to why the sale of shares in Royal Mail, through an initial public offering, must be carried out now; nor have they illustrated how a sale will deliver maximum value for the taxpayer. They have failed to show that the climate for an IPO now is a good one or how much capital would be injected into the Royal Mail business as a result. Instead, they are pressing ahead with a fire sale this financial year in a desperate attempt to cover the gaping hole in George Osborne’s failed economic plans.

There are further points that the Government have failed to address. First, there is the timing of the sale. No evidence has been provided to demonstrate that the Government will secure best value for money for the taxpayer from a sale at this point in the Parliament. Additional years of profitability may well increase the sale value in future years.

Secondly, there are unresolved competition issues. Legitimate questions regarding the fairness of competition posed to Royal Mail by other postal operators—given that other postal service operators are not subject by the regulator to the same high performance and service quality standards as the Royal Mail—have not been resolved. The different services required of Royal Mail by the regulator arguably put Royal Mail at a disadvantage compared to its competitors.

Thirdly, there are the funding needs of the business. To what extent will Royal Mail be able to raise capital from other sources to meet its funding needs if it enters into private ownership?

Fourthly, there is the impact on the Post Office network. In January 2012, a 10-year deal was entered into between Royal Mail and the Post Office under which Royal Mail would continue to use the Post Office to deliver a range of Royal Mail services. However, there are no guarantees that this arrangement will continue on expiry of the agreement.

Fifthly, there is the impact on consumers and businesses. Royal Mail assets could be sold off, generating large, short-term profits for the private company: for example, high-value urban centres could be sold off to be replaced by distant depots, making it worse for the consumer. What assurances can be given that regulation will be sufficient to protect consumers from being ripped off in the same way that they were after transport and energy privatisations?

Sixthly, there is the issue of postcode access for businesses. As part of the proposed sale, it has been reported that the Royal Mail maintenance of post-office codes is up for sale, with a wider negative impact on business. I would welcome the Minister’s response on that point.

Finally, in relation to employee ownership, we welcome the giving of 10% of the shares in the business to its employees. However, if that is such a good idea, and given that the Government are proposing fully to mutualise the Post Office, why is the share being given to Royal Mail employees not larger?

In conclusion, I have the following questions for the Minister. First, Royal Mail faces competition from other postal service operators which are not, as I have said, subject to the same high performance and service quality standards as Royal Mail, putting it at a competitive disadvantage. How will that not depress the sale price, and what will the Minister do about it?

Secondly, this cannot be allowed to put the Post Office at risk. What guarantees can the Minister give that a privately owned Royal Mail will renew the agreement under which the Post Office provides Royal Mail products, which is essential to the Post Office’s future?

The Minister said that the universal service obligation is fully protected; that it will take precedence; and that if things start to go wrong, Ofcom will renew the financial burden. What exactly does he mean by “renew the financial burden”?

We believe that this is an ill-thought-out process that will not benefit the taxpayer, the consumer or the employees, and believe that the Government should think again.

--- Later in debate ---

[Viscount Younger of Leckie]

My noble friend would probably be surprised if I gave an accurate answer to the first question, so I will pass on that one. In terms of the price, as I mentioned, the prospectus will be produced at some point between now and April 2014, which is the period during which we anticipate the sale will take place. Market conditions and investor demand will also be part of that aspect.

[Lord Young of Norwood Green]

I raised a number of questions that the Minister did not answer and, before he sits down, I request that he addresses those in writing. I do not have time to reiterate them all. I also could not help but observe that the right reverend Prelate did not get an absolutely explicit answer on the uniform tariff and the universal service obligation. Maybe I missed something.

[Viscount Younger of Leckie]

I will be very happy to write to the noble Lord, Lord Young, on any questions that I have not managed to answer.