Postal Services Bill
Debate between Michael Connarty and Baroness Burt of Solihull
Lorely Burt
The hon. Gentleman says that having large numbers of shares does not necessarily help, but being a small shareholder can be extremely helpful in large companies in which even small shareholders have a say and a voice.
Michael Connarty
I only wish that that were true. I assure the hon. Lady that although small shareholders can go along and make a protest and trumpet what they have to say, the bonuses, the sale of companies and the redundancies will still be voted through regardless of small the shareholders’ shouting. I am not in the business of standing on the fringe and shouting. I would much prefer the Bill to be rejected out of hand. I am against the privatisation of Royal Mail and I believe that the pension fund deficit was caused by the holidays taken by Royal Mail and Post Office Ltd, which were allowed by previous Governments of both hues. I would rather be standing here opposing what the Government are about to do to Royal Mail because I think that all the assurances we have been given, hard-won though they are, will not make a difference.
Capitalism will work as capitalism works and will do what is to the advantage of the people who hold the majority of the shares for the bottom line of their dividends. That will mean that people will lose their jobs and the Post Office will not be sustained using Royal Mail, which will not continue to provide a universal service at one price. The amendments will have to come with a lot more specific targets, which I do not see in the Bill or in any of the schedules to the Bill. Although I welcome the smaller amendments that have been made in this part of the Bill, I do not believe they will make a major difference to the outcome for Royal Mail or Post Office Ltd.
Postal Services Bill
Debate between Michael Connarty and Baroness Burt of Solihull
Michael Connarty
The hon. Lady is moving on from mutualisation of the post office network. I thought she might ask the Minister where the guarantees will be when the Post Office is mutualised or split off. I believe that we have to put in £270 million at the moment to keep the network alive. I can see no guarantee under the Bill that the Post Office will be supported. How could mutuals find that £270 million to keep the network intact?
Lorely Burt
We have already had the announcements of the Secretary of State, which have covered the point that the hon. Gentleman has made. The Secretary of State might wish to address that point in his summing up.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I declare an interest, as I have worked with the Scottish branch of the National Federation of SubPostmasters over a number of years to oppose the closure of post offices introduced by the last Government, and I will continue to oppose closures. I have also worked with the Communication Workers Union, while my predecessor Harry Ewing—now, sadly, deceased—was a postman and eventually a Minister. I am deeply involved in this, and I am secretary of the liaison group for the Communication Workers Union in this Parliament.
The Bill does not provide a logical or necessary solution to the problems of Royal Mail, and it is not the only response to the Hooper report. It is, indeed, another Liberal Democrat betrayal. It is not part-privatisation, but a political decision by the Liberal Democrats to join in the carnage in the public sector.
Michael Connarty
I will take no interventions, as many Members wish to speak and I want to take just six minutes.
This is not about a part-share sale, which was the policy on which the Liberal Democrats were elected, but, to quote from the Bill, it is about allowing
“for an unrestricted sale of shares in Royal Mail”.
The Bill returns to the 1992 plan to break the link between Post Office Ltd and Royal Mail, with all the duplication of management and logistic structures that it will require, which will eat massively into the £1.2 billion set aside to set up a separate Post Office Ltd. It will tear up the operating synergies, which provide a third of Post Office Ltd revenues from services provided for Royal Mail, and there is no guarantee that these will continue. The current subsidy is £180 million a year; it will have to rise £270 million a year to sustain the post office network in future.
The problem is that there is no guarantee that the subsidies will be provided. Clauses 11 demands only an annual report and says nothing about what the Government will do to guarantee the post office network that sends the report. The sub-post offices’ postal and Royal Mail services that are vital to the commercial survival of villages and the sub-post offices in rural and urban areas will be jeopardised.
The Hooper report called for a number of things, none of which required the privatisation of the Post Office. The final report specifies three necessary elements: private sector investment, the Government taking on pensions, and changing the regulations, as the Bill does—in fact, in that respect, it is exactly the same as the previous Labour Bill. Hooper 1 recommended new management, and we have it, from a noted organisation that has been associated with high-quality services; Moya Greene has come from Canada Post to run Royal Mail. All parts of Royal Mail, including Post Office Ltd, are profitable at this moment. There is no need for a subsidy.
On the recommendation on pensions, let us look at what happened with BT’s pension deficit. The Government thought that they had taken on a liability of £7 billion, but the High Court has just ruled that the liability is an exposure of £24 billion, because it must include everyone who joined BT after its privatisation. There are no guarantees that the same will not happen with this privatisation. The clear and simple way to deal with the matter is to accept that we must nationalise the debt. If we did that now, Royal Mail would not have to pay £291 million a year to service its deficit. The changes involving Ofcom would bring in another £120 million of income, which would make £411 million available to Royal Mail to complete its modernisation.
Increased efficiency was the basis of the other recommendation in Hooper 1. In a vote in March 2010, there was two-to-one support among CWU members for the new modernisation programme. That was one of the first Hooper 1 criteria. Many opportunities were missed between 2000, the passing of the Postal Services Act and the granting of commercial freedom and the 2010 decision. Loans were given, but the management failed to deal with distribution or with sorting office networks. Sorting machines were bought from France and left uninstalled by the management. Bullying was used to downsize the number of staff in the distribution and delivery centres. The management’s actions were based not on efficiency, but simply on a desire to keep people out when they left the service. The chief executive who failed in that regard was given a £2.8 million bonus for his trouble.
The fully funded modernisation scheme based on the business transformation agreement that was reached in March is a great leap forward, but, as has been said, it will be massively painful. There will be substantial job losses. The whole thing could be handled by means of a change to allow Royal Mail to raise finance directly, without the need for privatisation or the sale of shares.
Let us examine the myth of “necessary privatisation”. Share sales do not guarantee investment; they merely move the ownership of shares to another body. Following Hooper 1, it was impossible to find any organisation, even TNT, that would take an interest in buying shares in Royal Mail. The failure came about not because those organisations feared that they would not gain enough control, but because they realised that there was not enough money to be made from the delivery of mail under the present universal service delivery obligation.
So what will happen? A private equity company will buy into Royal Mail. It will probably borrow money, and then load the debt on to Royal Mail. The Business Secretary will deliver a lot of money to the Treasury rather than to Royal Mail. It is likely that the service will then be split between the part that makes money by picking up and sorting the mail and the part that deals with delivery, which will be dumped on regional sub-contractors who will fail both financially and in terms of delivery. The whole service will then collapse.