Michael Fallon
Main Page: Michael Fallon (Conservative - Sevenoaks)(10 years, 9 months ago)
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The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
With permission, Mr Speaker, I wish to make a statement on the future of Royal Mail.
This is an important day for Royal Mail, its employees and its customers. This morning my right hon. Friend the Secretary of State laid a written ministerial statement before the House reporting that the Government have made a formal announcement of our intention to float Royal Mail on the premium segment of the London stock exchange. This follows the report and the statement by my right hon. Friend to the House on 10 July setting out our plans to conduct an initial public offering of Royal Mail shares during this financial year.
The sale of shares will complete the final part of the Government’s reform of the postal sector, which Parliament debated and decided over two years ago. The overall objective of our reform is to continue to secure the universal postal service—the six-days-a-week, same-price-goes-anywhere service—which is vital to our economy. We have already put in place a proper regulatory framework and given Ofcom stronger powers to take the action necessary to protect the universal service. We have taken on Royal Mail’s historical pension liabilities, which were crippling the company’s financial position.
Our reforms, together with the hard work of employees in modernising the business, have put Royal Mail on the road to sustainable health. But under the restrictions of public ownership, its core mail business has lurched between profit and loss and has made a loss in five of the past 12 years. It has lost more than £1 billion, and during that period some 50,000 jobs were lost.
The sale of shares will give Royal Mail the commercial freedom it needs to succeed in a fully liberalised, competitive market. It will give the company future access to the private sector capital it needs for investment and to seize the opportunities for growth, such as increasing parcel volumes arising from the boom in online shopping, a market now estimated to be worth £76 billion. It will give Royal Mail commercial confidence, free from Whitehall interference.
As set out in this morning’s announcement of the intention to float, shares will be made available to institutions and members of the public through intermediaries or via direct application to the Government. When the public offering goes ahead, 10% of the shares will be allocated to around 150,000 eligible Royal Mail employees for free through an employee share scheme. Through that scheme, the Government will be delivering in full on the commitment to employees that Parliament made two years ago. It will be the largest employee share scheme of any major privatisation for 30 years.
The Government will take forward the sale and Royal Mail will publish its prospectus in the coming weeks. We will retain flexibility on the precise timetable, which will be announced at a later stage, just as we will retain flexibility around the size of the stake to be sold, but we intend to dispose of a majority of the shares in the company, taking into account shares sold and the 10% of shares that will be made available to employees through the share scheme. The final size of the stake sold through the public offering will be influenced by market conditions, investor demand and our objective of ensuring that value for money for the taxpayer is achieved.
I and Royal Mail’s management fully recognise and understand the work force’s natural apprehensions about the sale. I have continued to meet the union regularly over the past year to discuss those concerns. I want to reassure employees that a change of Royal Mail’s ownership will not trigger any change in their terms and conditions. The Communication Workers Union will continue to be their recognised representative and their pensions will continue to be governed by the trustees.
As part of a three-year agreement, Royal Mail is also prepared to give legally binding assurances on: the continuation of a predominantly full-time work force; a commitment to provide and enhance existing services to customers using the current work force, with no change to the current structure of the company in relation to those services; and no additional outsourcing of services. Royal Mail and the union are discussing those assurances, along with a new pay deal and reform proposals on the pension fund. I do not believe that industrial action will help the situation, and it will certainly not prevent the sale going forward.
Following last week’s debate on the postal services in rural areas, I want to reassure the House once again that a change in Royal Mail’s ownership does not, and cannot, trigger any change in the provision of the universal postal service.
As universal service provider, Royal Mail will continue to be obliged to deliver to urban and rural areas alike, six days a week, at the same affordable prices. Changes to the uniform nature of that service would require new primary legislation. The Government have no plans for any such changes. Changes to the universal service’s minimum requirements, which include free services for the blind and services to urban and rural areas alike, can be made only by affirmative resolutions in both Houses. The Government have no plans for such changes. Any suggestion that the privatisation of Royal Mail will lead to changes in the universal service are therefore completely unfounded.
I also want to reassure the House about the Post Office—the company that operates the network of post offices. The Post Office is now separate from Royal Mail, and it is not for sale. There will be no repeat by this Government of the closure programme that the Labour party implemented. Far from it; this Government are committed to ensuring a sustainable future for the Post Office. We are providing funding of £1.34 billion over four years to maintain a network of at least 11,500 branches and to ensure that 90% of the population live within 1 mile of a Post Office outlet. That is the largest investment in the Post Office’s history, and it will also enable the modernisation of up to 6,000 branches.
This is a significant day for Royal Mail, and the sale of shares will complete our reform of the postal sector. We want Royal Mail to have the real commercial freedom that it needs to compete and to ensure the universal service that consumers and businesses rightly value. That is what our reform will deliver, and I commend this statement to the House.
Ian Murray (Edinburgh South) (Lab)
I thank the Minister for his statement and for coming to the House today, following his intention-to-float announcement to the stock exchange this morning. Let us start by putting on record our thanks to all the staff at Royal Mail for all that they do, and for their dedication to delivering the mail, come rain or shine, to all parts of the country. Royal Mail is a much-cherished national institution.
The case for the privatisation of Royal Mail has not been made. Its recent annual profits were more than £400 million and we should be allowing it to flourish in the public sector, but the Minister has told the stock exchange today that he will sell a majority stake in the company, on a shortened timetable. He is pushing ahead with this politically motivated fire sale to fill the hole in the Treasury created by George Osborne’s failed economic plan.
This decision will have significant impacts on consumers, businesses and communities up and down the country. The Government are pressing ahead with the fire sale of Royal Mail despite having failed to answer critical questions on the six-days-a-week, one-price-goes-anywhere universal service obligation. The Minister has failed to ensure the long-term maintenance of the USO. He claims that it is written in legislation, but I am sure that he can envisage a scenario in which a privatised Royal Mail comes to the Government and asks for alterations to that legislation.
Why is that a realistic scenario? It is because the regulatory environment does not prevent the cherry-picking of the most profitable parts of Royal Mail by rival companies that operate under much lower service standards than Royal Mail. If the USO becomes unsustainable, the Government will have no choice but to alter it. Royal Mail will still have to deliver daily to Shetland while its rivals enjoy providing services in London, Manchester, Liverpool, Edinburgh and other profitable centres. Pressure will be put on the Government to respond to such requests to alter the USO; otherwise, what is there to prevent the privatised Royal Mail from handing back the USO keys, just as we have witnessed with the east coast main line? The result will be that the taxpayer will, ultimately, pick up the costs.
Concerns have been expressed about higher prices. Other privatised companies have already set precedents in that area. One of the questions posed in the Government’s documents today is whether the Post Office will be affected. The Minister says no, but the 10-year inter-business agreement can be reviewed in four years, and it can be altered if there are material adverse effects on either of the two companies. How can the Minister say that this privatisation does not affect the post office network? A privatised Royal Mail will want to look closely at costs, and that £380 million annual contract could be a good place to start.
The National Federation of SubPostmasters tells us that the privatisation of Royal mail threatens the future of the post office network and, as a result, it now opposes the privatisation. It has called it a “reckless gamble”, and we should listen to what it says. It is not only the NFSP that is against the move. Despite the £2,000 shares bribe to the staff of Royal Mail, a massive 96% of them voted against the privatisation, on a turnout of over 75%. Moreover, they already own the company. A poll in The Sunday Times last week showed 70% of the public to be against it, and former Prime Minister Baroness Thatcher, the architect of privatisation, said that it was a step too far. The Bow Group, a right-wing Tory think-tank, said that it would be deeply unpopular and should not be considered. A vast coalition of groups and organisations echo the concerns about prices, the maintenance of the USO and the impact on the Post Office. And the Minister himself said in a letter in 2009 that he was against the privatisation of Royal Mail. The problem is that the Government cannot see the wood for the ideological trees.
Let me ask the Minister four questions. He said in his statement: “Changes to the universal service’s minimum requirements, which include free services for the blind and services to urban and rural areas alike, can be made only by affirmative resolutions in both Houses.” Would that involve primary or secondary legislation, and would such legislation be dealt with on the Floor of the House or in Committee? Secondly, in what circumstances can he envisage the USO being revised? Thirdly, what assurances can he give us that the inter-business agreement with the Post Office will not be removed or revised? Fourthly, when will the prospectus be drawn up and made available? This is the largest privatisation since that of British Gas. The Government are playing politics with the Queen’s head, and they should think again before it is too late.
Michael Fallon
I do not think that we can legitimately be accused of conducting a fire sale, given that the previous Government were proposing to privatise the company four years ago. The process has hardly been rushed. A lot of people were against that sale; it was a half-baked sale and almost every Labour MP was against it, which is why it was abandoned.
I have already made it clear to the House that the universal service obligation is laid down in statute. It can be changed only by Parliament, and we have no plans to ask Parliament to change it. I can give the hon. Gentleman an absolute assurance in that respect. He asked me about the minimum requirements of the service. They can be changed by affirmative resolution, which would involve secondary legislation. We have no plans to alter those requirements. They will be properly policed by the regulator and will apply irrespective of any change in ownership. The price of stamps is also regulated. The price of a second-class stamp is capped by the regulator, and we have no plans to change that position either.
The hon. Gentleman asked me about the relationship between the Post Office and Royal Mail. They are natural partners in the delivery business, and it is unthinkable that they would not seek to work closely together. They have done more than that, however. Last April, they signed a 10-year commercial agreement to provide for the two businesses to work more closely together.
We heard nothing from the hon. Gentleman about what a future Labour Government would do. It seems extraordinary that, four years on, the Opposition still have not worked out a policy. Even now, they cannot say whether Royal Mail should be public or private; they cannot make up their mind whether they would renationalise the company if there were ever to be a Labour Government again.
Katy Clark (North Ayrshire and Arran) (Lab)
Does the Minister not accept that bringing companies such as TNT—which uses zero-hours contracts and sends people home every day because there is not enough work for them—into the most profitable areas will put pressure on a privatised Royal Mail to cut the terms and conditions of its work force and to cut the service for customers?
Michael Fallon
There is already competition in the postal market from companies such as TNT, but Royal Mail management have made it clear in their discussions with the union that there will be no change to the work force’s current terms and conditions, and they are prepared to sign an agreement with the union on that basis.
Sir Peter Bottomley (Worthing West) (Con)
Does my right hon. Friend believe that the union is opposed because that is Labour policy or that Labour is opposed because that is the union’s policy? Will anything in the announcement stop the Communication Workers Union continuing to support Labour’s constituency party development plans, which strike me as rather political?
Michael Fallon
No, I do not think that anything in the agreement will stop that continuing relationship, but we are still waiting for an answer from the Labour party on whether it will respond to the union’s call to renationalise this company, should we ever be unfortunate enough to have Labour in government again.
Sir Edward Leigh (Gainsborough) (Con)
Given that we started this process in the old Department of Trade and Industry 21 years ago, this must be the longest fire sale in history. It was apparent then, as it is apparent now, that if Royal Mail is to grow it must have commercial freedom. At the same time, it is possible through primary legislation to protect the universal service—the stamp costs the same in rural Lincolnshire as in London. We said that 21 years ago and we have been saying it ever since. When will Labour Members start to listen?
Michael Fallon
I am grateful to my hon. Friend, who played a part at an earlier stage of the story. A lot of progress has been made since then in tackling the pension deficit, setting up a proper regulatory framework and separating Royal Mail from the Post Office, but he is right to emphasise the key point: Royal Mail needs commercial freedom to invest in its future. The private post in Germany, Deutsche Post, is spending about £600 million a year in modernising its network and in automating, and Royal Mail needs the freedom to invest similarly.
Mr Peter Hain (Neath) (Lab)
What credibility can we attach to the Minister’s promises on the universal service when The Daily Telegraph reported last December that Ministers were pressing for a reduction in the commitment to first-class deliveries being provided universally? Is not that the beginning of a slippery slope that the public fear over privatisation, and why is he not imposing the same obligation on competitors to Royal Mail, such as TNT, to deliver to every house in the land, which Royal Mail has and which is costly to it while competitors cream off the most profitable business?
Michael Fallon
This is not a promise or pledge from me that the right hon. Gentleman and his constituents need to rely on; it is a law—an Act of Parliament—that the universal service has to continue to be provided. That law can be changed only by the House. We have absolutely no plans to change it. It is up to the regulator to ensure that competition is proper in that market and that the universal service provision is properly provided by Royal Mail.
Jason McCartney (Colne Valley) (Con)
Yesterday morning, I met some RAF personnel who have just returned from six-month tours in Afghanistan, and I know the importance they put on the mail and parcels that they receive while serving our country overseas. Will my right hon. Friend say what arrangements are in place for armed forces personnel serving overseas?
Michael Fallon
The postal service will continue. It is funded by the Ministry of Defence in agreement with Royal Mail.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
As organising secretary of the communications group in this place for the 20 years I have been here, I am not surprised that the Minister is the person bringing this forward—domesday for Royal Mail is reality—but when someone gets old they will do anything to get into a ministerial car, I suppose.
The point is that the Postal Services Act 2011 is deeply flawed, because it will allow a Minister in a future Government—or even this Minister, although he will not do it before 2014—to go to a Statutory Instrument Committee, not the Floor of the House, and destroy all the things that are guaranteed at the moment. Is it not true that, although there might not be enough money to renationalise the industry after it is given to the private sector, only a Labour vote will guarantee that the universal service and the terms and conditions of employment in the Act will be sustained by a future Government?
Michael Fallon
This Government have put the protection in place that the universal service has to continue and be provided irrespective of the ownership of Royal Mail.
Martin Horwood (Cheltenham) (LD)
The employee share percentage is not as high as originally advocated by the Liberal Democrats, but it is nevertheless the most significant in many decades. Has the Minister heard from the Communication Workers Union that it welcomes that significant advance in worker ownership?
Michael Fallon
I have had discussions with the union about the details of the employee share scheme. At the moment, the union is opposing privatisation, but my hon. Friend will recall that the unions have opposed previous privatisations, yet their own members have taken the schemes up. I will be interested to see how many members of the Communication Workers Union opt out of the free shares that are being made available.
Mr Dennis Skinner (Bolsover) (Lab)
Does the Minister recall—he probably does—that in the late ’80s we had a wholesale privatisation of almost all the public utilities, with the exception of this one? That was under what Mrs Thatcher called the share-owning democracy. It is almost as if I can hear the same words from the Dispatch Box today. What happened to that share-owning democracy? Almost without exception, the public utilities are now owned abroad and are ripping off the British consumer. The only difference between now and then is that those lickspittle Lib Dems have joined the Tories to privatise this one. What an utter disgrace.
Michael Fallon
I do recall hearing roughly the same sentiments from the hon. Gentleman back in the 1980s, but I do not want to return to a world where people waited weeks and months for a phone to be installed. Is he really suggesting that we go back to the days when the state owned car companies, electricity, gas, water and all the rest? Let me be clear about his allegation that the consumer could be ripped off: the price of the second-class stamp will continue to be regulated and will be set by the regulator. It will not be possible for Royal Mail to increase prices in the way he suggests.
Robert Halfon (Harlow) (Con)
I welcome the transfer of shares from Royal Mail to the Royal Mail workers, but will my right hon. Friend reassure my constituents in Harlow that we will not go the way of the water companies, where the directors paid themselves huge wages and increased prices for consumers? Will he set out the consumer protection?
Michael Fallon
Let me reassure my hon. Friend absolutely that there are no deal bonuses for the senior management as part of the share sale. The protection for the consumer has been laid down by the House in the Postal Services Act 2011, which he will recall—I hope—voting for two years ago. The regulation is set out there and the price of the stamp will continue to be capped by the regulator.
Caroline Lucas (Brighton, Pavilion) (Green)
Does not the Government’s insistence on flogging off Royal Mail demonstrate their pursuit of ideology rather than evidence, given that Royal Mail is doing pretty well and is in profit? Will the Minister guarantee that profits following the sell-off will be invested in what is good for Britain, rather than what is good for a handful of shareholders?
Michael Fallon
There will be many more than a handful of shareholders; I hope that Royal Mail will have millions of owners in the future. Let me absolutely reassure the hon. Lady on one part of her question: there will be continuing regulation of the price of the stamp by the regulator and the universal service will continue to be protected. Neither will change with the change in ownership.
Richard Graham (Gloucester) (Con)
It is true that privatisation is not always the right way forward for public services, and as secretary of the all-party parliamentary group for post offices I am clear that it is not the way forward for post offices. Therefore, I welcome the Minister’s complete reassurance today that post offices are separate and will remain in public service.
However, I believe that the only way for the business of Royal Mail to grow is to have that chance to invest in new technology, so that it can track parcels, compete with its competitors, win business, grow, employ more people in Britain and export its services abroad so that it can become a global brand and a great British success. Does the Minister agree that this is the right way forward for a successful Royal Mail?
Michael Fallon
Yes, this is one of Britain’s biggest businesses and the biggest delivery company in Britain, and it is a profitable company in a fast-growing market, particularly the parcels market. There are huge opportunities as online shopping develops—it is more developed in this country than in some European countries, so there are huge opportunities at home and in Europe for Royal Mail. It needs, however, commercial freedom and access to capital markets to take full advantage of those opportunities.
Clive Efford (Eltham) (Lab)
The Government cannot have it both ways. They cannot have a regulatory regime that allows services to be cherry-picked where profitable by the jackals that will buy Royal Mail, and then say they will protect the universal service. We all know it will be broken up, but will the Minister say whether his description of the universal service requires people to collect their mail from a central collection point, rather than its being delivered door to door?
Michael Fallon
The universal obligation is set out by the regulator and is not—and cannot be—affected by the change in ownership. Any change to the universal obligation would be made by this House, and as I have said, we have no plans to change that. On cherry-picking and so on, it is for the regulator to police the market and ensure there are no unfair practices.
Julian Smith (Skipton and Ripon) (Con)
May I congratulate the Minister on delivering a deal that many other Governments failed to deliver? Even the prince of darkness failed on this one. Instead, the Minister is giving Royal Mail hope and a vision for the future. Does he agree that for my rural constituents in north Yorkshire, innovation from the private sector, combined with the service obligation guarantee, could mean better services in the future?
Michael Fallon
I am grateful to my hon. Friend for what he has said. Today’s announcement builds on work done by the House in passing postal service legislation, and by my two Liberal Democrat predecessors in getting us to the position we are in today. Yes, there is every opportunity for Royal Mail to face its future with confidence, access to capital markets and new commercial freedoms, and every reason to expect the service to continue to improve.
Mr David Hanson (Delyn) (Lab)
Given that the minimum purchase of shares is £750, will the Minister explain how my low-paid constituents such as pensioners or the unemployed will retain a stake in what they already own? Is this a transfer from us all to the richest in society?
Michael Fallon
I thought the Labour party opposed this privatisation, but if there are ways we can help the right hon. Gentleman make it more accessible to his constituents, we will certainly let him have details of the website and so on. It is fairly standard to set a minimum threshold—for example, it was £1,000 in the recent Direct Line public offering—and the amount simply reflects standard practice. We hope there will be sufficient opportunity for retail participation, as I would not like members of the public who wish to subscribe to miss out.
Nigel Adams (Selby and Ainsty) (Con)
To build on a previous question by my hon. Friend the Member for Colne Valley (Jason McCartney), will the Minister confirm what protections will be in place to protect the excellent discounted delivery service for armed forces personnel serving overseas?
Michael Fallon
Those arrangements will continue. That is an arrangement between the Ministry of Defence and Royal Mail, and both parties have every interest in ensuring it continues. There will be no change for members of the armed forces.
Mr Mike Weir (Angus) (SNP)
The Minister makes much of the protection for consumers, but Ofcom has already shown its true colours by abandoning all price caps other than that for second-class mail. Does the Minister realise that experience of previous privatisations means that no one outside his Government believes that the regulator will give consumers protection on either services or prices?
Michael Fallon
The regulator is independent of the Government, Ministers and this House, and it is not possible for it to change legislation that we have passed. The cap remains in place.
Guy Opperman (Hexham) (Con)
My constituents in Northumberland want a six-days-a-week universal service, but with incentives and shares for staff, and want Royal Mail to have the commercial freedom to invest, innovate and compete with online and other providers. Will the proposal address the problems that successive Governments have failed to address over successive decades?
Michael Fallon
Yes, I believe it will. It will give Royal Mail the chance to face its future not just with confidence but with access to capital markets and the commercial freedoms it needs to respond to new opportunities, particularly in a rapidly growing parcels market.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
The Minister has repeatedly mentioned the cap on the cost of a stamp. Will he confirm that that relates only to second-class mail? Does he understand the concerns of many small businesses that rely on first-class mail, and what assurances can he give them?
Michael Fallon
There is a cap on the second-class stamp, and a provision that the first-class stamp must be affordable—something the regulator must keep a close eye on. It is not simply the second-class stamp.
Charlie Elphicke (Dover) (Con)
Has the Minister read the statement on saveourroyalmail.org:
“If the Royal Mail is sold off affordable prices, rural services and free postal services for our service men and women as well as vulnerable groups will disappear”?
Will he confirm whether that statement is true or whether it is so false and misleading that the Advertising Standards Authority might intervene?
Michael Fallon
A number of unfortunate scare stories have been put about in connection with this sale, but I emphasise that there is no threat to existing arrangements for the blind or the armed forces. Those arrangements are not being changed by this announcement.
Mr Geoffrey Robinson (Coventry North West) (Lab)
Is the Minister aware that in Coventry, particularly in my constituency, there will be widespread relief that post offices are being left out of this privatisation? Just a few weeks ago I had the honour of opening a newly modernised and already highly successful post office facility, which shows that companies in public ownership can do well and services can be maintained.
Michael Fallon
I am glad the hon. Gentleman was able to take some credit for Government investment in his local post office, and I am sure he drew the attention of his constituents to the fact that it was due to this Government’s money and commitment to modernising the network. I did the same when I had the honour of opening a newly modernised post office in my constituency a few weeks ago. Let me be clear: the Government are not privatising the Post Office. What is being put up for sale is Royal Mail—the delivery part of the business. The Post Office will remain in public ownership.
Alison Seabeck (Plymouth, Moor View) (Lab)
Post offices in Plymouth and rural Devon are a vital resource. Will the Minister say whether a mechanism exists so that if the private company decides to break the link with the Post Office post-2022, Parliament and the Government will have some say in the matter to protect the public interest?
Michael Fallon
The agreement is, I think, the longest possible under European Union law—as the hon. Lady said, it is a 10-year agreement taking us to 2022. As I said in an earlier answer, it is pretty unthinkable that Royal Mail and the Post Office would not want to continue a close working relationship, but it is, of course, up to the House to scrutinise that agreement any way it wants.
Andrew Percy (Brigg and Goole) (Con)
The Labour party in my constituency is so committed to Royal Mail that on the rare occasions it delivers literature, it chooses to use Royal Mail’s private sector competitors to do so. Those same people have being saying publicly that the Government are selling off the Post Office. Will the Minister confirm for their benefit that the Post Office will not be sold off, and may I urge him to go further and demand an apology from the Labour party for the vast number of post offices it closed in communities in my constituency?
Michael Fallon
I do not think we are likely to get an apology for the extensive and damaging closure programme for which the previous Government were responsible, but at the very least the work force of the Royal Mail is entitled to some statement from the Labour party as to whether it would renationalise the business. I hope that someone from that party will make its position clear before we go much further into this statement.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I declare an interest in that I worked for Ofcom before entering the House. From that experience, I know that the only way that natural monopoly networks of this type work in the private sector is when we have real competition at the infrastructure level on the ground, as in telecoms. Is the Minister truly proposing that we will have multiple posties delivering to doorsteps from North Devon to Newcastle, or will we end up with another bloated private sector monopoly vested interest, as we have seen in water, energy and rail?
Michael Fallon
This is not a monopoly market at the moment. There are companies competing in the marketplace, as they have to do under European law. This House has decided that there should be that competition in that particular way and has established Ofcom, for which the hon. Lady used to work, to supervise that competition.
Mr Philip Hollobone (Kettering) (Con)
Residents in the borough of Kettering and across Northamptonshire very much value their local post offices. Can the Minister confirm that those post offices will not form part of the Royal Mail privatisation, and indeed will be subject to record additional new investment? Can he also assure the posties who work in the Kettering delivery office that their terms and conditions will not change, and they will be entitled to free shares in up to 10% of Royal Mail?
Michael Fallon
I confirm that the Government are committing more than £1.3 billion to modernise the post office network and I can also confirm that all those eligible for Royal Mail shares—those employed by Royal Mail at the time of the statement on 10 July—will be eligible for free shares. More details will be published with the final share offer.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
Can the Minister help the House with an urgent missing persons case? Where is the Minister with responsibility for postal affairs? Is she in hiding because it is only with the help of Liberal Democrat votes that a privatisation that even Mrs Thatcher thought was beyond the pale can go ahead?
Michael Fallon
This is a statement about Royal Mail, although I have also given assurances about the future of the Post Office. This is a coalition policy that was in the coalition agreement and Ministers across the coalition have worked on it. My two immediate predecessors with responsibility for Royal Mail were Liberal Democrat Ministers, and I have had support throughout this process from my right hon. Friend the Secretary of State.
Nia Griffith (Llanelli) (Lab)
In the fattening up for privatisation we have already seen price hikes and the ending of 7 pm collections in many towns. What guarantees can the Minister give that there will be no further erosion of collection, such as the getting rid of post boxes, fewer collections later in the day and some rural post offices not even having collections every day? What guarantees can he give about the delivery of parcels six days a week? None of those issues are fully covered by the legislation.
Michael Fallon
I reassure the hon. Lady that all those matters are covered by the licence conditions under which the Royal Mail operates. The licence is given by Ofcom, and it is for that body to ensure that the licence conditions are adhered to.
Jim Shannon (Strangford) (DUP)
What Royal Mail needs is new investment, upgrading and modernisation within continuity of service. Can the Minister give an indication of the additional investment that will take place as a result of the sale of shares in Royal Mail?
Michael Fallon
I told the House of the scale of investment now being made by the privatised German postal service, Deutsche Post. That £600 million of investment gives us an idea of the scale of investment that may be needed to help to modernise the Royal Mail. It has to modernise its network, invest in its infrastructure and automate more of its parcels business. It can no longer compete for scarce public resources with schools and hospitals that will always have priority over such investment. It is absurd to have a company of that size as the only really big British business that cannot access the private capital that it needs. That will end.
Derek Twigg (Halton) (Lab)
Many of my constituents have contacted me to say that they oppose this privatisation. They recall similar promises of improved services made when the utilities were privatised, and few people could be found today who believe that happened. Why does the Minister think that a majority of the British people are opposed to his policy?
Michael Fallon
There are members of the public who do not yet fully understand how Royal Mail has been separated from the Post Office and who have chosen to believe some of the untrue scare stories that have been put around. The hon. Gentleman will also recall that almost every privatisation that I can remember has initially been opposed—or failed to command universal support—but nobody now suggests that we reverse those privatisations of the 1980s.
Diana Johnson (Kingston upon Hull North) (Lab)
My constituents are concerned that a national asset—our Royal Mail—will end up in foreign ownership. What guarantee can the Minister give that that will not happen?
Michael Fallon
By the end of the privatisation process, the Royal Mail will have multiple owners, including the work force itself, which will own 10% of the business. We have chosen not to sell Royal Mail to another mail operator or a single private equity owner, but to make this a public offering so that Royal Mail will have millions of new owners. The hon. Lady should also consider the opportunities for Royal Mail in international markets. Royal Mail already has a subsidiary, GLS, and there will be huge opportunities for it to win more business overseas and across Europe.
Mr William Bain (Glasgow North East) (Lab)
The hard-working staff of Scotland’s largest sorting office, based in my constituency, are very much against these plans. Is the Minister aware that they have been joined this morning by TNT, which described his plans in The Daily Telegraph as
“preposterous…bad for consumers, bad for business”?
Is he not increasingly isolated from what is in the best interests of the industry and of the country?
Michael Fallon
It sounds as though TNT is a little nervous about a more competitive and better financed Royal Mail. We will see how many of the hon. Gentleman’s constituents working at that sorting office choose to opt out of the share scheme in the next few weeks.
Glenda Jackson (Hampstead and Kilburn) (Lab)
The Minister continues to refute the allegation that this is a fire sale, but as 70% of people in this country are totally opposed to such privatisation, will not the flotation occur in an atmosphere in which the basic share price will automatically be reduced, so the taxpayer will have been cheated?
Michael Fallon
It is one of the primary objectives of the sale to secure maximum value for money for the taxpayer, and of course it will be subject to scrutiny in this House, as previous sales have been, and by the National Audit Office.
Mr Jim Cunningham (Coventry South) (Lab)
The Minister can say what he wants about the work force having a say because it owns 10% of the company, but within a couple of years those shares will be sold. That is what happened at Rolls-Royce. The public will be the loser because they will not get any benefit from the billions of pounds that have been invested in the service. It should remain where it is, and the public should get the benefit of its profitability.
Michael Fallon
One point of agreement between the union and me has been the need to ensure longevity so that the shares are held, not sold off the next day, by the work force. They will have to hold the shares for a minimum of three years before they are able to sell. During that time, they will receive dividends and be able to vote on the future policy of the company, and day by day they will see the actual share price.
Nic Dakin (Scunthorpe) (Lab)
The Minister struggled to answer the question by my hon. Friend the Member for Kingston upon Hull North (Diana Johnson), so I will give him another go. Can he guarantee that the Royal Mail, with the Queen’s head on its stamps, will continue to remain UK-owned and UK-headquartered?
Michael Fallon
It will of course be UK-headquartered. It will have multiple owners after privatisation. Those who are located in the UK are able to apply for shares on the issue. We are not restricting the issue to UK citizens or UK nationals. Anybody located here can invest in the business through the retail offer. Having a multiple ownership is the best possible protection for the company. I repeat that we deliberately decided not to sell the company to a single owner or single private equity company.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
TNT, one of Royal Mail’s competitors, provides the core service in Holland on a similar basis to the Royal Mail, with VAT exemptions. However, the universal service obligation in Holland and across much of the EU is very different from the UK USO—it is on a five-day basis. The Minister knows that his Government’s Postal Services Act 2011 allows him to go upstairs and, through a statutory instrument, change the USO from six days to five days. Will he do that in the future?
Michael Fallon
No, it is not possible to change the six-day service through a statutory instrument. That can only be changed by this House. As I have said, we have absolutely no plans to change that obligation.
Mr Iain McKenzie (Inverclyde) (Lab)
In his statement, the Minister gave some commitments on the future of the Royal Mail. Will he go one step further and give some guarantees that there will be no job losses, no move to increase part-time working, no closures of sorting offices, and a continuation of the much-loved Saturday delivery?
Michael Fallon
Let us be clear: there have been 50,000 job losses in the last 10 years of public ownership, so public ownership is no guarantee of job security. The best guarantee of job security is to be able to work for a company that is growing and investing in its future, and able to access the finance it needs. The management of Royal Mail have put on the table a series of assurances about future terms and conditions, which they hope the union will come to agree before we get to the point of privatisation.
Stephen Timms (East Ham) (Lab)
The Minister has told us that the price of a second-class stamp will be regulated, but that will not reassure people who pay regulated energy bills. What grounds does he have for his assurance that price control will be effective in the case of Royal Mail?
Michael Fallon
The price control arrangements were set by this House, and they are for Ofcom to regulate. Ofcom has capped the price of a second-class stamp, which cannot rise higher than 55p. It is not at that level yet, but that is the cap imposed by Ofcom. Ministers cannot interfere with that.