Royal Mail

Mike Weir Excerpts

Tuesday 25th June 2013 Westminster Hall

[Katy Clark]

I am grateful to the hon. Lady for that intervention. Of course, I served with her on the BIS Committee for a considerable period. Clearly, she is making a party political intervention. Unfortunately, we are still seeing post offices closing as a result of the vulnerable situation that they are in, and we must not be complacent. We need to ensure that we put in place a framework whereby the Post Office is able to survive and our mail services can operate in such a way that they have a long-term future.

[Mr Mike Weir (Angus) (SNP)]

rose—

[Jake Berry (Rossendale and Darwen) (Con)]

rose—

--- Later in debate ---

[Mr Weir]

I thank the hon. Lady for giving way and she is quite right that some post offices are still closing. However, many other post offices are suffering from having to offer reduced services, because they are being moved on to the Post Office Local model, and in some cases the Post Office is approaching local postmasters and asking them if they want to change or retire and consequently downgrading the service.

[Katy Clark]

The hon. Gentleman puts his point well. I will now move on to discuss some of the issues relating to Royal Mail itself, because I think that we have fully explored some of the challenges that the post office service will face if this privatisation goes ahead.

Since the legislation was passed, the Government have taken a considerable number of steps to prepare Royal Mail for privatisation. Royal Mail Holdings Ltd, as it is now known, is currently a 100% publicly owned UK-wide company, which was established as a sister company to the Post Office. This restructuring took place as part of the preparation for privatisation. A legal framework has been created that makes Royal Mail responsible for the collection, sorting and delivery of letters and parcels under a universal service obligation. The Government have indicated that they intend to sell shares in Royal Mail in the financial year 2013-14. Indeed, in a written statement in April, the Minister said that the Government would proceed with the sale of shares at what he called a fair commercial price.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

I am pleased to appear under your chairmanship this afternoon, Mr Davies. I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark), who made a fine speech in introducing this important debate.

I served on the Committee that considered what is now the Postal Services Act 2011. I opposed privatisation at the time; nothing that has happened since has persuaded me to do otherwise, and I still strongly oppose privatisation. Areas such as mine have seen major changes in postal services, with reductions in mail collections and ever later deliveries. I live in a town, but I do not now get my mail until about 1 pm; in rural parts of my constituency, it is much later. For me, it is a minor inconvenience, but deliveries are crucial for many businesses in my constituency.

It is the business side of the matter that I want to comment on. Royal Mail is not a drag on public spending, but an important economic driver, especially in rural areas. In his evidence to the Committee that considered the Postal Services Act 2011, Richard Hooper quoted the point that I made to him at the outset of his 2008 investigation of Royal Mail, during the Labour Government. I observed that the universal service is crucial to businesses in rural areas, and have argued that point ever since. It colours my whole attitude to the issue; the service is crucial to rural areas throughout the UK.

Mr Hooper made a point about a young lady with a mobile phone and laptop, and wondered why she would need anyone’s physical address. Perhaps she has now moved on to a smartphone, and I empathise with that view, because young people are no different in Angus from anywhere else. They use e-mail and texts. Mr Hooper made the point that only about 10% of mail is private letters, and about 8% of that is sent around Christmas—it is mainly cards. That is a sobering fact, and I suspect that things have deteriorated since then. It seemed to me that there were fewer Christmas cards about last year. Perhaps that was because of the rising cost of postage, or perhaps I am simply less popular—I do not know. The youngster with the phone and laptop may never feel the need to write a letter, but I am almost certain that if they live in a rural area they will use the internet to order books, CDs or DVDs, even though those may be under threat from digital streaming, and, increasingly, fashionable clothing—not a problem I have. There are very few outlets for entertainment and fashion items in rural areas now.

It is sobering that when last Christmas I, like many others, visited my local sorting office, I was struck by the fact that it was stacked with packages from Amazon and similar online retailers. That is where the great growth in mail delivery is happening. The important point for areas such as mine is that the process works both ways. Not only do people in rural areas use the post to get items delivered; crucially, small and medium-sized businesses in those communities use Royal Mail to get their products out. In many cases they do not have an alternative. The other private companies do not offer a service in many parts of rural Scotland. The universal service is crucial to those businesses, and it is crucial to those of us who hope that businesses will be created and sustained in rural areas.

The hon. Member for Stourbridge (Margot James) said that the regulations under the Bill were sufficient to enable a universal service obligation to be maintained. I am afraid I do not accept that. There are many aspects of the Bill that cause me great concern. That is nothing new, because under the previous system Royal Mail investigated the introduction of a zonal pricing system. I must ask what protection the customer really has. Ofcom has already removed price caps from all Royal Mail products, apart from the second-class universal mail service, with the result that that is now the only truly universal service. First-class mail can be priced out of the reach of many, and with the price of a first-class stamp already 60p—one of the highest in Europe—how many people or, crucially, small businesses will send first-class mail?

The Federation of Small Businesses in Scotland has noted a substantial increase in the small packages rate, which is affecting many small businesses in rural areas of Scotland; and things could get worse. There is nothing in the 2011 Act to prevent Royal Mail or a private owner from introducing zonal pricing. I took that point up with Ofcom, which confirmed in a letter to me:

“Ofcom does not have any powers to restrict Royal Mail from introducing this pricing variation related to user location, as the Postal Services Act 2011 limits our regulatory powers to universal services and access”.

That is from the horse’s mouth—from the regulator that oversees the service. There is nothing to stop such a variation in price being introduced now, never mind after the service falls into the hands of a private operator.

The Government have talked about an initial public offering, but they have not ruled out a sale to one of the major international companies, such as TNT and Deutsche Post. The Communication Workers Union in its document in relation to the Bill made the views of some of those companies about the universal service very clear: they amount to an intention to get rid of it if they can, because they consider it to be an anchor on their business.

Ministers have previously argued that the universal service is a benefit to Royal Mail, as it is the only carrier that guarantees a delivery to every address. However, that ceases to be true when other companies take on the most profitable routes. A couple of months back I met a man delivering mail on the stairs of the block of flats where I live in London. He was wearing a postal uniform, but not a Royal Mail one: it was a TNT uniform. Ofcom has already, as the hon. Member for North Ayrshire and Arran said, sanctioned trials in areas of London for other companies to run an end-to-end service. Quite how that fits in with attempts to sell Royal Mail to such companies I am not sure, but it is a sure sign of the huge pressures on the USO that will come with privatisation. You can bet the mortgage on the fact that they might do it in London, but they will not do it in rural Scotland.

I remind hon. Members that section 43 of the 2011 Act allows Ofcom to review the USO and recommend, among other things, a review of the minimum requirements —which amounts to cuts in what the USO must deliver. Royal Mail should be seen as part of our national infrastructure—an economic driver, not a drain on the public finances. It should remain in public ownership.

--- Later in debate ---

[Mr Weir]

rose—

[Ian Murray]

I will not be taking an intervention, because I do not have much time, but perhaps on the next occasion that we debate Royal Mail, the hon. Gentleman might come prepared with some of that information.

The environment therefore has changed since the Hooper report in 2008. That is why we should allow Royal Mail, under its new regulatory regime and its new environment, the opportunity to thrive in the public sector.

What is the real purpose of privatising Royal Mail? First, ideology—there is an ideological thirst for privatisation in the Government—and, secondly, to plug a hole in the Chancellor’s funding gap, because he is borrowing £245 billion more during this Parliament, owing to his failed economic policy. The fire sale of Royal Mail is the opportunity for him to plug that gap.

Let us analyse who is against the proposals. The late Prime Minister, Baroness Thatcher, the architect of ideological privatisation in the Conservative party, said that it would be a step too far. More recently, the Bow Group, a right-wing think tank to which the Minister might give much credence, said:

“It is likely to be hugely unpopular, prices will rise at a time when people cannot afford it, an amenity that many communities consider crucial will be removed, it will undermine the heritage of Royal Mail. The privatisation of Royal Mail is likely to move swiftly from a poisonous legacy for the Government now, to a poisonous legacy for the Conservative Party going forward”.

I would include the Liberals in that.