Nia Griffith
Main Page: Nia Griffith (Labour - Llanelli)
Mr Davey
I would like briefly to take hon. Members back to the Bill’s Third Reading in this House, when I marked the passing of the Bill into the capable hands of the other place by saying that the coalition Government’s decision to take on this difficult issue showed them at their strongest and most radical. As we welcome the Bill back, I would like to add to that and say that the Lords amendments before us today also show government at its most open-minded and collaborative, because they represent the constructive and collective efforts of both sides of the other place to improve and strengthen the Bill. The amendments in this group concern part 1 of the Bill and the provisions for the ownership of Royal Mail and the Post Office. I am clear that when it comes to undertaking a sale of shares in Royal Mail, the Government must have the flexibility to negotiate the right deal at the right time.
I know that hon. Members have been anxious to hear more about the next steps in our plans for Royal Mail, so with your indulgence, Madam Deputy Speaker, and in the interests of transparency, I would like to set out briefly the next two crucial steps that need to be taken to secure the future of Royal Mail. As my noble Friend Baroness Wilcox said on Third Reading in the other place, the Government intend to take on Royal Mail’s historical pension deficit with effect from March 2012 as part of the preparations for the sale of the company. I am sure that hon. Members will appreciate what a relief it will be to the 435,000 members of the Royal Mail pension plan to know that their accrued pension rights will be protected sooner rather than later.
The key concern of people up and down the country is that the universal service must be protected. To do that, Royal Mail needs to be on a sustainable commercial footing. The company currently has about £1.7 billion of debt facilities with the Government. We need to restructure the company’s balance sheet in due course, and in order to put Royal Mail on that sustainable commercial footing, we will need to reduce significantly that level of debt. Of course, we will need approval from the European Commission to provide this financial support, and we have already begun informal discussions with the Commission. The Government will submit a formal stated notification in the next few days, and I hope that the process will be completed by March 2012.
We will discuss amendments to part 3 of the Bill, which deal with the new regulatory regime, later on, but of course implementing that regime will be another crucial step towards securing the future of the universal service. I would like to assure hon. Members that the work to establish this is already under way. In particular, Ofcom, the new regulator, will launch a consultation in the autumn with a view to establishing the new regulatory framework in the spring of 2012. I hope that that update is helpful.
I begin my main remarks on this group of amendments by commending Opposition Members on pushing us on whether, given our commitment to transparent government, more could and should be done to offer more information to Parliament. Amendment 1 is a direct response to that. Clause 2 already commits the Government to report to Parliament when a decision to dispose of shares has been made. Amendment 1 adds three new requirements for that report: first, that it must include the objective for the sale; secondly, that it must include details of the expected commercial relationship between Royal Mail and Post Office Ltd following the disposal of shares; and thirdly, that where the proposed disposal would result in shares being placed into the employee share scheme for the first time, the report must include details of that scheme. As I previously said to the Public Bill Committee, I will ensure that shares are placed in the employee share scheme from the time of the very first sale of shares in Royal Mail.
The second of the new requirements—to provide information on the expected commercial relationship between Post Office Ltd and Royal Mail after the sale of shares—will work together with amendment 9 to address a key concern that I know is held by many in the House. After much debate in the House and elsewhere, I can still see no reason why the strong commercial relationship between Post Office Ltd and Royal Mail should weaken after the two companies have been separated. More importantly, the senior management at Royal Mail has been clear that this relationship will continue. That is why the chairman of Royal Mail, Donald Brydon, felt able to say to the Bill Committee that prior to a sale of shares in Royal Mail, the two companies would put in place a new contract for the longest time legally permissible. I have gone on the record—and I am happy to do so again today—as saying that the Government, as sole shareholder, will ensure that the two companies fulfil this commitment.
The negotiation of that contract is, rightly, a commercial matter for the two companies, and not for the Government or this legislation. However, Lords amendment 1 will ensure that, prior to a sale of shares in Royal Mail, Parliament has a snapshot of the expected commercial relationship following the sale, and Lords amendment 9 would make it clear that the annual report on the post office network must include information every year on the postal services provided as part of that relationship. Lords amendment 10 is a technical amendment to clarify the enforcement powers that apply to the annual report on the post office network.
There can be no doubt that the future of this iconic British institution is of enormous interest to Members of this House and in the other place. I believe that a mutual Post Office is a radical and exciting proposal, and one that is supported by all parties. However, I acknowledge that our position—that mutualisation must be a bottom-up process that engages sub-postmasters, customers and management—means that we cannot be as explicit now about what that mutual will look like. Co-operatives UK has now published its report on the options for a mutual, and that report will form the basis for the Government’s full public consultation in due course. Until the conclusion of that process, the Government remain open to all views. We will not dictate the form that mutualisation will take.
To give both Houses more oversight of what an eventual Post Office mutual might look like, we have tabled Lords amendments 2 to 8, which would introduce the affirmative procedure to the powers to mutualise Post Office Ltd. Furthermore, those amendments would ensure that the report on mutualisation provided for under clause 5 must be laid prior to the vote, so that hon. Members have full and detailed information on the mutualisation plans before they debate and vote on them. Let me be clear, however, that the plans, as I have said before, will be developed from the bottom up and in full consultation with all of the Post Office’s major stakeholders.
The last amendment in this group—Lords amendment 11 —addresses an issue that I know is close to the hearts of many hon. Members. When my right hon. Friend the Business Secretary opened the debate on the Bill on Second Reading, he talked of this country being a pioneer of postal services in the 19th century. It is that proud and rich postal history that Lords amendment 11 seeks to protect, by requiring Royal Mail to report annually on its activities in relation to the British postal museum and archive. Having visited the British postal museum and archive, I can say that it provides a wonderful and fascinating record of our postal heritage, and is absolutely deserving of the protection that Lords amendment 11 seeks to provide. I would be quite keen to share with the House the benefit of my visit and some of the lessons that I learnt—for example, that the first post boxes were green, before moving to chocolate brown and then ending up one of the shades of red that we see across our country—but I am sure that you would bring me to order if I did, Madam Deputy Speaker.
In conclusion, the amendments in this group respond to a number of concerns raised in both this House and the other place. They seek to offer more information on the implications of the sale of shares, more parliamentary control over Post Office mutualisation and greater transparency of Royal Mail’s heritage activities. I believe that the objectives that they seek to achieve are truly cross-party objectives, so I would urge the House to agree to them.
Nia Griffith (Llanelli) (Lab)
It is indeed our intention to be a constructive Opposition and to welcome amendments that improve the Bill. However, even though we welcome some of the amendments this afternoon—particularly where they reflect to some degree the position that we have taken on aspects of the Bill—we remain totally opposed to the main purpose of the Bill, which is to sell off Royal Mail 100% to private enterprise. That is completely different from our proposal, which was to keep Royal Mail in majority public ownership. Selling off Royal Mail into 100% private ownership means that only through the regulatory regime will the Government and the taxpayers of this country have any influence on the service provided.
Nia Griffith
I shall take your advice on the matter, Madam Deputy Speaker; I believe that the hon. Lady should stick to the amendments on the Order Paper.
This first group of amendments concerns the sell-off of Royal Mail and the splitting up of the Royal Mail Group into a privately owned postal service and a publicly owned network of post office counters. It is against that background that we should consider Lords amendment 1, which requires that when the Secretary of State lays before Parliament a report on the disposal of a Royal Mail company, it should include
“information about the expected commercial relationship…between the Royal Mail company in question and any Post Office company”.
We genuinely welcome the inclusion of such information in the report, but no one should be under any illusion that this in any way constitutes an inter-business agreement between Royal Mail and the post office network. Hooper recommended in his report that there should be a long-term agreement between Royal Mail and Post Office Ltd, and the National Federation of SubPostmasters has asked for an IBA of a minimum of 10 years. We have repeatedly called on the Government, at all stages of the Bill, to include an inter-business agreement in the legislation, and have tabled amendments to that effect.
One third of Post Office Ltd’s revenue comes from Royal Mail. Without that revenue, Post Office Ltd would be unable to keep many post offices open. With the greatest of respect to Moya Greene, the current chief executive officer of Royal Mail, who has talked about a privatised Royal Mail continuing to use the post office network, it is no good simply having fine words. Those fine words need to be translated into a proper bankable contract—a proper agreement. Other countries manage to put agreements into their legislation, but the real difficulty in this case is an intense obstinacy on the part of the Government, who have set themselves against enshrining any protection for the post office network in legislation.
A profit-hungry privatised Royal Mail will be looking to cut costs and maximise profits. That could result in Royal Mail drawing up an agreement for part or even all of its services with providers other than the post office network, such as a supermarket chain or a high street store. A privatised Royal Mail may well wish to continue to have some sort of agreement with Post Office Ltd, but that agreement could be for a much reduced service from that which the Post Office currently provides. It could involve just a small proportion of the current network of Post Office branches. That could give rise to the surreal spectacle of some post offices being places where people could hand over their parcels or register their letters, with other post offices not offering postal services. It sounds a bit like a children’s riddle—“When is a post office not a post office?”—but it would be no joking matter for our post office network or for the public, who want easy access to postal services, if such services were available at only some of the current post office branches.
Mr Davey
The hon. Member for Linlithgow and East Falkirk (Michael Connarty) finished where the hon. Member for Llanelli (Nia Griffith) started—in total opposition to the Bill. I have to tell the Opposition that they are ignoring the economic and financial reality of Royal Mail. As a result of the reduction in letter volumes because of technology such as e-mail, the internet, text messaging and social networking, it is losing a huge amount of money. The reduction in letter volumes—its core business—is predicted to fall again and again, but it is not only Royal Mail that is affected. Every postal administration around the world is seeing letter volumes and revenues go down. That means that those administrations are leaching money and something has to be done. The previous Government failed to do anything, although I should pay tribute to Lord Mandelson, who had the decency, on Second Reading in the other place, to recognise that we were on the right track with this Bill. The fact that Labour Front Benchers are unable to recognise that today is testament to Labour’s unwillingness to face up to the reality of the challenges.
Nia Griffith
I am sorry to stray away from the amendment, Madam Deputy Speaker, but I think it needs to be put on the record that our Bill, as it stood as Lord Mandelson was taking it through the other place, would clearly have kept Royal Mail in majority public ownership. That was written into the Bill, but it is not in the current Bill. We are talking about a totally different Bill that goes for 100% privatisation. They are two completely different scenarios and the amendments in the Bill arise largely from some of the situations created by that difference.
Madam Deputy Speaker (Dawn Primarolo)
Perhaps we could return to the amendments. We are debating the Lords amendments to the Bill—this is not Third Reading. The Minister is experienced and knows that. He has made his opening remarks. Will he answer the debate please?
Mr Davey
I listened carefully to that interesting point in the hon. Gentleman’s speech, and the way in which he eloquently described the situation and referred to the Companies Act 2006 showed that we need to ensure that we design the scheme carefully. We will do so, because we want to deliver on employee share ownership, which is an objective of the Liberal Democrats, the coalition Government and the Bill.
The hon. Member for Llanelli was generally supportive of the proposals on mutualisation, but she spent a lot of time—do tell me if I stray out of order, Madam Deputy Speaker—saying that Government front-office services had not been delivered. We are turning around the decline under which the previous Administration took away more than £300 million of Government services from post offices. Our policy statement and the things that we are delivering show that there is a real future for the front office of government.
Nia Griffith
We are talking about the mutualisation of the Post Office, but that can take place only if it is viable. Will the Minister tell us what new streams of Government business have been given to the Post Office in the past year?
Mr Davey
The hon. Lady is right—and we have been clear about this—that the network must be viable before going to mutualisation. The problem is that we inherited a post office network that was so badly managed that we had to turn it round. She asks for specific details, but she knows that several were set out in our November policy statement. She ought to know that the National Federation of SubPostmasters welcomed the start of the pilot scheme offering document verification for pension applications in 106 post offices in the north-east. She should also know that that is only the first of three planned pilots with the Department for Work and Pensions; the other two involve national insurance applications and testing the impact of requiring jobseekers who sign on by post to attend their local post office instead. I would have thought that she would have welcomed such pilots.
Nia Griffith
This is a group of technical amendments. We all want legislation to be as clear, precise and effective as possible. We will therefore support them.
Lords amendments 12 to 14 will form an important part of the Bill. The transfer of the Royal Mail pension plan and the fact that the Government will take responsibility for it are aspects of the Bill with which all parties agree. Any amendments that offer further clarity and security in respect of the handling of workers’ hard-earned pensions are to be welcomed. We had a thorough discussion of the pensions issues in Committee, so I simply reiterate our support for those amendments. I also confirm our support for Lords amendments 24 and 26.
Lords amendments 23 and 27 give effect to recommendations of the House of Lords Delegated Powers and Regulatory Reform Committee. Lords amendment 27 strengthens parliamentary scrutiny by introducing the negative resolution procedure into the Secretary of State’s power to amend the universal service order in a special administration scenario. As it strengthens the opportunity for parliamentary scrutiny, we shall support it.
Lords amendment 28 is purely technical and has been made to reflect the new situation with regard to Wales, following the result of the referendum held on 3 March in which the people of Wales voted yes to additional powers for the Welsh Assembly Government. We campaigned for and welcomed that referendum result, as it will help to streamline procedures, cut out wasteful duplication and ensure that the Assembly has the appropriate legislative powers in the areas for which it already has spending responsibility. We accept the clear need for the amendment and will support it.
Nia Griffith
Lords amendment 17 requires that, when having regard to the requirement for a postal service to be financially viable, Ofcom should include the need for a reasonable commercial rate of return for the universal postal service. We argued this very determinedly in Committee. The provision of the universal postal service constitutes a considerable financial burden and we have seen how, in recent times, the opening up of opportunities for competitors to come in and cherry-pick some invitingly profitable parts of the postal delivery service, leaving Royal Mail to provide the universal postal service, has led to some considerable controversy about the price charged for the final mile. Royal Mail feels that the price set by Postcomm is too low, while the competitor providers would quite naturally always want the price kept as low as possible.
We welcome the fact that—as is made clear elsewhere in the Bill—Royal Mail will continue to be the provider for 10 years after privatisation, not just three. This will provide some much needed stability for the service and make it worth Royal Mail investing sufficiently in the necessary infrastructure. But crucial to the success and stability of the service is the need for the postal service to be financially viable. It would be immensely disruptive and damaging if a privatised Royal Mail got into difficulties and had to be bailed out. That is one reason it is essential that the regulator, Ofcom, should understand the need for a reasonable commercial rate of return for the universal postal service and make its judgements and interventions accordingly. This is common sense, so we shall support this amendment.
Lords amendments 16 and 18 provide clarity that the requirement for efficiency would apply after a reasonable amount of time and provide a definition of that reasonable period as a period beginning on the day that the provisions of the Bill come into force and which Ofcom considers to be reasonable. These amendments also help to improve the Bill and we shall support them.
Lords amendment 19 is an extremely important amendment. In Committee, we tried very hard to persuade the Government to amend the Bill to ensure that the post office network was used to provide the network of access points, and we were very disappointed that the Minister chose to turn down the opportunity to show any real commitment to the post office network and refused to accept our amendment on using the post office network to provide the access points to the postal service.
This Lords amendment does not safeguard the post office network. It does, however, provide some protection for the public, and some reassurance that the Secretary of State may direct Ofcom to take action to ensure that sufficient access points are provided to meet the interests of the public. It is not, however, anything like as specific or forceful as we would have liked. It does not specify, as legislation in some other countries does, the number of access points or their geographical distribution. This is done elsewhere either by specifying a precise number of outlets, as in the German model, or by insisting on specific access criteria, as in the Australian model.
This amendment is much more subjective and leaves it as a matter of opinion for the Secretary of State to decide what is meant by sufficient access points to meet the interests of the public. Will the Minister clarify the thinking behind this, and specify the number of access points? We understand that the access criteria, as laid down in the document “Securing the post office network in a digital age”, could be met by a network of some 7,000 or 8,000 post offices. When we were in government we put in money to keep open a network of 11,900 post offices, and the present Government are doing likewise. What number of access points is the Secretary of State likely to designate as sufficient to meet the interests of the public? Will it be as many as the current network of post offices, or will it be fewer? If it is the latter, some post offices could cease to be access points for postal services and not only would they lose the third of their income that comes from the Royal Mail work that they do but they would stand to lose a lot more income, as they would lose footfall.
Access points would not, of course, have to be post offices. We have already seen some very adverse public reaction when post offices have been moved into the upstairs of some high street chains, making them difficult to find and time-consuming to access. Will the Minister clarify the number of access points he envisages meeting the interests of the public, and whether the Secretary of State might also have criteria for the accessibility of access points so that we do not end up with access points that are hard to access?
Access points does not just mean counter services, but can also include post boxes. Will the Minister give us any indication of what number of post boxes the Secretary of State would consider sufficient to meet the interests of the public? Would it be the same number as now, or are we likely to see post boxes removed or boarded up? I say that as someone who has only recently had to fight for Royal Mail to restore a post box at Brynteg in my constituency, and I can well envisage that a profit-hungry privatised Royal Mail would look to reduce the number of post boxes in order to cut down on collection costs. That could mean people losing their local post box and no longer having one within walking distance of their homes. We welcome the amendment because it could improve the chances of a better service to the public, but we would have liked a much stronger amendment to give a stronger guarantee of a comprehensive network of access points.
We welcome Lords amendment 20 and the consequential amendments 15 and 25, because they enable Ofcom to impose a notification condition on any person providing, or intending to provide, a service within the scope of the universal postal service. Again, this is important for the rational management of the universal postal service, and we should support it. Lords amendment 21 makes a significant change to Ofcom’s review of the costs of the universal service obligation. Whereas previously the Bill specified that Ofcom would have to wait three years from when the Bill came into force before it could carry out a review of the costs of the universal service obligation, the amendment increases the period to five years, unless the Secretary of State intervenes and directs Ofcom to carry out a review. We have not sought amendment 21. Will the Minister clarify under what circumstances the Secretary of State might intervene before the five-year period is up?
On Lords amendment 22, we have consistently pointed out that the universal service provider incurs very large costs and needs to have as much certainty as possible about its future obligations so that it can plan long term and make the necessary investment in the latest technology. We therefore welcome the amendment, which means that Royal Mail will continue to be the universal service provider for the next 10 years, rather than just the next three years. This is a significant improvement. We know that significant modernisation has taken place within Royal Mail over the past few years. In the evidence sessions, the chief executive, Moya Greene, expressed her pride and delight in the world-class facilities that Royal Mail has in some of its depots, but she also pointed out that there are still areas awaiting modernisation. If Royal Mail is to continue to invest, the certainty of knowing that it will remain the provider of the universal service for the next 10 years will provide a much better basis for doing so than a mere three years. This is very important to create the necessary stability and justify the necessary investment. We therefore welcome the amendment.
Lorely Burt
This final string of amendments is another testimony to how the Government have listened to colleagues on both sides of the House. I greatly welcome a number of the amendments, particularly those that make the duties of Ofcom stronger than under Postcomm. I want to ask the Minister about amendment 19, which specifies that the Secretary of State can override the regulator on access points. We need to be wary about setting up an independent body but saying, “Never mind, the Secretary of State can override it”. We want to be sure that that could be done only to the benefit of the consumer. Bringing politics into the matter concerns me a little, so will my hon. Friend confirm that he cannot envisage any circumstances in which the Secretary of State could intervene, perhaps to specify that we do not need as many access points as now?
I particularly welcome amendment 17. Royal Mail has found it difficult to make a profit given the constraints under which it has had to work. The previous situation was impossible, so I am delighted with the amendment. We had to address the appalling decline in profitability, which was due to the ceiling imposed by the previous Government, who were unwise in their overzealous interpretation of the European legislation. If we can do it now, why could we not have created a more competitive environment for Royal Mail in the past? No one can make a profit with one hand tied behind their back. I particularly welcome Lords amendment 22, which guarantees that Royal Mail will remain a USP for 10 years, thereby removing any lurking uncertainty, which is particularly helpful.
Finally, Lords amendments 20, 15 and 25 require pre-notification to Ofcom of the planned commencement or expansion of a letters business on a specified scale. That will allow Ofcom to evaluate the potential impact beforehand, not after the stable door is opened and the horse has bolted. I wonder whether the Minister could say a little more about the circumstances in which he would envisage the provisions applying. Opposition Members have rightly raised the spectre of lots of other organisations wanting to come in and expand their letter delivery services, so how will the provisions work to ensure that Royal Mail’s commercial interests remain viable?
Mr Davey
I am grateful to the hon. Member for Llanelli (Nia Griffith) for her general welcome for many of our amendments. I began my remarks by saying that a degree of consensus had emerged in the other place.
The hon. Lady spent most of her time talking about access points and amendment 19. We must be clear about what an access point is. It comes from the directive; the definition of an access point and the requirement to provide them flow from the universal postal service directive, and we then define it in this Bill. It would be wrong for us to state that it could only ever be post offices, and to enshrine that in the Bill, because, for instance, some rural communities might need access points in a form that the post office network is unable to provide. I hope that the hon. Lady recognises that it is therefore important to have some flexibility.
The hon. Lady was concerned about some post offices not being accessible, and gave the example that some of them might be upstairs. In addressing the access points issue, Ofcom will be required to look at the needs of users, and its obligations, under the Communications Act 2003, are much stronger than those of Postcomm, and they include taking account of the needs of disabled people. I hope, therefore, that the hon. Lady will understand that the accessibility requirements have been improved. On access points more generally, the hon. Lady did not give the Government credit for the fact that in the—signed and legally binding—agreement we have reached with Post Office Ltd providing the £1.34 billion, Post Office Ltd has to secure a network of at least 11,500 post offices. That is the clearest and strongest way to ensure that the network is delivered.
The hon. Lady had some concerns about amendment 21, and asked why the Secretary of State would intervene before the five years was up. It is sensible to maintain the Secretary of State’s ability to intervene and direct Ofcom to conduct an unfair burden review. That measure adds some flexibility to the Bill. If all the evidence pointed towards there being a need for an unfair burden review, a process to allow a review to be conducted would clearly be beneficial. We wanted that extra flexibility in the Bill.
Nia Griffith
I am not against the idea of Ministers intervening, because it is very important to have that opportunity for a review. I was just wondering whether there were any particular circumstances in which the Secretary of State might be proactive, because of the damage that could be caused if the review was left for five years rather than three. I am all for the Secretary of State having that additional power, but are there any circumstances that would precipitate an instant review?
Mr Davey
We need to have flexibility in the legislation to ensure that if the circumstances are so bad for Royal Mail because technology is having a worse effect than we had expected on its letter flows, we can still provide the universal service. That is what this Bill is about. This extra flexibility ensures that if an unforeseen circumstance arises requiring an unfair burden review before the five years is up, that flexibility is in place. I am glad that the hon. Lady welcomes that.
I was grateful for the comments made by my hon. Friend the Member for Solihull (Lorely Burt), who acknowledged that these amendments show that the Government have listened. She was concerned that amendment 19 would give the Secretary of State an override. May I assure her that we think it very unlikely that the power would be used? We need to make it clear that the first step is for Ofcom to assess the needs of users, and it will consult the public. We would not expect to use the power, and it is highly unlikely that we would interpret the “interests of the public” as being less important than the “needs of the public”. The words in the amendment should reassure her. The amendment is intended as a broader test to capture elements that the “needs of the public” do not, and that Ofcom is not allowed to consider. I hope that she will be reassured by that.
My hon. Friend also asked about the notification scheme. I assure her that it is designed to enable Ofcom to act to prevent harmful cherry-picking, which would damage the universal service. Again, this is another tightening up of part 3 and the regulations, to ensure that we can deliver the universal service through this Bill.
The hon. Member for Dunfermline and West Fife (Thomas Docherty) talked about what happened in his constituency following the bad weather just before Christmas, and asked me whether I talked to Royal Mail about it. Of course I regularly meet the management of Royal Mail, and they are committed to providing an excellent service. I think we all accept that the conditions last winter were exceptional and did create lots of problems. Royal Mail took exceptional measures to try to deal with them, including investing £20 million of extra resources to ensure that deliveries could be maintained. Although the details of Royal Mail’s operations are, of course, a matter for Royal Mail, it is worth pointing out that in areas of Scotland, including his constituency, the private companies had much greater problems in delivering. Royal Mail acted strongly, made the investment and was able to deliver. As the universal service provider, it showed its strength.