Royal Mail Privatisation

Nia Griffith Excerpts

Tuesday 18th January 2011 Westminster Hall

[Anne Marie Morris]

I thank the hon. Lady for her comment but, to be honest, hearing her discussing the concerns about the future of the post offices was very reminiscent of the concerns felt by Opposition Members under the previous Administration. Our concern in opposition, when there were mass closures of post offices, was that the Government of the day had failed to recognise that such post offices were crucial to communities and were providing a social service as much as anything else.

I am delighted that both parties supporting the coalition Government are determined to ensure that post offices have a bright future. I do not share the hon. Lady’s concern about the future of post offices; they are far better off under the new coalition Government than they ever were under the previous Administration.

The hon. Lady made some points about universal delivery, but I am very heartened. It is important. The Government look on it as fundamental and will retain it.

Turning to post offices, we must remember that 99% of the population live within three miles of a post office. In the grand scheme, that is not a bad position to be in. The Government subsidy to non-commercial post offices is currently £150 million, but I am pleased that it will increase to £180 million in the next financial year.

[Nia Griffith (Llanelli) (Lab)]

Is the hon. Lady suggesting that a three-mile access criterion would be sufficient? In other words, as long as someone was within three miles of a post office, that would be acceptable. Is that the sort of network of post offices that she envisages?

[Anne Marie Morris]

I thank the hon. Lady for her comment. Clearly, we need to have as good access as we can for every individual. Therefore, we need to look at a good service and a good distribution of post offices. The sort of figures talked about, and where we are now with the number of post offices, will give a good service. What I would like to comment on, and will come to in my contribution, is what more those post offices could do.

--- Later in debate ---

[Mr Reid]

I hope that the Government will not react in the way that my hon. Friend fears. I share his concerns, however. What worries me—I hope that these fears are ungrounded—is that there may be silo thinking within the Government. Clearly, in these very difficult financial times, with Departments having to make huge savings, it must be very tempting for Ministers to go for the cheapest contract, but I hope that they will resist that temptation, that there will be joined-up thinking in the Government and that the Post Office will be given work because of the good service that it provides. I hope that that will be the case for social reasons and because of the access provided by having a network that is unmatched throughout rural Britain and on many of the islands in my constituency.

Let us consider other Government work. When I tour my constituency, as I do every summer, one bone of contention that keeps cropping up in the rural parts of it is vehicle excise duty. Vehicle excise duty can be renewed only in certain post offices. I understand that that is because the Department for Transport decided the number of outlets that it wanted. However, it means that people living in rural areas must go into the town if they want to renew their car tax at a post office. Clearly, the temptation, then, is to use the internet, and if people do that, the work is lost to the Post Office completely.

My understanding is that the computer system is the same in all post offices, so there seems to be no reason why vehicle excise duty cannot be paid in any post office. Again, I hope that the Minister takes that point away from the debate and has a word with his ministerial colleagues in the Department for Transport, so that when that contract comes up for renewal, the restriction on the number of outlets can be removed.

I also want to refer to the BBC. As we all know, during the last Parliament, the contract for renewing TV licences was taken away from the Post Office and given to PayPoint. When Ministers are questioned on that, we just get indignant responses that the BBC is not part of the Government. However, it is a public body, and I hope that the Government are explaining to all public bodies the benefits of the Post Office and the Government policy of supporting the Post Office, and are encouraging the BBC and other public bodies to use the Post Office.

I was delighted with the commitment given during last week’s Report stage of the Postal Services Bill by the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for postal services, that Post Office Ltd and Royal Mail would sign an inter-business agreement for the longest legally permissible period before they become separate companies. That is important to give post offices time to adapt to being part of a separate company from Royal Mail.

I do not share the concerns of the hon. Member for North Ayrshire and Arran about Royal Mail in the long run taking business away from post offices. I do not believe that supermarkets or other shops could replicate what the post office does. Post office staff undergo a tremendous amount of training. There is also the computer system. One of the hon. Lady’s fears was that in urban areas, supermarkets would take over the contract, but in rural areas the post office would be responsible. That would mean two separate computer systems and training other staff. I simply do not see that happening. As I said in response to a point made by my hon. Friend the Member for Weaver Vale (Graham Evans), I see no problem with post offices being located in supermarkets, but I simply cannot see the benefits to a privatised Royal Mail of having a different arrangement in towns compared with rural areas. Many post offices are located in supermarkets. In the towns in my constituency, that is the norm and I see no problem with it, but I simply cannot see a situation in which there would be separate arrangements in towns and villages.

[Nia Griffith]

The hon. Gentleman has mentioned training, the quality of post office staff and the different reception that people may have in supermarkets and garages. Does he not think that it is precisely that type of thing that makes it possible for supermarkets and high street chains to undercut the price that the Post Office will probably be tendering at, and that therefore there is a real danger that the Royal Mail could switch to a cheaper option, which might be a much poorer-quality service? It may even be a loss leader for some of the big chains.

[Mr Reid]

I simply do not see that happening, because those organisations would have to develop a computer system and train staff. At the moment, in the towns in my constituency, the post offices tend to be located within supermarkets. I do not see any benefit to Royal Mail or a supermarket from developing its own system rather than encouraging a post office to be located in the supermarket.

--- Later in debate ---

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) on securing this debate on a very important topic. Her worries and concerns are shared by many hon. Members on both sides of the House, as we saw from the number who attended and participated on Report in the debate on the amendment to guarantee a 10-year inter-business agreement.

Post offices are at the heart of our communities and are well loved by the people they serve. Hon. Members will remember the postcard campaign lobbying MPs to keep the Post Office card account; many were contacted by more constituents on that issue than on any other, before or since. They received cards from constituents who used Post Office card accounts, and from people who did not have one but who realised the value of the facility to other members of the community and the account’s value to the post office network, because of the work it brought in, directly and indirectly, through increased footfall in post offices and increased business for the corner or village shop where the post office was situated.

Consumers and sub-postmasters alike recognise that any drop in post office business or footfall could have an impact on the economic viability of the post office or village shop. Yet the Government are complacent about the potential loss to the post office network of some 37% of its current business. The loss of all or even some of that business will inevitably mean a dramatic reshaping of the post office network on an unprecedented scale. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) has not explained that complacency. He has hidden behind some potential barriers, which he seems unwilling to try to shift and which may be more a figment of his imagination than a reality. I hope that the Minister will today be able to give us a better explanation for that complacency.

The Under-Secretary did not tell us, either in Committee or on Report, about any detailed work or discussions that have taken place to secure future Royal Mail business for the post office network. There are many ways in which that might be achieved, but I shall concentrate my remarks on three of them, namely the inclusion of a specific number of access points in the Bill, the inclusion of an inter-business agreement in the Bill and other ways of securing an inter-business agreement. In Committee, the Under-Secretary steadfastly refused to consider any mechanism to protect the post office network or the number of outlets where consumers can access post office services. One of the issues that we debated at length in Committee was including in the Postal Services Bill measures to guarantee the number and geographical spread of access points to postal services, which would guarantee the public a number of outlets across the country to post parcels or register letters. Without that guarantee of a specific number of outlets to serve consumers, there will be nothing to stop a privatised Royal Mail from drastically cutting the number of outlets, and limiting them to the larger centres only, whether through high street chains or part of the post office network.

[Mr Reid]

Under the Bill, Ofcom has a duty to ensure that there are enough access points to meet users’ reasonable needs. Surely that is the guarantee. The Post Office will either remain in Government hands or it will be mutualised, so the Government have a role there. The regulator has a role in ensuring enough access points—that is post offices.

--- Later in debate ---

[Nia Griffith]

If the hon. Gentleman looks carefully, he will see that there is much flexibility in the Bill about what can be changed by the regulator and where things can be moved to, so the guarantee is not robust.

Returning to putting more robust access criteria in the Bill, if that does not happen consumers will have to travel much further to access Royal Mail postal services, and inevitably those who have least access to transport will miss out—those who do not have cars and those who are served by an infrequent bus service or by no bus service at all. A reduction in the number of access points would also have a negative impact on small businesses in rural areas that make frequent use of the parcel service and whose costs, both in fuel and time, would increase significantly if they had to travel many extra miles to use postal services. There is nothing to stop the Government including in the Bill that vital guarantee for consumers. Only a simple guarantee of a number of access points similar to the current number of post offices would ensure that consumers would continue to have access to the same sort of availability of counter services as they enjoy at present.

[Mr Reid]

Legislating for a specific number of post offices does not help, because they could all be moved into cities. The problem is writing the requirement for a spread of post offices into legislation. The previous Government’s access criteria could, as we know, be satisfied by closing 4,000 post offices, so the difficulty is writing the spread into legislation. No one—neither the official Opposition nor Back Benchers—tabled such an amendment on Report, because devising the formula is impossible.

[Nia Griffith]

The hon. Gentleman rightly mentions geographical spread, which is important. Provision should be made for it. Perhaps we should look to the Australian model. There it is guaranteed that 90% of the urban population will have a post office within 2.5 km; and almost unbelievably in such a large continent it is guaranteed that 85% of the rural population will have a post office within 7.5 km. If they can manage that in Australia, we could introduce a guarantee that is much more robust than what we now have. The irony is that, if Deutsche Post were to purchase Royal Mail, consumers here could have a reduced service, while they contributed to the profits of a company which must provide a specified number of outlets in its own country. In other words, we could have a poorer service here, while propping up a better service in Germany—a scenario we might associate more with 19th-century colonialism than modern Britain.

The Under-Secretary did not give convincing answers on Report about what exactly the legal obstacles are to the inclusion in the Bill of a guarantee of an inter-business agreement. He did not tell us about any legal precedents on which he was drawing, or what research his team has done on any relevant challenges in EU law.

The Under-Secretary has also failed to tell us about options outside the Bill itself. Currently both Royal Mail and the post office network are in public ownership. Both the chief executive and the chairman of Royal Mail speak favourably of the post office network. They recognise the respect it commands, the trust it enjoys in our communities and its value as a business partner. What, therefore, is preventing the signing of a new inter-business agreement now, while Royal Mail is still in public ownership? I am not now talking about a new clause in the Bill, but a new business agreement: an agreement that goes beyond the end of the current inter-business agreement, which could run out within a couple of years of privatisation, depending on the time scale, and that lasts for an additional 10 years. Has the Minister explored that possibility with Royal Mail? What would be the legal difference between an inter-business agreement with just a couple of years to run and one that was to last five or 10 years? Has he sought to capitalise on the warm words of Moya Greene and Donald Brydon about the post office network? Has he had any talks about an extended IBA between Royal Mail and the post office network?

I am sure that the Minister does not need to be reminded that Royal Mail is currently in public ownership. He must realise how serious the loss of business would be to the post office network. Even though any decision by Royal Mail to abandon the Post Office will be taken after privatisation, and therefore will technically not be a Government decision, he knows that the people of this country will not be slow to make the connection between the privatisation of Royal Mail and the demise of their local post offices.

The pity is that the Minister does not seem to want to take specific action. He seems to think that he can rely on warm words to guarantee Royal Mail business for the Post Office, but people are wary of warm words. There have been warm words about no rise in VAT and warm words about no increase in tuition fees—people are becoming very cynical about warm words. No shrewd business person would trust future business security to warm words. Surely, in his enthusiasm to privatise Royal Mail, the Minister has not overlooked the fact that it is currently in public ownership, and that he therefore has every opportunity to influence the way forward and to negotiate a longer IBA, here and now, before proceeding to privatisation.

Indeed, the Under-Secretary told us on Report that the Government

“as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.”—[Official Report, 12 January 2011; Vol. 521, c. 357.]

I ask the Minister to enlighten us about what talks he or the Under-Secretary have had with Royal Mail about drawing up a longer IBA with the Post Office before privatisation. What was meant by the “longest legally permissible contract”? Is there a legal limit on such a contract? If so, what is it? As I said in last week’s debate, purchasers take over existing contracts and responsibilities in all sorts of takeovers, and such arrangements can be long-lasting.

The hon. Member for Warrington South (David Mowat) rightly questions what joined-up thinking has taken place on the subsidy. In our debate on the subsidy on 20 December, I said that the taxpayer is paying a large subsidy to the post office network, of which only 48% is necessary to continue the subsidy that Labour introduced to maintain the operation of the current post office network. We have been told that the remainder includes money to convert post offices to the post office local model, which involves paying the sub-postmaster by transaction, but that has been criticised by the Rural Shops Alliance, which questions why anyone would want to work longer hours for less income. It predicts difficulty in attracting new entrants to the post office local model; indeed, a similar pilot in Linlithgow ended with the shopkeeper saying that it simply was not worth his while to provide post office services.

Taxpayers will rightly ask what is the point of so much taxpayers’ money going into the post office network, particularly when they are seeing savage cuts in other services, and given that the Government are doing absolutely nothing to help secure the 37% of post office income that comes from the IBA with Royal Mail.

[David Mowat]

The Opposition continually talk about the IBA as if it were some kind of nirvana. Even with it in place, 7,500 post offices in the network are making a loss. At least the Minister has proposals on fixing that and on modernisation. Do the Opposition have any proposals other than the status quo?

[Nia Griffith]

Frankly, despite the Government’s fine words, the Post Office has no new Government contracts and no new streams of business, and it faces the possibility of losing all its Royal Mail business. Taxpayers will ask why they have to pay for that.

Taxpayers understand the idea of investment that brings returns and the value of business start-up funds, which can help to launch new businesses that subsequently stand on their own two feet, and they accept the need for some subsidy to make the network a truly nationwide service. However, if the post office network does not provide nationwide access to postal services or develop new business streams to improve its viability, the taxpayer may well ask what is the point of allocating £1.34 billion to the post office network. The taxpayer has every right to ask what steps the Minister is taking to ensure that the Post Office continues to do for Royal Mail business that provides 37% of its income.

In its recent report, the Scottish Affairs Committee stated that:

“we recommend the Government take a more proactive approach to facilitating a long and robust IBA, through removing any obstacles: practical, legal or otherwise that may exist. Ideally, a ten year agreement should be reached prior to any sale of Royal Mail. We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland. It is in everyone’s interest”.

Members on both sides have stressed time and again the valuable social role of the post office, and the Government’s recent subsidy allocation suggests that it is a role worth paying for.

Will the Minister say whether concern about the marketability of Royal Mail is the reason for the Government’s reluctance to pursue a robust IBA? If so, does he consider potential diminished marketability to be a price worth paying when it comes to guaranteeing the future of 37% of the post office network’s business? What analysis have the Government made of the cost of a presumed lower price for Royal Mail with a robust IBA with the Post Office, and the cost of continued subsidy of the post office network? Once Royal Mail is privatised and possibly sold to a foreign owner without a long-term IBA in place, it will be too late to insist on one.

The Government will not be able to insist on Royal Mail using the Post Office. They will not be able to do what Lord Mandelson did. They have the chance here and now. I want to know whether they are going to take it.