Royal Mail and the Universal Service Obligation

Rachel Hopkins Excerpts

Thursday 12th January 2023 Westminster Hall

[Rachel Hopkins (Luton South) (Lab)]

It is a pleasure to serve under your chairship, Ms Ali. I congratulate my hon. Friend the Member for Jarrow (Kate Osborne) on securing this important debate.

Royal Mail is a proud British institution, established by King Henry VIII in 1516. I begin by thanking postal workers in Luton and across the UK for their work all year round. I am pleased to have a delivery office in my constituency of Luton South; I have visited it many times. I have spoken with postal workers and their local and regional Communication Workers Union representatives, and I have seen at first hand their dedication to delivering—literally and metaphorically—for our community.

Postal workers take huge pride in their job, and want to ensure the long-term success of the service. Strike action is never taken lightly. Substantial real-terms pay cuts and attacks on terms and conditions of employment give workers little choice but to stand up for their livelihood. Alongside those legitimate grievances, there is also the threat to the universal service obligation, which is the obligation to adopt a “one price goes anywhere” principle of affordable postal services. Under the minimum service requirements enshrined in the Postal Services Act 2011, Royal Mail must deliver letters to every address in the UK six days a week, at a uniform price, and parcels five days a week.

As we have heard, in May 2022 the Royal Mail Group, which is now International Distributions Services, announced record-breaking profits for 2021 of £758 million and then promptly paid £567 million to its shareholders. Then, just weeks afterwards, Royal Mail announced significant losses, alleging that it was losing over £1 million a day. That led to the concerning approach to the Government to request a reduction of the universal service obligation, from an obligation of letter delivery six days a week to an obligation of only five days a week, between Monday and Friday. It is clear that there are serious questions to be asked about what is going on at Royal Mail. Shareholders are given huge dividends, yet soon afterwards up to 10,000 postal workers’ jobs and the six-day-a-week delivery service are at risk. It just does not stack up.

Now we have the prospect of a takeover of Royal Mail by Vesa Equity, which is also concerning for the future of the universal service obligation. There is a serious risk that Vesa Equity would sell off Royal Mail UK but retain control of General Logistics Systems—the international parcel subsidiary—which continues to be profitable and has previously helped to cross-subsidise the UK business.

Reducing the universal service obligation would be hugely detrimental to the scope and quality of the UK’s universal postal service, which is heavily relied on by businesses and consumers. It would also lead to the loss of thousands of permanent Royal Mail jobs around the country, exacerbating regional inequalities.

Let me reiterate the points that have been made this week. The Government must guarantee that the universal service obligation is secure for the future and will continue to be provided by Royal Mail, because people value their local postal workers. Just look at the covid-19 pandemic, when postal workers put their lives on the line to deliver letters and parcels, as well as providing vital contact for vulnerable residents, many of whom were isolated, elderly or lived on their own. We must focus on the value of our postal service—particularly its relationships and its reach across the UK—and not just on the cost of individual transactions.

This key community contribution must be protected, and I agree with my hon. Friend the Member for Jarrow that Royal Mail must not adopt the gig economy employment model of low wages and insecure contracts. I therefore ask the Minister whether there needs to be an inquiry into whether the mismanagement of Royal Mail will undermine the postal universal service obligation, and I look forward to his response to the debate.