Royal Mail

Debate between Robert Flello and Baroness Clark of Kilwinning

Tuesday 25th June 2013 Westminster Hall

[Katy Clark]

My hon. Friend is well aware that many parts of the public sector that have been taken into private hands have ended up being owned by both private people abroad and by foreign countries. That is not in the public interest.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I apologise because other business in the House detained me, although I know that my hon. Friend’s speech will have been excellent so far. I congratulate her on securing this debate. Does she agree that there is also quite a strong possibility—indeed, a probability—that because of Royal Mail’s land assets and buildings, often in central locations in our cities, we could end up seeing the complete dismantling of what we currently know as the Royal Mail, with bits being sold off, left, right and centre?

[Katy Clark]

My hon. Friend highlights a real threat.

The original Hooper report in 2008 identified a number of issues with Royal Mail that needed to be addressed, many of which have now been dealt with. We have already heard that the Government have taken over the pensions deficit and that regulation has been put in place. The Government’s case now seems to be based on the need for capital. However, Royal Mail is doing well in the public sector and, contrary to the Government’s claim, there does not seem to be any good reason why Royal Mail should not be able to borrow the capital it needs to invest, while remaining in the public sector.

We have heard that Royal Mail’s operating profits increased from £152 million in 2012 to £403 million in the last year. The state aid approval that enabled the Government to take on the pension deficit also gives them authority to write off almost £1 billion of Royal Mail’s debt, as £1.1 billion was allowed and only £150 million has been used so far.

Any revenue from the privatisation would go to the Treasury, not the company. If the Government believe that Royal Mail will be strong enough to borrow in the private sector, why do they not believe it will be strong enough to borrow in public hands? Network Rail, for example, is to all intents a public company, but it has borrowed more than £30 billion from private markets. This borrowing does not count towards public debt.

I have asked the Government today to confirm how many shares they intend to sell off. For example, should only 50% of the shares be sold, does the Minister believe that Royal Mail could borrow from the private sector, or does he believe that all the shares need to be sold off to do that?

The service to the public is severely put at risk by a privatised Royal Mail. No doubt, the Minister in response will explain the protections of the inter-business agreement between Royal Mail and the Post Office. However, he will also be aware that there are few safeguards to ensure that that agreement is not watered down significantly a few years down the road. The Government may say that this proposed privatisation is not ideological, but given the risks of proceeding down this path, surely the Minister must accept that it cannot be in the interests of the public for this privatisation to take place at this time.

I ask the Government to answer a number of questions. Will they explain whether the legal requirement for the provision of universal service is a UK-wide obligation or could it be met in Scotland, Wales or Northern Ireland alone? How frequently will Ofcom, the regulator, be required to carry out a review of the universal service requirement, to ensure it reflects the reasonable needs of postal service users? Will Ofcom be required to seek the Minister’s approval before it can carry out a review of the universal service requirement?

Will prospective purchasers be allowed to divest Royal Mail of its international parcels business, General Logistics Systems? Will Royal Mail purchasers be allowed to divest the business of the postcode address file? What steps is the Minister taking to ensure that the universal service is protected following privatisation? What steps are the Government taking now to publish the terms of the sale of Royal Mail and how they intend to proceed, so that Parliament can give proper scrutiny to what is going to happen in the next few months?