Postal Services Bill

Tom Blenkinsop Excerpts

Wednesday 12th January 2011 Commons Chamber

[Bob Russell]

I need to reflect on what the Labour Government, particularly Lord Mandelson, had in mind, and how that may or may not differ from the proposals.

I am critical of the Labour Government, but I am also critical of the Government who preceded them. This is the third time that I am going to say this: for the past 30 years, this great British institution has been run down by successive Governments. It was the envy of the world—it no longer is—and ultimately the blame must rest with Government and, it must be said, the somewhat mediocre management for many of those years.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The problem for Labour Members is that when the Government discuss mutuals or co-operatives, we do not know whether they are proposing a workers’ co-operative or a mutual co-operative. We received some indications in Committee, but we do not know for certain what model they are proposing. As has been said, 97% of post offices are independently owned, and we assume that those owners will go into a mutual model.

[Bob Russell]

I thank the hon. Gentleman for his intervention, and in so doing I return to the confusion about post offices and Royal Mail. If we get confused in this debate, we can understand why the general public are confused too. He is absolutely right that 97% of sub-post offices are not owned by the Government. We are not talking about them—we are talking about Royal Mail and how privatisation and whatever measures and aspects of the Bill are introduced will assist post offices and Royal Mail and its workers.

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[Ian Murray]

We must leave no stone unturned in looking to provide services through the post office network, so that it can survive this process. The black hole in finance that will appear if the inter-business agreement is removed will make most post offices in this country unviable. We should look at every conceivable option to get as much revenue as possible into the post office network, because, as everyone in this Chamber knows, people love and enjoy the services that it provides.

[Tom Blenkinsop]

On the point made by the right hon. Member for Gordon (Malcolm Bruce), given that banks are closing branches left, right and centre, it suits the banks in the current commercial circumstances to use the post office as an access point.

[Ian Murray]

Absolutely. My hon. Friend makes his point clearly.

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[Lorely Burt]

My right hon. Friend is absolutely right. It is shameful that Royal Mail’s demise has been caused partly by the fact that we have gold-plated the rules that have come down from the EU.

[Tom Blenkinsop]

I think we are getting slightly confused about the matter. There is cherry-picking within Royal Mail, with which I personally do not agree, and the report that members of the Bill Committee considered before our sittings recommended that the practice should be got rid of. However, that should not be a defence for what the Government are doing, which will undermine internal business arrangements. They have created a smokescreen of European legislation for what they are doing, but in fact the Government make 10-year agreements with rail companies, for example.

[Lorely Burt]

I am struggling to answer the hon. Gentleman’s point, because it is a bit technical. I am looking over towards my hon. Friend the Minister, and I am sure that he will make a better fist of giving an answer.

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[Mr Weir]

I do not agree with that, as I think Post Office Ltd will be very much the junior partner in the negotiation. I would ask whether Royal Mail rather than the Post Office is the brand for letter delivery, and Royal Mail will focus on how it delivers its mail business through the Royal Mail brand. In an earlier intervention, the hon. Gentleman made the point that an alternative provider could go to Post Office Ltd, but I ask him to consider whether that is realistic, given that only Royal Mail as the statutory provider of the universal service obligation will be required to have a nationwide delivery service. Other companies do not go in for that, and most of the present business for alternative providers relates to bulk mail delivery, not individual delivery. That requires a different business model from the one currently operated by Royal Mail.

[Tom Blenkinsop]

Another point is that there seems to be a massive assumption that these independently-owned post offices will suddenly opt into this mutualised model. A significant number of independent post offices will not want to do that; they enjoy the profits and the livelihoods they earn from their businesses.

[Mr Weir]

The hon. Gentleman makes a reasonable point. The problem is that it is not at all clear what mutuality means. If I understood the Minister correctly in Committee, what is being mutualised is not the post office network, but Post Office Ltd—the management of the Post Office—so the individual post offices would not be in a mutual network, but continue as individual businesses. I struggle to see how that is going to improve the situation.

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[Mr Davidson]

That seems like a very constructive way of looking at the issue. I am not sure about the practicalities, and nobody else raised the matter with us during our discussions, so we have not introduced it as a recommendation. We were interested in the outcome, however, and we had sufficient faith in the Minister and his support staff to identify ways in which it could be achieved.

That brings me to the other point about which we had anxieties. It relates to the point about the number of outlets, and it is the issue of wandering vans. The Government have committed to a certain number of outlets, and the Minister has indicated that he wants to have 11,500, but an outlet can be a van that stops for a certain period at a location and then moves on; it does not necessarily have to be a post office.

We have already heard how some sub-post offices and outreach facilities were not considered adequate, and the hon. Member for Banff and Buchan (Dr Whiteford) described how people had to queue outside some of them in the rain and snow. The facilities were not always satisfactory, and we worry that the Government will be able to meet their target of 11,500 by introducing a number of wandering vans that go to five places a day, five days a week, meaning that 25 outlets are covered.

So, 100 peripatetic vans—to use their Sunday name—would cover a substantial number of the 11,500 outlets that the Minister identifies, and that is clearly not what we intended. It would therefore be helpful if he indicated the criteria that will apply when deciding to introduce a wandering van. Is he willing to state that there will be a maximum number? We do not want the commitment to 11,500 outlets undermined and devalued by there being not even full-time vans, but part-time vans that appear for only a limited number of hours per week. That is the final area of the proposed changes on which we want the Minister’s clarification. Again, if he does not feel able to provide it today, I hope that he will find it possible to produce appropriate statements before the legislation is finalised.

[Tom Blenkinsop]

I support new—cross-party—clause 2 as part of a damage limitation exercise in opposition to this Bill to privatise Royal Mail, and in order to protect Royal Mail, which Moya Greene, its new chief executive, says provides one of the most excellent services in the world.

I, like many colleagues, have major concerns that the Bill’s proposal to separate Post Office Ltd and Royal Mail will lead to significant changes in arrangements between the two entities—two that are currently one. My Opposition colleagues and I are not the only ones to have said that; the postmasters, and the Royal Mail workers and managers whom I met in my constituency over Christmas, reiterated it.

There is no known international precedent for separating a national mail operator from its retail arm, and the changes will be detrimental to post offices in my constituency and to my constituents, their customers. The changes are likely to lead to Post Office Ltd no longer being treated as a preferred and reliable in-house provider by Royal Mail. Instead, I fear that the Post Office will be seen no differently from any other supplier, with the long, shared history between the two companies overlooked and the public’s wishes for a good, complementary service disregarded.

As we have heard, post offices—especially small rural post offices in villages across the country and in my constituency—are heavily dependent on Royal Mail business for income and attracting customer visits to their premises. In the same area, our local post offices provide a convenient and trusted location to carry out Royal Mail transactions both for the general public and for our local small businesses. Many of those post offices act as village shops and sell convenience goods, groceries, sweets and newspapers. However, many of those businesses’ activities are unviable on their own without post office activity underpinning them.

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[Mr Robin Walker (Worcester) (Con)]

Does the hon. Gentleman accept that the alternative of bringing credit unions into post offices is very attractive and that the opportunity for credit unions to work with post offices creates a positive alternative to the banking approach?

[Tom Blenkinsop]

It certainly is an alternative and I take it on board as an option. However, in and of itself, the post bank would not necessarily be in conflict with the credit union. Other Government policies have undermined and withdrawn funds from credit unions. That happened recently with the north-east moneylending team, which was within the Minister’s remit.

Many postmasters fear the worst—that the Bill will be passed—and have made a plea to Government to consider at least extending the contract to 10 years. That request has been knocked back by the Government on the basis that it would not be compatible with EU regulations. However, I am assured by postmasters who investigated the matter that that is merely an excuse. The Government’s position regarding BSkyB and the fact that the potential buyer of the Royal Mail could own 90% of the company leads us to ask what the difference is between a state-owned monopoly and a private monopoly.

Postmasters have also referred me to the rail franchise contract as an example of how such things can be and, indeed, have been done. I cannot think of any reason why the Government are willing to grant 10-year rail franchises, but will not do something similar for the Royal Mail. A 10-year agreement would be advantageous for a number of reasons. First, in the German and Dutch models, which have been referred to as examples of best practice by Ministers in Committee and today, legislation stipulates the number of national access points. It appears that the Minister has more of a problem with German geography than with the potential German ownership of the Royal Mail. Without such a clause, a minimum 10-year deal is necessary to reassure those running existing post offices, which are mainly independently owned.

[Neil Carmichael (Stroud) (Con)]

Having seen several post offices close in my constituency before the general election, I welcome the Minister’s commitment to end the closure programmes. The key point is that post offices should be given the flexibility to get in extra services and respond to new developments, and that is the fundamental point of this aspect of the Bill. Does the hon. Gentleman agree?

[Tom Blenkinsop]

No, I do not. The point of the IBA is to allow for an established foundation so that post offices can exploit further services, but we have not seen, to date, what those services will be. We have had promises about potential services, but as in the case of the press stories about PayPoint bidding for benefits contracts, for example, we hear one thing and then there is evidence of something else occurring.

Post offices are, in the main, independently owned, and the mutualised scheme assumes that the vast majority will opt into the mutual model, without providing any details of what that will mean in practice for a particular post office, which mutual model will be adopted, or whether Government will sit on the board of a mutual or a workers’ co-operative or customer-workers’ co-operative. Nor does it say what would happen to a sub-postmaster if they decided not to opt into the model. In any case, a mutual model offers no safety without a long-term guaranteed IBA for business. Royal Mail could, and probably will, seek cheaper access points after the IBA has expired.

How can the Government guarantee fair commercial negotiations between a privatised, large and powerful Royal Mail and a mutualised, smaller Post Office Ltd? Perhaps the two coalition partners, with one obviously being large and the other smaller, can give us some information on how such negotiations go ahead and how such agreements are reached. However, looking at this from the outside, it does not look particularly helpful for any form of Post Office Ltd taking forward any sort of commercial negotiations. If the position cannot be guaranteed, what message does that give to business and to the general public at large, and what chance is there of having an independent Post Office that opts out of a mutualisation scheme and goes into commercial dealings with a larger Royal Mail?

The Government’s proposed pilots have yet to start and to prove how new services in post offices will have worked. That is not to say that they will not, but there is no evidence as yet for us, as legislators, to see that evidence before we carry on.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Obviously the details are some way from being decided, and the model for how the Post Office will be organised as a mutual, if that happens, has yet to be chosen. Surely, however, this is something to be welcomed across the House. There may be concerns about the specifics, but does not the hon. Gentleman feel a sense of warmth towards the idea of a mutual Post Office?

[Tom Blenkinsop]

As a member of the Labour and Co-operative party, I always have a sense of warmth towards mutuals and co-operatives. However, I do not yet know what we are being sold, and until I see the details I ain’t signing anything.

Post office and mail services are seen not as mere businesses but as an essential part of our way of life. These are not just romantic notions on my part. I cite the report issued last year by the Business, Innovation and Skills Committee, which says that local post offices provide a focal point for communities. It says that they are

“an instrument of social cohesion”

that

“preserve the fabric of our society”

and are places

“where vulnerable and non-vulnerable people alike share services”.

Every week 20 million people visit a post office. For every £1 transacted in the UK, 14p is handled through the post office network. Post offices are also a lifeline for many of the most vulnerable people in society, including older people, the disabled, people on low incomes and also—this is important to me in my constituency—those living in rural villages and small towns.

Small businesses are also extensive users of the post office network, particularly its mail services. I understand from the Federation of Small Businesses in my region that 20% of its member companies use post offices, while 59% use their local post office at least once a week. The growth of online business transactions has boosted this usage significantly, with Royal Mail parcel delivery posted from local post office branches being the preferred medium.

The inherent strength of the current post office network lies in its depth and its reach. The existence of 11,500 sub-post offices means that the network of post offices remains bigger than all the bank and building society branches put together. This becomes even more important when we note the continued closure of local bank branches.

[Damian Collins]

As we have discussed, that is the inherent attractiveness of the Post Office and one of its great bargaining tools. No retail outlet in this country can offer the breadth and number of locations of the Post Office.

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[Tom Blenkinsop]

We have seen recently that Tesco could compete with the Post Office, and have heard in this debate that other commercial ventures could do so.

[Damian Collins]

Even the major supermarkets—and probably all the major bank branches—combined do not reach the scale of the Post Office. I am yet to be convinced that there is a realistic retail alternative whereby the Royal Mail could take its business wholesale out of the Post Office and give it to someone else. That is the picture painted by some Opposition Members.

[Tom Blenkinsop]

No, we are portraying a picture of the future in which that could happen. Royal Mail Group has admitted that nearly two thirds of existing post offices are economically unviable. That does not mean that they are not propped up by the inter-business agreement. That is the difference in how the Opposition and some Government Members view the IBA. Is it simply a system that keeps post offices alive, or is it a redistributive mechanism within Royal Mail Group, alongside other mechanisms, that ensures that there is a service provider across the UK?

[Mr Davidson]

Perhaps it would be helpful if we clarified whether it would be possible, without an IBA, for Royal Mail to do a deal with Tesco, other supermarkets and a number of banks, and to fill in the missing parts of the jigsaw with post offices. Surely that is the alternative that we ought to be worried about. That is the danger of going down the road indicated by the hon. Member for Folkestone and Hythe (Damian Collins). He seems to think that the option is between the Post Office in its entirety and Tesco in its entirety. A predatory Royal Mail could easily decide to pick and mix. The danger is that we would be left with a small number of post offices, with the rest replaced willy-nilly by Tesco and the like.

[Tom Blenkinsop]

There is also the assumption that the Royal Mail will stay at its current size and not contract wholesale to a more commercially viable size in urban areas, and an assumption that it will remain as one national system and not fracture into regional systems with further purchases and sales. It depends who the buyer is, and we have no guarantee on that either.

The importance of the inter-business agreement is demonstrated by the figure from the National Federation of SubPostmasters that income from transactions carried out in post offices on behalf of the Royal Mail accounts for a third of Post Office Ltd’s income—£343 million in 2009-10—and makes up a third of sub-postmasters’ pay and income. It is clear that if the agreement, which has almost four years left to run, is not retained and carried over, more local sub-postmasters will conclude that the game is up and hand in their keys. The arrangements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 are likely to change, and the terms and conditions for sub-postmasters may change substantially. If I was a sub-postmaster in a rural area and wanted my pension or redundancy, I would see this as a dodgy area.

It may be easy for Ministers to ignore such arguments and say that there are always people who are willing to provide post office services, but from my constituency experience, that is far from the truth. When a local urban post office in Coulby Newham closed recently, the response to the advertisement of the new business opportunity was negligible. Luckily, we were able, in partnership with the regional offices of Post Office Ltd to find a business man, Mr Patel, who was willing to take the risk of opening a new outlet in Coulby Newham, but I stress that that was with the benefit of the inter-business agreement. Without it, I do not believe that he would have taken the plunge.

Any changes to Royal Mail and its relationship with Post Office Ltd that adversely impact on the network will unquestionably risk further widespread post office closures. If the Government do not heed that warning, the public and my constituents will know who to blame. Royal Mail is a great example of how the market does not solve everything. It simply does not make economic or business sense for a company to set up to provide a postal service in rural areas. That is why we need Royal Mail, why we have the IBA, and why it must remain.

[Nia Griffith (Llanelli) (Lab)]

To most people in this country, the Royal Mail and the Post Office are synonymous. To them, the matching colours of the Royal Mail vans and the oval sign indicating the presence of a post office are symbolic of an inextricable link between the two. They are the two arms of one and the same service. The post office is the collection or access point—the place where people take the parcel that they want to post or the letter that they want to register—and the Royal Mail van that does the country rounds, or the postman or woman wearing the badge with the red and yellow insignia on it, provides the delivery service.