---

Royal Mail

I am grateful for the opportunity to speak, and for the opportunity to follow the speeches that we have just heard. I must, of course, declare an interest. As noted in the Register of Members' Interests, the Communication Workers Union has been a generous donor to my constituency campaign funds in the last two general elections. However, its members know that, on this issue, I do not agree with them. I must also say that I have considerable sympathy with my right hon. Friend the Minister. I believe I am right in saying that I was the longest serving Secretary of State for Trade and Industry since the 1950s, and in that capacity I had the great pleasure of being the owner, on behalf of the public, of Royal Mail. In that period, we made substantial changes to Royal Mail's leadership, financing and structure. We brought in a completely new board led by Allan Leighton, to whom all of us owe considerable thanks. We put in additional funding. We changed the balance sheet. We introduced real support, with the help of the TUC, to try to create the social partnership that was so obviously needed between management and trade unions. We did all that, and some change came. Costs were reduced—Mr. Hooper says by about £0.5 billion, while Royal Mail says by more than £1 billion. Customer service was improved, at least for some years. Losses, which in those days were £1 million a day and threatening to rise, have been turned into a fragile, to use Royal Mail's own word, profit just last year. However, the reality—to which my right hon. Friend the Minister clearly pointed—is that the changes that have taken place in Royal Mail in the last eight years have not gone far enough or anything like fast enough. Over the past decade and more, I have been a regular visitor to my local sorting office in Leicester. I have seen one very welcome change: industrial relations, which were pretty parlous 10 years ago, are now, so far as I can tell, reasonably good. Sadly, however, that is not the picture across Royal Mail. Apart from that, as far as I can see almost nothing has changed in that sorting office. I welcome one aspect of that: many of the Post Office men and women whom I met 10, 11 or 12 years ago are still there, absolutely dedicated and loyal Royal Mail workers whose commitment to the organisation is one of its greatest strengths. However, the lack of change in the sorting methods is shocking. My right hon. Friend the Minister rightly referred to the business of sorting post into the ““walks”” that are then taken out. What I saw just before Christmas was exactly what I saw more than 10 years ago: postmen and women who are going to go out on the ““walk”” at about at 8 o'clock coming in at 5 or 6 o'clock in the morning and hand-sorting the mail into old-fashioned cubby-holes that were probably there 50 or even 100 years ago. A system that has been 85 per cent. automated by Deutsche Post, TNT and other postal operators and competitors is wholly unautomated in my own and many other local sorting offices. That lack of change, coupled with the transformation in the technologies we all now use, is probably the central reason that has led to the crisis—that is what it is—in Royal Mail's current position. Royal Mail itself says the overall financial situation is increasingly fragile. The universal service obligation lost money last year. The pension scheme is completely unaffordable by the company on its current performance. Postcomm says Royal Mail in its current form is not sustainable. Richard Hooper says that the status quo, and in particular the USO—to which all Members, at least on the Labour Benches, are completely committed—is under threat. The truth is that only about a third of the original master modernisation plan, which was drawn up under Allan Leighton's leadership of the new board, has actually been implemented, and only about £85 million of the Government's financing facilities that were put in place in 2001-02 and renewed only a few years ago has actually been used. Royal Mail desperately needs a new capital injection and a much faster pace of modernisation, in particular to deal with the massive inefficiency in the running of local sorting offices. That modernisation would benefit employees, who should not be working in 19th century conditions in a 21st century Royal Mail. It also needs a solution to the pension fund deficit. The Minister rightly said that once the new valuation is made, given what has happened to stock markets in this global financial and economic crisis, that deficit will be frightening. Beyond all those changes, what Royal Mail needs is an injection—not just at the top, but all the way down, through senior, middle and junior management—of new people who have expertise and experience gained in another organisation. I am thinking of a network organisation, preferably a postal one, that has already been through this difficult transformation, on which Deutsche Post and TNT embarked in the 1990s. That expertise and experience exists, but it is not to be found in Royal Mail. It needs to be introduced through a strategic partner—a minority partner. That partner also must demonstrate the track record of social partnership working that we have tried to create in Royal Mail. Clearly, the management have not succeeded in that, but neither has the leadership of the Communication Workers Union, who accept the need for change in principle, but have not been willing to make those changes in practice.