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Postal Services Bill [HL]

My Lords, I join the Secretary of State and the noble Lord, Lord Clarke of Hampstead, in paying tribute to the late Lord Dearing. Ron Dearing was a very great and close friend of mine and gave me a lot of wise advice. I agree with the noble Lords that we will miss him very much indeed. I declare my interests as listed in the Register of Members’ Interests. Let me make it clear straight away that we on these Benches welcome the Bill and support in principle the conclusions and recommendations contained in the excellent report produced by Richard Hooper and his colleagues. In a sense, the title of the report, Modernise or Decline, says it all. I have always believed that a universal postal service at a uniform and affordable tariff is an essential requirement. As the Hooper report rightly observes: ""The universal service has a strong social and economic rationale ... Customers place a high value on the affordability of the service, on a uniform tariff, and deliveries on six days a week"." However, as the report also demonstrated in stark terms, the viability of the concept of the universal service obligation is increasingly in jeopardy and cannot be sustained under present policies. Page 60 of the report states: ""The universal service is under threat and the status quo untenable"." Let me be clear: the preservation of the universal service obligation must be at the heart of any reform. Our strong desire to underpin the USO is why we on these Benches accept the urgent need for modernisation as outlined in that excellent report. The previous Conservative Government consulted on and explored the right way forward. The sad fact was that we did not have the necessary numbers in another place to drive through the necessary reforms in good time in the face of what I recall was strenuous and often opportunistic opposition from the Labour Party. I remember one Division in another place when the now Prime Minister and the Secretary of State himself supported a Motion that rejected, ""whole privatisation or part privatisation of Royal Mail".—[Official Report, 12/7/94; col. 835.]." Of course, after the general election of 1997, the Secretary of State took over responsibility for the future of the Royal Mail and the Post Office and, as he rapidly discovered, things often look different from a ministerial vantage point. In a Statement on 7 December 1998, he accepted the need for urgent change and, indeed, singled out the possibility of a minority private shareholding. Since then, sadly, we have endured a decade of decay, drift and decline—10 wasted years, as a result of which we now find ourselves in the pretty pass outlined so convincingly by the noble Lord. Surely, that is the essence of bad government: Ministers sit on their hands for 10 years and then produce a rushed job of a Bill that raises more questions than it answers. The Government's lack of leadership and inaction has caused great problems for the Royal Mail. Now the internal strife of the Labour Party, as evidenced by the first two speeches in this debate, is adding to that uncertainty. In another place, Ministers have attempted to paper over the cracks by playing at semantics. When is privatisation not privatisation? I must tell the noble Lord that I am reminded of Through the Looking-Glass by Lewis Carroll. ""‘When I use a word’, Humpty Dumpty said, in a rather scornful tone, ‘it means just what I choose it to mean, neither more nor less’"." I suppose that the Secretary of State has fallen off the ministerial wall twice before and succeeded in putting all the pieces back together again. If he gets this Bill wrong, all the King's horses and all the King's men may strive in vain to reconstruct his ministerial career once again. What matters is not the label we attached to any system of ownership, management or governance; what matters is whether it delivers the necessary reforms and safeguards. If the universal service is to survive, Royal Mail needs to be radically transformed. The strategic partnership between Royal Mail and a private sector company with experience of transforming a major business is, I believe, necessary to provide the commercial confidence and the access to capital and corporate experience that will ensure the future both of Royal Mail and of the universal service itself. Unfortunately, Richard Hooper’s clarity on the necessary reorganisation has not yet found its way into the Bill, nor even into government policy as laid down in press releases and Command Papers—nor, no doubt, into what happened at the private meeting referred to by the noble Lord a few moments ago—that have been appearing at intervals on the departmental website and elsewhere. Although we would not want to limit unduly the sort of partnership that a private sector company might consider appropriate, I must say that the Government do not have a reassuring record in negotiating difficult deals with private sector companies. There is a great deal of concern about the sort of package to which they might accede in their haste to improve the dire public finance figures. Even the final percentage to be sold off is unclear. The Bill seeks only to ensure that a majority shareholding remains in public hands, but the Government’s Command Paper 7560, published alongside the Bill, states at paragraph 4.8 that, ""we expect the partner would take around a 30 per cent interest"." It will be interesting to learn from the Minister how he arrives at that rather arbitrary-sounding figure. Does it have an economic justification, or is it merely the product of desperate arbitrage within a viscerally divided Labour movement? Perhaps the Secretary of State will explain in his winding-up speech. We on these Benches will ensure that the Bill receives the line-by-line scrutiny in which, I believe, this House excels, in order to clear some of the fog, counter some of the rumours and answer all the questions. The speed with which the Secretary of State has produced this Bill has left a number of stakeholders out in the cold. After hearing the Minister—I pay tribute to his experience and the contribution he has made—I feel particular empathy with the current employees of Royal Mail, who effectively are being excluded from this key debate about their future. As the two wings of the Labour Party in Parliament become evermore entrenched in their views, as we have heard today, the employees seem to find themselves in no man’s land nervously watching the shells explode overhead and waiting for one to fall directly on them. Their jobs and pensions are being drastically amended by decree from on high, with little or no discussion or consultation. That is no way to conduct such an important process. This Bill contains no provision to allow employees to participate in the part privatisation of Royal Mail. We shall certainly be seeking to insert a scheme for some form of employee share ownership. Nothing underlines the failure of Labour’s management of Royal Mail for the past 12 years more clearly than the provisions in Part 2. Here, we are talking about burdening the taxpayer with billions of pounds of unfunded liabilities. It is only because the Government have already drawn us into trillions of pounds of debt through their mismanagement of the wider economy that their failure here has not been more widely recognised and condemned. Unfortunately, this Government’s refusal to address the problems of the Royal Mail in a timely manner has led us to a place where there seems to be no other honourable, acceptable or equitable way out. We therefore regretfully agree with the Hooper review that, when a successful private partnership is found for the Royal Mail, the Government should step in to prevent the pension scheme going under. However, this Bill fails to meet the standards for which one might reasonably hope. Some critically important questions are left unanswered and, once again, important provisions are missing. The situation is not helped by the imminent revaluation, which is expected to change the figures dramatically and drastically in the wrong direction. Clarity also needs to be established about what will be left behind in the Royal Mail and Post Office pension pots. We certainly shall look to insert proper transparency to ensure that the public and Parliament are, and remain, fully aware of what they are taking on. As with the first two parts, Hooper’s conclusions on Part 3 are very clear, especially with regard to, ""the depth and range of disagreements between Royal Mail and Postcomm"," at paragraph 83. When, as Hooper highlights, even basic facts are disputed, it is clear that there needs to be a proper market analysis and consequential adjustment of the regulatory process. We support the transfer of regulatory responsibility from Postcomm to Ofcom, not only because of the breakdown in the current relationship, but also because of recent developments in the communications sector. We hope that Ofcom, with its greater experience of sectors where there is rapid technological change, will be able to develop a proportionate and appropriate regime that weighs competition objectives against the overriding necessity of maintaining and supporting the universal service obligation. However, again, this Bill falls short. It certainly transfers responsibilities to Ofcom and establishes the duty to secure provision of the UPS, but the abrupt and enormous extension of powers and the incorporation of an entire sector into a regulatory regime are being proposed with an almost total disregard for the concerns of firms that are going to be drawn into the regulatory net. We need to look carefully at the regulatory objectives. We are told that these provisions are the very model of modern drafting for a modern regulatory regime, but the proposal seems to be that the establishment and maintenance of a fair and balanced regime are to be left entirely in the hands of Ofcom. It will possess newly minted nuclear options such as the imposition of a levy, with little or no clarification about the possible circumstances in which such draconian powers might be implemented. Ofcom of course needs some flexibility to respond effectively to the market review, but we should not accept the extension of regulation into an entirely new sector without a full debate about this market and the supposed consumer detriment that regulation is supposed to address. These provisions will not ensure proportionate regulation, nor do they provide for a properly transparent and independent assessment of the decisions that Ofcom will make in response to any developments the sector might undergo in the future. Of course the Hooper report made a categorical recommendation that Parliament should have a significant role in ensuring that the regulator acts appropriately, and to help achieve that objective the adoption of a risk-based approach should also be made explicit in the Bill. Unregulated cherry-picking would obviously undermine the ability of Royal Mail to satisfy the USO, but oppressive, expensive and burdensome regulation must also be avoided at all costs, especially in the current economic climate. Proper transparency and scrutiny by Parliament and the wider public are necessary to ensure that an appropriate balance is struck. This Bill is welcome so far as it goes. The noble Lord, Lord Clarke of Hampstead, has just indicated his intention to take the very unusual step of dividing the House at Second Reading. It seems fair for me to make the House aware that, if it does come to that, personally I shall be very comfortable walking through the voting Lobby shoulder to shoulder with the Secretary of State. However, our support in principle at this stage should not in any way be interpreted as a carte blanche for Ministers. This may be a necessary Bill, but it is far from being a perfect Bill. This House is at its best when it undertakes detailed legislative scrutiny, and, without seeking to pre-empt your Lordships’ intentions, I believe that the future stages of this Bill should see substantial changes made. I hope that this legislation will be in better shape, particularly on the detail, when it leaves this House, and I look forward to working with the Secretary of State and his colleagues in the coming weeks, and possibly months, to help bring about that desirable outcome. I am sad to say that I believe this Government have sold the Royal Mail short and sold the country short. We deserve a better Government and a better Bill, and it is our firm and avowed intention to help deliver that.