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Postal Services Bill [HL]

My Lords, I intend to focus exclusively on Part 1 of the Bill. I shall be making a point with which the Minister is already familiar; he heard me expound it very briefly in another forum the other day. Essentially, I want to direct attention to the nature of the relationship between the incomer—the third party, which will bring in expertise and other things I shall mention—and the existing Royal Mail Group Ltd and its board. I want to make one point which will perhaps be novel in the context of this debate. I am not particularly concerned with questions of ownership. My point would arise even if the strategic partnership took a form which did not involve any transfer of shares. I make this point because, by chance, as counsel, I was involved in a case called Bermuda CableVision Ltd and Colica Trust which came out of Bermuda to the Privy Council in London in 1998; the appeal case is at page 198. The issue was whether the Bermuda television operators could show that they controlled the company because they complied with the statutory obligation of having 60 per cent Bermudian ownership and 60 per cent Bermudian directors, as the local companies Act required. The contention on the other side, which I put forward, was to forget about the shareholding, because if you looked at the other arrangements, you would find that in fact the Americans controlled the company. They did it in various ways such as altering the by-laws and having a separate side agreement. In other words, we want to focus on, or at least include in our discussions, who will control the operation. What do we know about the new third party? What have we heard? The Hooper report says on page 14: ""We recommend a strategic partnership between Royal Mail and one or more private sector companies with demonstrable experience of transforming a major business, ideally a major network business"." Per Hooper, the incomer does not necessarily have to be someone who has been in the network business. That was the ideal. Hooper makes it quite clear that the existing company is simply not coping. The previous page, page 13, states: ""The company urgently needs commercial confidence, capital and corporate experience"." Hooper gives details of that. Incidentally, in relation to capital, he makes the following remark, which may nowadays seem slightly out of the true Bill: ""By contrast"," with public finance, ""private capital is generally more flexible and more tolerant of necessary risk"." Hooper says that the Government already have enough financial commitments, so there must be a newcomer who will bring in some money and access to corporate experience. He continues: ""Royal Mail needs access to the corporate experience of one or more private-sector companies which have successfully managed complex change on a similar scale"." So the "whizz-kids" to whom the noble Lord, Lord Clarke of Hampstead, referred are the people who will have to be brought in to get the show on the road. That is a rather broader description of who the third party will be. The White Paper of the noble Lord, Lord Mandelson, accepts the recommendation for a strategic partnership and cuts the possible "partners" down to a single "partner". It is not until we get to the Explanatory Notes that we read anything about this partner. Paragraph 11 states: ""Strategic partnership: Royal Mail should enter into a strategic partnership with a private sector firm that has demonstrable expertise in transforming a major network business"." Not a word of that is in the Bill; it is in the Explanatory Notes—it is a gloss on the Bill. There is no definition of who it is we are looking for. How many firms in the world have this expertise? We do not know; we are not told; we do not have the evidence. What problems will arise? Let us look at this simply from a commercial point of view without beginning to get excited about public ownership and private ownership. What issues will arise when the newcomer is introduced? For example, of whom will the board of directors consist? What will be the balance between the newcomer and the old guard—I call it that without any disrespect? What about the adoption of new technologies and techniques? Let us suppose that the new company and its experts come in and say, "Look, you’re running a complete shambles. You want to do what they’re doing in Holland or Singapore. They’ve got the machinery. It’ll take a couple of years to buy, or the lead time might be longer, but that is what is absolutely essential. But we must get our running costs down". What if those proposals fall on deaf ears or are controversial and do not immediately capture the imagination of the old guard? What about the top staff who run the show daily? I have already said that the underlying intention is for a whole lot of new people to come in with new ideas. They will have run a company previously and they are going to run this one. What about money? First of all, there will be a sale of 30 per cent of the shares, which is the figure that has been mentioned today. Some money will come in from that. But what about new capital for the expensive machinery and so on that will have to be acquired? As I read his report, Hooper is looking to the new company to bring in that money itself or with its colleagues or companies. How will that money be provided? Will it be in the shape of loans? What about repayment? Will there be guaranteed repayments to the third party? Let us suppose that it goes straight into the business and is used forthwith? Then, the newcomer will look for a kick-back. He is putting his money in and not getting any interest, but he is hoping to get something out of it. One can therefore see all sorts of problems arising. My complaint is as follows. I can guess exactly what the Minister will say. He will say, "You’re asking for the moon. You’re asking me to talk about some of the difficulties in the negotiations which will arise when we talk to A, B, C, D and E". I appreciate that point, but we must be able by Committee stage to know something more about the Government’s intentions on some of these points and how they are going to resolve these commercial difficulties. They could at least open them up for future discussion; it would not preclude the path of any negotiations. If you read Part 1, you find absolutely nothing, not even a definition of the type of person who is to be brought in or even the 30 per cent. My plea is for more information.