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Postal Services Bill [HL]

My Lords, first, I declare an interest as chair of Consumer Focus, which has inherited the responsibilities of Postwatch in looking after the interests of consumers in the postal markets. I welcome very much a lot of the process through the Hooper report, the Government’s statements and the production of this Bill, along with the various statements made by my noble friend the Secretary of State. Most of the attention in this debate has focused on the issue of ownership—whether we like to call it privatisation or strategic partnership. There are other aspects of this package which I should like to draw out too, however. I hope that the issue of ownership, which is politically dynamite, does not overshadow some of the other measures here. The Royal Mail faces a critical situation. It has falling volumes of physical mail, increasing competition from the electronic sector, technological backwardness, a history of failure of investment from successive Governments, whether it is the lost decade of the pensions holiday and slices off to the Treasury or the recent failure of this Government to turn their promise of a big investment into reality in a modernisation programme, with half of it being stuck in state aid activity in Brussels. In some respects, it has had poor industrial relations and poor management. As my noble friend Lord Sawyer said, it is not as bad as all that. Some progress has been made; it is now making a profit. I take the point made by my noble friend Lord Hoyle. Comparisons with international equivalents or near-equivalents are somewhat misleading. You have to look at the revenue and the costs as well as the profit. In terms of the revenue, the price of postage is relatively low in this country, certainly on higher value packages and letters. That is of huge consumer benefit. It is a significant benefit to the people the Royal Mail rather disparagingly refer to as social consumers—you and me—and to business. I hope that in all this transformation we do not lose that benefit, which is positively thought of throughout society. We need a serious change in structure. I believe that although it has had its problems, the unbundling of the Post Office Ltd from the Royal Mail structure, while keeping the holding company, will be beneficial. It needs spelling out and it needs to be made clear. I have yet to see a nice diagram from the department explaining the relationship between all the bodies, where they all fit together, quite how the governance will work and whether there are Chinese walls at various points in the organisation. In general, it is sensible to unbundle, but only if equal attention is given to the Post Office network that we are now giving to Royal Mail. We have been through two swathes of post office closures. Postwatch has diligently tried to improve the local outcome of that, but it has been faced with a decision by the Post Office board and the department that a certain number of closures will take place. It is in an impossible position for a consumer organisation. We want to turn that around and look at a creative solution for the use of post offices. They are the outposts of the state, both national and local, and many services, public and private, could operate through our post offices and sub-post offices. I welcome very much the initiatives made by my noble friend’s colleague Pat McFadden in getting other government departments together to look at their services, and the other ways in which the post office network could be a more positive representation of service to consumers, particularly in rural areas and the outer suburbs where they lack services of all kinds. That side of the structure of Royal Mail needs to be addressed in parallel with its logistics. We need regulatory change. I welcome the transfer of the oversight of Royal Mail out of Postcomm into Ofcom. We in Consumer Focus have recently written a report on rating regulators. Postcomm did not come out very well in it. Ofcom came out reasonably well. Postcomm of course was in an impossible position. It was virtually a single company regulator in a market where the temptation for the regulator to micromanage was far too great, with the resulting strange mixture of incestuous relationship and serious fraction. The move into Ofcom will be beneficial. The Bill is silent on Ofcom’s duties on the other side. Postcomm had a duty to look at the level and adequacy of the number of post offices. The Bill does not seem to mention that. Perhaps my noble friend the Secretary of State could address it. We also need to clarify whether Postcomm’s whole range of responsibilities will be transferred to Ofcom with the mandate to improve and modernise the system of regulation, or whether it is left too vaguely, as the noble Lord, Lord Bradshaw, implied. I think that Ofcom needs to be left substantial elbow-room but not everything. The Bill is also silent on consumer representation, relative to the regulator and to the industry. My organisation and I will need assurance that arrangements set up under the consumer Act 2006 will continue as well as strengthen the internal communications panel within Ofcom itself. The provisions on the pensions burden are a good move. The Government in any case would probably have to take ultimate responsibility, but this is a clean break and a clear drawing of a line in the historic situation. Of course, I have to mention that the prospect of a reasonably decent pension was often used for the post office workers as an excuse for their relatively poor pay and other conditions. The Government should not lose sight of that. We need a change in technology. As others have said, the level of automation is pathetic within Royal Mail. We need drastically to change that. That will mean changes in working patterns, some loss of jobs and a serious rationalisation of the whole logistical structure of Royal Mail. That leads into the whole HR situation and management competence. It is absolutely clear to me that the level of management in Royal Mail, although there are some very creative and dedicated people within it, requires a step-change improvement. Therefore, we need an injection of management expertise, particularly in modern logistics and the wider communications market. We also need money. The crucial and controversial bit of how we get that money is where we are now going to focus, but these wider issues need to be addressed as well. It is not clear to me that the injection of capital and the injection of money need to come from the same place. Consumer Focus is pretty neutral on the question of ownership. Clearly, we have to judge the propositions in the light of what benefits they will bring to consumers, both business and individual, and we need to see more clearly what is proposed and how it will operate. I have to say, and I now speak personally as against wearing my Consumer Focus hat, that I am currently on the sceptical side of neutral. I accept that some of my arguments are irrational and nostalgic. The noble Lord, Lord Bradshaw, mentioned the Secretary of State’s grandfather twice. I will mention my grandfather. He was a postman and a strong trade unionist. Because of the tradition he came from, he was also an ardent royalist. Therefore, on both counts any idea of privatising Royal Mail would make him turn in his grave. However, I have slightly more rational reasons for querying whether this is the only way in which we can mobilise the degree of capital that is there. I appreciate, and the Secretary of State will tell me, that we are in a new area. There are some novel arrangements of public/private relationships whereby we privatise the Post Office and nationalise the banks, and we have to be into that era. Is this the only way in which the capital could be mobilised? In particular, thinking about the number of partners under the strict criteria that the Secretary of State has referred to and under the Hooper report who are conceivably likely to provide this injection of capital and the management expertise, there are really only two of them. The Government’s negotiating position is fairly weak if you limit it to two. There is the problem also that if part of the improvement in Royal Mail has resulted from real competition in part of their trade, we are actually absorbing or handing over, whichever way you look at it, part of the activities of Royal Mail to one of the competitors. Therefore, competition is reduced rather than increased by this relationship. I tell my noble friend the Secretary of State that I am not unpersuadable that this is the best way to proceed. I utterly accept that we need better management and an injection of capital. Do we need to close all other options in order to raise the money? After all, we could normally raise money on the market. We could issue bonds. We could get private money in that way. I think that the reputation of TNT and, to some extent, DHL in the industrial relations area will not help my noble friend in his discussion with the employees of the Post Office and Royal Mail, or with arguments that we will have in another place within our own political party. Therefore, I agree with the general approach to this legislation. I agree with the needs identified by Hooper, the department and my noble friend, but I remain to be persuaded that in the final detail we have yet reached the ideal solution of how we provide that money.