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Postal Services Bill [HL]

My Lords, the easy thing to do today, particularly if we think of the hours and days ahead of us going through the Bill, would be to drop it now, but that would be a real dereliction of duty if we want to secure a strong future for a universal service in the UK. We do not have the Bill because of the EU, as the noble Lord, Lord Stoddart, says. We have the Bill because the Royal Mail is in serial decline and needs a fundamental shake-up. It is not about tinkering at the edges; it needs a fundamental change. Changes in high-profile public services, especially those to which the public have a strong emotional attachment, are always difficult. Just think of the arguments that there have been at every stage of health service reform. At each and every stage, variously, we have had strongly felt and passionately held views, real fears, protectionism dressed up in other clothing, accusations of privatisation, prophets of doom about the demise of the NHS in all but name—I remember most of them personally. There are those who doubtless still believe that some of that is true, but most people see a massively improved service, which has had investment and the necessary reform and which commissions the private sector intelligently to drive up standards. Above all, patient experience and treatment have improved, but still within a universal service. Look at air traffic control. When the Government announced the plans for a public-private partnership of NATS in 1998, there was a concerted campaign of opposition. Attempts to change NATS, including full privatisation, had been mooted by earlier Governments and dropped. Before the 1997 general election, Labour’s transport strategy had argued that, ""it is the role of government to set the framework, then enable much of the provision to be privately funded. We must construct genuine public-private partnerships in which clearly stated policy aims have the central place. It would then be the role of the private sector to participate in projects to which they can bring the expertise and investment within a stable and strategically planned environment"." It is always instructive to look back at what you have promised, and this strategy holds true today and is relevant in this debate. Genuine public-private partnerships should involve a sharing of responsibility, not a shifting of the Government’s strategic responsibility wholly on to the private sector. There has to be a sharing of risk and the creation of a stable environment for the private partners. Above all, of course, there has to be good value for taxpayers and a good service for consumers. In the case of NATS, as my noble friend Lord Brooke said, after the consultation it was announced that we would move ahead with the PPP, with 49 per cent government control and 51 per cent in the private sector, including employees in this case. Safety regulation was left with the CAA and safeguards were introduced for employees’ pension rights. I remember, as many of us probably do, the highly charged arguments at that time and some pretty major scare stories around these proposals but, as with other reforms, the rows are now a distant memory and the outcome has been improved performance, effective regulation and a stable workforce that has decent conditions. We cannot avoid facing up to the challenges that face Royal Mail. The public may feel a level of emotional attachment, but that attachment goes only so far; it is not strong enough to make us go back to letters from e-mails or to be sympathetic when the post is less efficient than we expect and deserve. We must face up to the facts. The status quo is not a tenable option. It will lead only to a larger crisis in the near future. The need for change is compelling. The volume of mail being sent is falling, as people and businesses switch to digital communication. All of us here know that. We posted 5 million fewer letters per day last year than two years ago. Royal Mail’s performance does not match the best European postal operators. By its own estimation, it is 40 per cent less efficient. Its distribution network and mail centres remain largely unchanged. Despite the launch of the renewal plan in 2002, it is not automated to the same extent as other leading operators. Performance is linked to industrial relations, and industrial relations in the Royal Mail need to improve. In 2007, 60 per cent of all days lost in the whole economy through industrial action were accounted for by Royal Mail. In total, more than 600,000 days of work were lost. Agreements that may be made nationally at the moment have to be made again—or often not—locally. We have heard about the pension deficit. Royal Mail’s historic pension deficit is one of the largest in the UK, larger than any FTSE 100 company. Sometimes we hear that pricing is the answer, but pricing is not going to solve the problem. Increasing postal prices would not generate sufficient revenue to counteract falling volumes; previous price increases have demonstrated that very clearly. Consumers have either used electronic media or reverted to second-class postage. Companies have given their business to competing operators. Relationships with the regulator are notoriously bad. Postcomm has been notoriously difficult, preventing management from focusing time, energy and skills on the consumer and the challenges of the business; too often, management has spent time and resources responding to the regulator. There will be those who say that competition is the problem, but competition has brought price benefits to consumers and fundamentally is something of a sideshow. Last year, Royal Mail lost £100 million in generating profit to postal competitors but £500 million to digital media. Royal Mail is already expecting a significant further decline. There are those who will argue that this is the back door to full privatisation, but the Hooper report and the Bill absolutely do not do that, nor does the proposal that the company would be broken up into separately owned companies. Indeed, the business will remain in the public sector. The Bill enshrines the universal service in primary legislation. Any further changes would need primary legislation. We have heard a more recent argument this evening: the Government can pour money into banks, so why not into the Post Office? Apart from that being somewhat trite, the Government are not walking away from the Post Office; they are proposing to tackle the significant pension deficit. This will not be a fair deal for the taxpayer unless there is a strategic partnership to deliver the necessary modernisation alongside it. Remember, too, that the Government have made available funds of £3.5 billion in the seven years since Royal Mail became a public limited company. The tough reality is that, since the Postal Services Act 2000, there has been progress, but not nearly enough, while the challenge from the changing postal market has escalated and will do so year on year. I agree with my noble friend Lord Soley and others that the Act did not go far enough. There is now a package in front of us that we should support—not the bits that we most like, but all of it in its entirety. It is something of a deal. That does not preclude intelligent amendments from being made. Indeed, we have heard tonight that there is likely to be a move on employee ownership. I certainly would be interested to hear the Minister’s response to that. The proposals before us enshrine the commitment to a universal service and make it clear that this takes precedence over competition. The issue of regulation is seized by including the Post Office in Ofcom’s arena. The access regime will be considerably fairer and much more transparent than is the case for Royal Mail now. As part of the package, the pensions mess will be sorted, which will be a huge benefit to company and employees alike. The proposals for partnership with an experienced operator will lead to faster change, new skills and new capital. The Royal Mail will stay in the public sector. Let us be clear that this is not just about capital; it is not about how we get some money into the Royal Mail. It is about the new management skills that are so obviously and fundamentally needed. We need a massive step change if the Post Office is to succeed and if the Royal Mail is to continue as a universal service supported by all. I see this package as a pretty strong and balanced deal, which offers not only protection to the universal service but the opportunities to make that service fit for purpose going forward. It would be short-sighted indeed to reject it.