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Postal Services Bill [HL]

My Lords, I declare an interest as a non-executive director of the Royal Mail Holdings board and as a member of the union Unite. Like others, I want to say how sad I am that a previous member of the board, the late Lord Dearing, is no longer with us. He would have wanted to be a central player in this debate. I am not the only one on these Benches to say that I wish we did not have to start from here but, frankly, I do not know what else can be done. The Hooper review, Modernise or Decline, identified not just the problems arising from the many years of lack of investment but also the consequent inability to modernise, the poor industrial relations problems between Royal Mail and Postcomm and the massive pension fund deficit. Of themselves those are huge issues, and any one of them is enough to knock a less sturdy and established organisation sideways. More seriously, Hooper identified structural and systemic problems within the mail business generally and globally. I repeat that something has to be done. I would like to give some background to the current situation and I hope to scotch a few myths which appear to be gaining in credence and which, if we are not careful, will become indelible truths. First, let us look at management which, as I know from my years as a trade union official, comes in many guises: senior, middling and junior, good, bad and just plain mediocre. The current most senior management of the Royal Mail, the chair and the chief executive officer, turned the company from a loss of £1 million per working day in 2002 to a profit of £255 million by period 3 of this financial year. That point has already been made. Each of the businesses which comes under the Royal Mail Holdings board—the letters business, Parcelforce Worldwide, GLS, which is the European parcels business, and even Post Office Ltd—made money. I remind the House that those two people pressed for colleagues’ shares, a system which operates as phantom shares. That system had to be adopted because of a lack of primary legislation, but it gives employees a stake in the business. So a big tick goes to the most senior management. That is not to say that all in the garden is rosy. Many managers at all levels are capable, committed and conscientious, but far too many are still not up to the jobs they hold. In answer to the point made by the noble Lord, Lord Rooker, some are there based on the old system of seniority, which the CWU used to insist on and which management went weakly along with. Management at lower and intermediary levels is hugely important to the success of the business. Organising shifts and making the best use of the workforce available is key to delivering increased productivity in the face of fluctuating volume demands. That sort of responsibility should be bread and butter to a manager. Sadly, it does not always work as well as it should and it is not helped by union representatives, paid or otherwise, the vast majority of whom have never worked anywhere but the Royal Mail and who, therefore, bring no new or different ideas to the negotiating table. Secondly, let us look at the nature of the work. In the past five years, the volume of letters handled daily has reduced by 7 per cent from 84 million to 78 million items. The Royal Mail projects a further 8 per cent fall in this coming year. That is a very serious projection which will impact in a big way on likely profitability. Globally, volumes are predicted to decline by between 6 and 8 per cent per annum. The Hooper report makes it clear that the major reason for this decline is e-substitution. Of course, the liberalisation of the market has had an effect. The cherry-picking by competitors of major customers whose bulk mail collections bear no resemblance to the time and effort required to collect and sort social mail has, to say the least, posed a challenge. However, the fact is that fewer and fewer people use the mail for paying bills, ordering goods or just general communication and that trend is set to continue and to increase. Changes in communications behaviour bring opportunities as well as threats. There has been a significant increase in the volume of packets, largely as a result of internet ordering. In the current difficult economic climate, the parcels business faces very serious competition. Modernisation and new technologies will help the business to adapt to these changes and to be on the front line when the economy picks up, ready to provide an improved letters business integrated with parcels and packets. So where are we with modernisation? From some of the comments I have heard, one would think nothing had been done. Some advances have been made. Pathetic it may be, as described by my noble friend Lord Whitty, but it is not nonexistent. The £1.2 billion commercial loan from the Government in 2007 was granted on the basis of a well thought out and agreed business plan. Approximately £700 million has been spent in line with the business case timetable and plans are in hand to make the most of this opportunity to spend every penny. To my noble friend Lord Brooke I say that there is a timetable, partly in relation to the business plan, but also in respect of further modernisation. For example, many walk sequencing machines have been installed, as have intelligent letter sorting machines. Mail centre rationalisation is taking place, but much more needs to be done. Track and trace technology providing a much more reliable service needs to be rolled out. Further investment is needed to establish successfully the company's new document production and management business. Not only would any Government find it politically difficult to provide the investment required, but it is common knowledge that we would run into big trouble with the European Commission over the rules for state aid. Under the plan and the proposed legislation, the Government have agreed to take responsibility for the pension fund deficit. I would have thought that that offer represents a decent deal. The pension fund, as we all know, is in dire straits, and as the market goes down, so the deficit goes up. Securing its safety should bring a sigh of relief to postmen and postwomen up and down the country who have paid in over many years and who will now be able to rest easy in the knowledge that their retirement income is safe. I think that most people can now see the sense of the changes to the regulatory regime. It surely will be beneficial for the Royal Mail to be part of the family of regulatory considerations across the whole communications sector. Finally, I shall say a word about Post Office Ltd. The recognition by Government—albeit relatively recent—of the value of post office services is welcome indeed. Within the company, much work has taken place to improve and broaden the standards and variety of services available. The retention of the Post Office card account has been well received, bringing, as it does, the required footfall to sustain the viability of many post offices up and down the country. We urge the Government to encourage their various departments to put opportunities for work and services through the Post Office. Your Lordships’ House will not be surprised to hear that the Government's network change programme has been a very difficult time for postmasters, postmistresses and the staff generally. Morale has been very low. Partly in response, managers have organised a nationwide competition asking the public to nominate their best Crown office, best town and city post office and best community post office. Some Members in the other place, for reasons best known to themselves, decided that this opportunity should be used to protest against the closure programme and nominated only post offices that have already closed. Whatever one thinks about the Government's requirement to reduce the Post Office subsidy or the subsequent handling of the closure programme by Post Office Ltd, that strikes me as gesture politics at its most infantile. If more of those Members in another place had seen fit to attend the many opportunities offered to them by the Royal Mail to discuss the post office closure programme and hear about the challenges facing the Royal Mail generally, maybe they would have greater appreciation of the issues at stake, which affect people's jobs, the content of their jobs and the security of their jobs. I close by declaring my support for the Bill. Many details need to be agreed. Discussions have taken place within the company and within BERR and the Treasury. This House will discuss the Bill line by line. We owe it to all the people involved—employees, customers and, indeed, the taxpayer—to grasp this opportunity to secure the future of the Royal Mail.