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Postal Services Bill [HL]

Ensuring the appropriate governance arrangements for the Royal Mail Group of companies is absolutely vital. At Second Reading, the noble Lord, Lord Bradshaw, raised very important points about corporate governance, as he has done again today, and the serious consequences which can arise if companies do not have sufficient clarity in this regard. I agree with the noble Lord’s sentiments if not his amendments. As required by company law, the board must discharge its duties in the best interest of the company, which is owned by its shareholders. The Combined Code on Corporate Governance states that, ""if this is ignored, the consequence may well be vulnerability or poor performance"." It is right, therefore, that the shareholders—in this case the Crown, and in the case of Royal Mail Group Limited, the private sector partner—should have their views represented on the board. The Government will maintain their existing rights of appointment to the board of Royal Mail Holdings plc, which will remain owned in its entirety by the Crown. Additionally, the Government will create a new board for the Post Office with a non-executive chair. This will provide a new level of support and challenge for the Post Office’s management team. I hope that that specific proposal will be applauded by all Members of this House and will give the necessary reassurance and confidence in this Government’s commitment to the future of the Post Office remaining not only wholly owned by the Crown but given the place within the corporate governance of the group as a whole that will enable it to develop fully in the future. In relation to Royal Mail Group Ltd, the Government’s intention under the partnership proposals is that its board should comprise both executive and non-executive directors, with a majority of non-executives. The precise composition of that company’s board will be a matter of negotiation with the prospective partner. The Government expect to appoint the chairman and a majority of the non-executive directors. Amendments 4 and 10 seek to give Ofcom the responsibility for monitoring the boards of Royal Mail and the Post Office. Of course, I agree that Ofcom has an important role to play in the postal services sector. That is why the Bill includes many provisions covering its powers and duties. To my knowledge, in only one very specific case linked to the maintenance of a free media does Ofcom have a role in appointing the board of an organisation—that is Channel 4. That rationale simply does not apply here. In response to the noble Lord, Lord De Mauley, on the question of the regulation of the Post Office, it is currently regulated through its contractual relationship with Royal Mail, and that will remain the case. The sentiment behind the amendments is that the noble Lord is concerned about the Government’s ability to operate and behave appropriately as a shareholder in relation to the company. While I appreciate that there may have been problems in the past, the Government have come a long way in how they behave as a shareholder, and they take their role very seriously. In 2003, we set up the Shareholder Executive, which is part of my own department, for the precise purpose of improving the Government’s performance as a shareholder in business. The Shareholder Executive is a professional group that aims to create a climate surrounding ownership that, while challenging, is genuinely supportive and provides the framework for success. To achieve this, it works with the boards and management teams of the government-owned businesses to create long-term shareholder value. That role has been recognised as being highly successful, not least in a report by the National Audit Office in 2007. I hope that I have reassured the noble Lord, Lord Bradshaw, that we have come a long way in how we approach governance. We take our role as shareholder very seriously; we do not spend our time second-guessing the board or exerting political pressure on the board. This approach is very much in line with the original legislative principles set down all those years ago by my grandfather in respect of nationalised industries. I say that to demonstrate that I did indeed read the noble Lord’s Second Reading speech, in which he referred to my forebears. The noble Lord also touched on industrial relations and the difficulty for management properly to manage when, in this business, it is possible for the union to go round the backs of the management to the shareholder to get matters—if I may put it in this way—"settled" without actually being resolved in the interests of the business as a whole and in the public interest. That situation gave rise to some unfortunate cases of, if not second-guessing the management, then a perception that the management was being destabilised—a sense in which there never seemed to be a bottom line in this business as the discussions went back and forth as people came in and out of the front doors and back doors of the sponsoring department. One of the reasons that the Government are particularly keen to see this legislation go through in its present form with the new private sector minority partner coming in is to bring about a much-needed, timely and refreshing change to that sort of atmosphere and climate that surrounded the management of the business and the conduct of its industrial relations. I am also not persuaded that a role for Ofcom in the appointment of the boards of these companies will make a real impact on delivering the transformation that Royal Mail desperately needs or delivering the vital services provided by the Post Office. In light of the reassurances that I have offered and the arguments that I have put in response to the amendment, I kindly ask for it to be withdrawn.