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Postal Services Bill [HL]

My Lords, it may be convenient if I speak to Amendments 91 and 92. My noble friend described them as modest amendments and I can live with that. One of the things I learnt over the years I spent as a trade union official was that if you were not certain what to do, the best thing was to try to buy some time. Indeed, I will not name them but some Chancellors of the Exchequer found that a useful approach from time to time when they had a troublesome problem. Everyone is in difficulty about one principal point of the Bill: that is, the issue of ownership. There are different schools of thought with different strengths behind them, but no one is quite certain whether part privatisation is the best way forward, whether the approach adopted for Railtrack or the BBC is the best way, or whether there might be considerable advantages in the status quo continuing, at least for a period. My noble friend Lord Clarke has pointed out that the weekend polls showed only 20 per cent support for privatisation. I do not wish to spend time on that but public opinion in either direction could easily change if, for example, Royal Mail did not change and we were faced with significantly higher costs of postage. Such charges are not so readily accepted here as they are in European countries, including Holland, Belgium and France. However, on the other side, there would be a reaction if there were a significantly poorer delivery service, as is the case in mainland Europe. My amendment offers a breathing space and a way through this difficulty. We should have one more shot at moving Royal Mail along under its present ownership, and three years is the best estimate that I have been able to obtain of the time it would take to complete the job. I do not accept that the present management has failed—that has been repeated over and over again—and I do not accept that its business plan has been lacking. Royal Mail is now profitable; it employs 50,000 fewer people than it did at the outset with only one compulsory redundancy; it is building new revenue streams and by 2012 parcels will represent 50 per cent of revenue and 75 per cent of profit. I hope that my noble friend the Secretary of State will at least reassure us that under no circumstances will the parcels business be part of any sale. Royal Mail has achieved that in the face of unfair competition. It could not have done so had the Communication Workers Union been as uncooperative as it has been painted. For a start, there is a long Royal Mail pay and modernisation agreement which was agreed in 2007. It is worth reading the introduction to that agreement, which in one sense says it all. It states: ""In order for Royal Mail to thrive as a business and to ensure that it remains able to compete effectively it is recognised that change is going to have to happen and at a scale and pace never experienced before.""Both Royal Mail and the CWU are jointly committed to working together to deliver that change by agreement, continuing to protect jobs (in line with our commitment in MTSF)"—" which I do not understand— ""and provide high-quality terms and conditions for all employees.""Both parties recognise that a fresh start is needed and are committed to moving away from the adversarial relationships that persist in too many parts of the business. This needs to be replaced by respect for different viewpoints and a determination to work together to find common sense solutions that are mutually beneficial. This agreement lays the basis for changing how we work to ensure a successful future for this business, its employees and how the business and the CWU will work together"." That was an extremely good start, and indeed it must have worked for a time, but somewhere along the way there must have been a stumble. Maybe it is a matter of—in the old, trite phrase—it takes two to tango. But I will come back to that. First, I would like to address one or two other aspects. On 24 February, Mr Crozier, chief executive of Royal Mail, gave evidence to the House of Commons Business and Enterprise Committee. On pages 40 and 41, Roger Berry MP asked: ""Why does Royal Mail Group so passionately believe that a minority shareholding is necessary?"." Mr Crozier said: ""As part of Hooper we said that in our view it boiled down to three requirements: equity capital, the pension solution and the change in the way we were regulated and the fairness of it in the wider market"." Later, Mr Berry asked: ""To cut to the chase, you have referred to equity capital, not private equity capital"." Mr Crozier said: ""We did not in our submission"," to which Mr Berry said: ""Exactly. Increased Government equity would be a possibility, would it not?"," to which Mr Crozier replied: ""It is not for us to say from where it comes"." I fully understand why Royal Mail would prefer equity capital. It is cheaper than borrowing, although it is a paradox that private enterprise itself so often eschews equity, usually because it diminishes the value of the present shareholdings. I sense that private equity capital carries with it clear potential risks for Royal Mail’s long-term future, a risk over which perhaps we would have little influence. It may well be significant that Royal Mail and Mr Crozier have never once raised the question of private equity capital. As has been said, Deutsche Post does not seem to be at the table. TNT, which is always referred to, has an extremely bad reputation on trade unions and has recently announced a 5 per cent pay cut with certain threats attached. Its profits for the first quarter of this year have fallen by more than 50 per cent and its own unions have rejected the new pay agreement. The Financial Times updates what the noble Lord, Lord Clarke, said and has spoken to Robeco, one of the top 15 holders. Robeco told the Financial Times that the chances of doing a deal are small. The reasons given were price, relationships with government and unions. I have grave doubts whether the Secretary of State will be able to strike a deal at 30 per cent, because one of the arguments advanced by one Robeco representative is that that would not give it sufficient power to bring about the change that is, in its opinion, required. I have mentioned the parcels issue, which is repeated in the Financial Times today. CVC is the remaining named applicant, though there may well be others we have not heard about. Has it got a record which provides us with what we need? It is a private equity company. Do private equity companies, and does CVC, invest for the long term? Am I right in saying that CVC has already sold off a large part of its mail investment? What future share sale or further buying rights would any private equity company seek? Perhaps we, too, are overlooking the great differences between other European states and the United Kingdom in what, in this context, I will call downsizing legislation. EU experience, based on Eurogovernment requirements and Eurogovernmental financial contributions, will not be found in the United Kingdom. I wish my noble friend who was the general-secretary of the Confederation of Independent Trade Unions in Brussels was here, because he had to deal precisely with this issue when he was appointed essentially to run down his office. It took nearly two years. In one sense, this is easier, because the Government pick up a big proportion of the cost. But the benefits to workers make them more willing to go than they otherwise might be. There is nothing like it here at all. I ask the House to consider—to the extent that there is, inter alia, a union problem—whether it is really likely to help take Royal Mail forward if we parachute in a TNT or CVC Ross Kemp. I do not think so. So where are we? Earlier in my contribution I suggested that one more shot at moving Royal Mail along under present management was worth while. Again, I am encouraged by some of the evidence given by Mr Crozier to the Commons committee, one short extract of which is worth repeating. He said: ""Do we need to find ways to improve it"—" that is, the relationship— ""and bring people with us? Absolutely. When we look at it, what kind of expertise do we need going forward? Like all big companies, we need more and better project directors and in any situation like this people who are experienced at brining in the kind of technology that we are about to use. This is not a kind of NHS IT issue. The machinery and technology we need to bring in exists and works so the risk is not to do with the machinery and the kit itself; it is the management capability in installing it. Do we need increased numbers and better skills in HR? Yes, we do. We know that we need to improve and we have been doing it steadily over the past few years. Like any company, we need to bring in skills at all levels of the business"." I challenge whether we need to do that by selling off shares in the company. I am for allowing him to try and do what he said. This amendment provides that without losing the Government’s goal if a last chance fails; rather it keeps semi-privatisation as a spur. This is not just a challenge to Mr Crozier, although he needs to assess objectively how Royal Mail’s management style could improve. I guess that he and his senior managers should also get round their staff a bit more, perhaps, on appropriate occasions, with corresponding levels from the UCW. As an aside, when there were dreams about putting pay-as-you-earn on to computers, the board of the Inland Revenue and the union, the IRSF, moved the whole of Scotland’s PAYE operation and the staff to East Kilbride by using the approach I have suggested, and there was no serious opposition. It can be done. I suspect that the union in this case, the CWU, will have to reassure us that it is ready, able and willing to continue modernisation. That means not just the executive committee but branches and members as well. I conclude with a personal thought for the Secretary of State. His grandfather, Lord Morrison of Lambeth, has been referred to previously in these debates. Despite the age gap, he was a good friend of mine. He gave me a copy of his autobiography, which I had a look at at the weekend. Herbert had several paragraphs on nationalisation, but this Bill is the other side of that coin. Herbert wrote: ""In all nationalisation schemes, there is a moral question as well as an economic one"." He explained that the Labour Party saw nationalisation as an end in itself and saw no need to carry out what we would call today a risk assessment. Have we carried out a risk assessment for this enterprise? If we have, I have not heard about it. I suggest that my noble friend the Secretary of State should reflect on his forebear’s wisdom.