---

Postal Services Bill

Under Clause 1, the Government have made it clear that they propose to sell off 100 per cent, albeit with 10 per cent employee shares, of Royal Mail—which may, as I have already said, be regarded as one our of oldest public services. It is the sale of a great public institution; it has a noble history in the development of the culture, social cohesion and economic strength of the nation and still provides a vital public service. For 350 years, Royal Mail has been, to all intents and purposes, a public service and is seen as a huge and valuable asset run in the national interest. One should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country’s development as the railway or the electricity grid. Turning to the modern day, I also pay tribute to Richard Hooper, who described the Royal Mail and the service it provides as part of the UK’s ““economic and social glue””, binding communities together. That is an elegant and apposite description. Many noble Lords have praised the work of the Royal Mail and the social value of the country’s 11,900 local post offices. Let us also remember that, despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, the Royal Mail still delivers some 70 millions letters a day to the 28 million homes and businesses in the United Kingdom. The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard, as I am sure all noble Lords appreciate, whether or not they support this move. We on these Benches will ensure that the Bill receives the line-by-line scrutiny at which this House excels in order to gain greater clarity and provide greater assurance for the future. It is a pity that the noble Lord, Lord Hunt of Wirral, has disappeared from his vantage point because at Second Reading he remarked that the debate seemed to him a little like Groundhog Day. My noble friend behind me has explored the relative merits and demerits of Groundhog Day and I am not going to go through that again. He said the debate had, "““a remarkably similar feel to it to many others that we have had. Of course, we had the Second Reading of a Postal Services Bill on Tuesday 10 March 2009””.—[Official Report, 16/2/11; col. 734.]" Yet perhaps his mind was wandering back to an earlier era because the history of attempts to privatise the Post Office goes back much further than just two years. The noble Lord was a serving member of the previous Conservative Government as Secretary of State for Wales from 1990 to 1993 and then in a number of positions. He earned a great deal of respect across the political spectrum for the way in which he conducted himself during that time but I must remind the noble Lord and the House that, for a good deal of that period, the privatisation of the Post Office was a burning issue of debate, especially between 1992 and 1995. On 30 July 1992, the Financial Times reported: "““In a departure from previous policy, Mr Michael Heseltine””—" as he was at that time— "““trade and industry secretary, put privatisation of the Post Office on the political agenda””." Some 18 months later, on 14 December 1993, the Independent newspaper reported under the headline, "““Post Office in ‘crisis’ over Tory delay””," that, "““the Government came under a barrage of criticism yesterday over the year-long delay in deciding whether to privatise the Post Office””." Delay and privatisation has an honourable—or dishonourable—history. There have certainly been a number of attempts to resolve this problem. On 2 February 1994, the Independent reported that full-scale, "““privatisation of the Post Office is still on the political agenda, Michael Heseltine said last night … after it had been shelved by the Cabinet in the face of opposition from ministerial colleagues””." There is certainly a sense of déjà vu about that. On 19 May 1994, a Green Paper on postal reform was at long last published. It proposed 100 per cent privatisation of the Royal Mail with a Stock Exchange flotation to the public and employees, and another option of 51 per cent privatisation of Royal Mail. The Post Office network would be kept under the existing arrangements and the Post Office management supported a 100 per cent sale. However, the records show that that met with considerable opposition from much of the public and Back-Bench Conservative MPs. That is an interesting scenario. In November 1994, a newspaper reported that: "““Michael Heseltine put a last-ditch compromise to leading Tory backbench rebels””." It certainly was the last ditch; although he did not die in it, the attempt to privatise certainly did. So there are certainly a few echoes in that report. There was a further twist in the tale. The Cabinet considered the privatisation plan and decided against it. Some members of that Cabinet at the time are Members of this House today. I feel sure that the noble Lord, Lord Hunt, will remember why they concluded that privatising the Royal Mail was a privatisation too far. Maybe these thoughts were in the noble Lord’s mind when he was experiencing his bout of déjà vu and teasing the Opposition Front Bench today. I make these remarks not only as a mild riposte to the comments of the noble Lord, Lord Hunt, about the 2009 Bill but to illustrate that the future of Royal Mail and the Post Office network is an important issue that has prompted heated debate for many years. What a shame we cannot rewind—but Hansard will reveal all. The noble Lord reminded us that all the Front Benches were in favour of the Postal Services Bill 2009. Indeed they were, but I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned; that is, they must be in overall public ownership. The previous Bill of 2000, still in force today, permits joint ventures between Royal Mail and private companies. That has been a good thing—for example, in relation to GLS. The 2009 Bill permitted a minority partnership. What neither Bill permitted was 100 per cent privatisation, which the Bill before us proposes. That is the nub of the difference and, I suppose, of this amendment. Amendment 2 is intended to reinsert the provision of the 2009 Bill that each Royal Mail company must be in overall—I stress ““overall””—public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time and indeed the Liberal Democrats supported that proposition. Perhaps there was a change of heart at the general election. One might find a clue in the manifestos of the two parties that came together to form the Government. If you search for the privatisation proposals contained in the Postal Services Bill in the Conservative or Liberal Democrat manifestos of 2010, though, I am afraid that you will search in vain. The Liberal Democrat manifesto clearly rejected 100 per cent privatisation of Royal Mail. It pledged to: "““Give both Royal Mail and post offices a long-term future, by separating Post Office Ltd from the Royal Mail and retaining Post Office Ltd in full public ownership. 49 per cent of Royal Mail will ""be sold to create funds for investment. The ownership of the other 51 per cent will be divided between an employee trust and the government””." No doubt Liberal Democrat Members will tell us that things have changed fundamentally since they wrote that manifesto, as they have done on a whole range of other issues that I will not refer to today. Perhaps the Conservative manifesto will be more enlightening. It was enticingly entitled Invitation to Join the Government of Britain. Did we miss something? Was it really an exclusive appeal to Liberal Democrat MPs and Peers? One can scour the contents of the Conservative manifesto from start to finish but there is no mention at all of Post Office privatisation. During debates in 2009, the noble Lord, Lord Hunt, criticised the previous Secretary of State for introducing a Bill with insufficient consultation, but by comparison this Bill is being pressed through with breathtaking speed. The Government carried out no public consultation on their proposal to privatise 100 per cent of Royal Mail. There was no Green Paper or White Paper. Questioned in another place, the Minister for Postal Affairs did not deny this but seemed unapologetic in the extreme. He said, "““We could, of course, consult again on some other idea. We could consult again and keep consulting. We could never take a decision””.—[Official Report, Commons, 16/11/10; col. 222.]" We are not suggesting that the Government should keep consulting but some consultation might have been of value, given the number of times that I remember receiving criticism when we were in government if there was not enough pre-legislative scrutiny or consultation. Our debates on Royal Mail have been usefully informed by Richard Hooper’s panel producing two reports in May and December 2008, and being asked by the current Government, sitting alone this time, to review his work in 2010. We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year Royal Mail experienced a drop of 7 per cent in letter volumes. Other operators are taking advantage of liberalisation and what are now regarded as generous terms for access to Royal Mail networks. If I am pleased about nothing else about my ministerial contribution, our prominent pledge that we were going to get regulation right is something that I hope will be achieved. Having taken over upstream business faster than expected, Royal Mail’s competitors have already won more than 60 per cent of the upstream pre-sorted bulk mail market by, ironically, delivering their customers’ mail into the Royal Mail system for final delivery. The rate of technological change continues apace, through e-mail, web-based advertising, text messaging, mobile phones and all the other means that we have of communicating with each other. Other developed countries are facing the same issues: the worldwide postal market is expected to decline by 25 per cent to 40 per cent over the next five years. When the problems with the Royal Mail’s pension fund—which had their origin in the 13-year pension holiday to 2001—mounted, there was a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper’s report Modernise or Decline ran through the challenging market conditions facing Royal Mail. His team recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in Royal Mail’s structure: the injection of private capital and, closely related to that, the involvement of private sector management. However, at that time, he rejected full privatisation, which he said, "““would not deliver the access to corporate experience which we believe Royal Mail requires””." Royal Mail certainly has that corporate experience now, in the shape of Moya Greene. I give my support and approbation not only to her experience but to the way in which she has gone about the task. Hooper’s 2008 report continued: "““Moreover, the company’s poor financial performance and the market uncertainty driven by e-substitution and liberalisation would make it difficult to raise the required capital, if the company were to be listed now. This option would only be appropriate and feasible if modernisation had been completed. Royal Mail’s pension deficit would need to be more manageable, the business would need to have restructured, the company would have plans to expand in the mail market and be capable of paying a dividend””." Although Royal Mail has made good progress, we know that it still has a long way to go. In short, we believe that partnership is the only approach that can deliver a universal service. At that time, there was a wide degree of consensus in this House about the nature of the action that needed to be taken. Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations—I think that those two factors have already been achieved. There was agreement that regulatory oversight should be by Ofcom, which deals with the wider world of communications, rather than by a regulatory body that is restricted to the postal sector—I am pleased that the Government have also gone in that direction. There was also consensus that access pricing needed to be addressed. Although the Government have not acted on that, we would like to hear much more about access pricing as we proceed to discuss the practicalities of regulation in detail. Hooper’s 2010 report also identified a need for private sector capital, but it was markedly more confident about the quality of existing management and the capacity for change, given the changes that have already taken place. The 2010 report states: "““The specific need for corporate experience is reduced today””," and it praises the progress made by Royal Mail management and the CWU in adopting a groundbreaking modernisation agreement. When the Royal Mail CEO, Moya Greene, gave evidence to the Bill committee in another place on 9 November, she said: "““I look at what Royal Mail has been able to do in just two short years, when they finally got access to capital, and it has been amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs—" those are hand-held postal digital assistants to help with tracking and tracing postal items— "““for all of our letter carriers””.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 8.]" She said that Royal Mail had been able to introduce 10 new world-class mail sites, which she invited people to come and visit. Indeed, I recommend that noble Lords go and have a look at the centre at Gatwick, which is well worth seeing. Although Hooper came down 100 per cent in favour of the introduction of private sector capital, he did not seem quite as confident when, on 11 November, he told the committee: "““The important point I want to make is that private sector capital is needed in this business—it is needed urgently, it was needed two years ago and it is needed now. Whether it is a minority or majority shareholding, I would prefer to leave that to the political process””.—[Official Report, Commons, Postal Services Bill, 11/11/10; col. 108.]" Our amendment is fundamentally different, for the reasons that I have already outlined. We believe that 100 per cent privatisation of Royal Mail is a step too far and unnecessary in the current circumstances. I ask the House to support the amendment.