Postal Services Bill

My Lords, this has been a stimulating evening all round. Amendment 14 is a sister amendment to Amendment 2 which we debated last week. Amendment 13A provides a new twist on the disposal of shares in Royal Mail and seeks to place time constraints on the disposal of shares specifically in the case of an initial public offering—an IPO. I will first respond to Amendment 14 which seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill which was considered by this House in 2009 but never found its way on to the statute books. As I said when we debated Amendment 2, the Government believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. Amendment 14 proposes a staggered approach to a sale of shares but with a limit on the disposal of 49 per cent of the value of the shares in Royal Mail. Given that the Government are also committed to establishing an employee share scheme—we will come later to amendments from noble Lords opposite to increase the size of the scheme—these amendments would in fact limit even further the amount that could go to private investors. However, the difference between this Government’s position and the previous Government’s position is that we do not believe that it is necessary for the Government to retain overall ownership of the Royal Mail. The noble Lord, Lord Young, was concerned about maximising the value of Royal Mail. That concern is welcome although somewhat surprising given his earlier amendments which sought to limit how much could be sold, which would undoubtedly impact on the value. The Bill as drafted allows for the sale of shares in tranches, as set out in Amendment 14. However, we do not believe that there should be a rigid structure for how shares can be sold. There is nothing to stop the Government, in the first instance, selling a minority stake in Royal Mail or for Government to retain a stake in the company in future. However, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. As I have said before, our focus is simply on what is best for the Royal Mail and the taxpayer. The noble Lord, Lord Lea, was concerned that Richard Hooper had steered the Government towards an IPO and that the Government would undervalue Royal Mail in such a flotation. I wish to make it clear that Richard Hooper did not express a preference for any form of sale. In his 2010 report he said that an IPO had become an option as Royal Mail now had less need for corporate experience from a partner thanks to its strengthened board. The Government are focusing on securing the best outcome for Royal Mail and the taxpayer. I hope I have already assured the noble Lord that we can sell in tranches, as he suggests, if that best meets our twin objectives. As I said in my remarks on Amendment 14, and earlier amendments, the Government want to maintain maximum flexibility in the method and timing of any disposal of shares. This will give the Government the opportunity to make the right decision at the right time and to ensure that we can get the best result for Royal Mail and the taxpayer. Placing statutory arbitrary deadlines in legislation will not help to achieve the Government’s objectives. If we choose to dispose of shares through an IPO, I believe that it would be impractical to be faced with a deadline of 31 July 2012 and to have to rush the process through by then. We heard last week from the noble Lord, Lord Jones, and the noble Baroness, Lady Kramer, about the damage caused by imposing statutory deadlines on commercial transactions. What if we were not ready to launch a flotation until August 2012? We would then have to wait until July the following year to make the disposal and give Royal Mail the access to the capital that it so badly needs. That would be in the interests of neither the company nor the taxpayer. As I said on Amendment 14, nothing in the Bill would prevent the Government staging a disposal in the way that the noble Lord, Lord Lea, suggests, but Amendment 13A would reduce the flexibility to make the right decision and I do not believe that that would be in the best interests of Royal Mail or the taxpayer. I hope that the noble Lord is persuaded by my argument and I therefore ask him to withdraw the amendment.