Postal Services Bill

In these amendments, noble Lords express a concern that has been debated at length in the other place and in other fora—namely, that taking Post Office Ltd out of the Royal Mail group of companies will put at risk the commercial relationship between Royal Mail and Post Office Ltd, and therefore the post office network. The amendment also seeks to provide for any situation where the universal service provider may no longer be Royal Mail alone. I share the noble Lords’ laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd but the approach taken in the amendment—legislating for a contract of a certain length—is not the way to achieve our shared objective. In the evidence given by various stakeholders to the Public Bill Committee in the other place, strong backing was given for the separation of Royal Mail and Post Office Ltd. Let me reassure this House that the separation of Post Office Ltd and Royal Mail will not lead to dangers for the post office network. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together. In her evidence to the Public Committee in the other place, Moya Greene, the chief executive of Royal Mail, called the post office network, "““the best and strongest network in the country, by any yardstick””." She also said that it would be ““unthinkable”” for there not always to be a very strong relationship between the Post Office and Royal Mail. To underline this point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence to the same committee that, before any transaction took place, a continued long-term commercial contract will be put in place between the two businesses for the longest duration that is legally permissible. On Report in the other place, the Minister for Postal Affairs pledged to the House that the Government will ensure that this commitment is upheld. I repeat that pledge to your Lordships today. I also remind your Lordships of my commitment to consider the amendment to Clause 2 proposed by the noble Lord, Lord Whitty. His amendment would have ensured that information regarding the relationship between the two companies is included in the report laid before Parliament when a decision has been taken to dispose of shares in a Royal Mail company. I hope to bring forward a government amendment on Report to address those concerns which I believe will also provide greater comfort to the noble Lords bringing forward these amendments today. However, I would like to explain why I cannot accept these particular amendments. In these amendments, the noble Lords, Lord Laird and Lord Rogan, seek to place the agreement between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 15 years. The noble Lord, Lord Young, and his colleagues on the Front Bench also specify that the Secretary of State should ensure that an agreement of at least 10 years is in place. As was discussed in the other place, legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. These negotiations are best left to the businesses themselves, which know far better than we in this House their customers, the markets they serve and the services they require of one another. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volume, service levels and duration. Focusing on the duration of the contract would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us in Parliament. What the Secretary of State and indeed the Government can and will do is to ensure that there is a contract in place between the two businesses before separation. Most importantly, government can of course help to create the conditions in which both businesses can flourish in partnership with one another. One thing is certain: a struggling Royal Mail will lead to problems for the Post Office. This Bill introduces the ability to bring in much-needed private capital for Royal Mail to invest in its transformation so that it can offer the very best service. Amendment 24P also envisages a scenario where Royal Mail is not the only universal service provider. That is an extremely unlikely scenario for the foreseeable future and one that can come about only in two very specific circumstances. In short, those circumstances would mean that Royal Mail was facing a crisis and unable to provide the universal service on a sustainable basis. I am afraid the idea that we should tie the hands of the universal service provider under such a scenario is not one that I believe to be sensible. But it is of course important, too, that the Post Office continues to offer the very best possible service to Royal Mail, as well as to other current and potential clients. Our £1.34 billion funding package to the Post Office over the spending review period will ensure that the service provided by post offices is modernised and improved, that people continue to see their local post offices as the natural and convenient place to access Royal Mail products, and that the Royal Mail management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government’s funding and support, I believe that is precisely what will be achieved. As such, I would ask the noble Lord to withdraw his amendment. With the leave of the House—and I apologise for trying to read a note in the middle of my answer—time apparently is pressing. The Clerk of the Parliaments is about to stand up and leave. I gather that this is his last stint on duty in your Lordships' Chamber, and I feel that it would be appropriate to offer him at this moment, from all sides of your Lordships' House, our very best wishes and enormous thanks for the good-natured care and attention he has given us over a period of quite a few years. On behalf of all of us, I wish him good fortune and thank him very much indeed.