Postal Services Bill

My Lords, in rising to move this amendment I cannot help reflecting that last Friday the vast majority of the nation was enthralled by the marriage of Prince William to Kate Middleton, now the Duke and Duchess of Cambridge. Even those who have doubts about royalty as an institution could not help but wish the young couple well. One of the ways in which the nation celebrated the wedding was through a series of special stamps featuring the royal couple during their engagement, and now I understand that stamps are to be issued featuring the wedding itself. What a fitting way to celebrate this royal occasion, through commemorative stamps issued by Royal Mail—and I stress Royal Mail. It is royal because it was founded by the monarch more than 350 years ago; opened to the public during the reign of Charles I, it has operated as a public service ever since. The Bill before us marks a momentous and historic change—it is an iconic Bill. In Clause 1 the Government have made it clear that they propose to sell off 100 per cent of Royal Mail, albeit with up to 10 per cent of shares held by employees. The Royal Mail Group has an annual revenue of some £9 billion. Royal Mail itself has an annual turnover of some £6.5 billion and employs more than 155,000 staff. That is impressive. However, this privatisation represents something more: the sale of one of the nation’s oldest and most cherished enterprises. The Royal Mail is a great public institution that has a fine history in the development of the culture, social cohesion and economic strength of this nation, and that still today provides a vital public service. We 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. It was an early information superhighway—a social network, in fact, ahead of its time. As for the modern day, Richard Hooper described Royal Mail and the service it provides as, "““part of our economic and social glue””" that binds communities together. I think that he was absolutely right. Many Members of this House have praised the work of Royal Mail and the social value of the country’s 11,900 local post offices, but 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, Royal Mail still delivers some 70 million letters a day to the 28 million homes and businesses of 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. I am sure that the whole House appreciates that regardless of whether they support the move. Referring to the Postal Services Bill in 2009, the noble Lord, Lord Hunt, said that all those on the Front Benches were in favour of it. Indeed they were. However, 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, which meant that it must be in overall public ownership. The Postal Services Act 2000, still in force today, permits joint ventures between Royal Mail and private companies. Though the 2009 Bill envisaged a minority private-sector partner, majority ownership would remain within the public sector. Neither the 2000 Act nor the 2009 Bill permitted 100 per cent privatisation, which the Bill before us today proposes. The amendment that we have tabled reinserts the original intent of the 2009 Bill that each Royal Mail company should remain in overall public ownership, with the majority of the company in public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time, and indeed the Liberal Democrats, supported that proposition. At the time, there was broad consensus that Royal Mail should remain in overall public ownership, with the possibility of a joint venture or a minority private sector partner but, I repeat, not 100 per cent privatisation of Royal Mail. We might find a clue in the 2010 general election manifestos of the two parties that came together to form the coalition Government. If you searched in the Conservative or Liberal Democrat manifestos of 2010 for the privatisation proposals in the Postal Services Bill, you would search in vain. Even the coalition agreement speaks cryptically of introducing private capital into Royal Mail, but does not say that that would mean 100 per cent privatisation. There was no Green Paper or White Paper to pave the way for this Bill, but our debates on Royal Mail have been usefully informed by two reports produced by Richard Hooper’s panel in May and December 2008 and by him, sitting alone this time, being asked by the current Government 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 volume. Other operators taking advantage of liberalisation and of what are now regarded as generous terms for access to Royal Mail networks have been taking 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 and deliver their customer’s mail into the Royal Mail system for final delivery. The pace of technological change continues apace through e-mail, web-based advertising, text messaging, mobile phones and all the other means 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. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have been recounted. There was therefore a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper’s report entitled Modernise or Decline recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in the structure of Royal Mail: the injection of private capital and the involvement of private sector management. However, he rejected full privatisation, declaring: "““This option would only be appropriate and feasible if modernisation had been completed””." He concluded: "““In short, we believe that partnership is the only approach which can deliver Royal Mail’s … 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. There was agreement that regulatory oversight should be by Ofcom dealing with the wider world of communications rather than by a body restricted to the postal sector only. There was consensus that access pricing needed to be addressed, which is still a live issue. Richard Hooper's 2010 report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change, given the changes that had already taken place. It states that: "““The specific need for corporate experience is reduced today””." He praised the progress that had been made by Royal Mail’s management and by the CWU in adopting a ground-breaking modernisation agreement, which is proceeding and has done significantly well. The chief executive of Royal Mail, Moya Greene, giving evidence to the Public Bill Committee in another place on 9 November, 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””—" hand-held personal digital assistants to help with tracking and tracing postal items— "““for all of our letter carriers. We have been able to introduce 10 new world-class mail sites. I invite you all to come and visit them—they are now being recognised internationally as some of the best mail processing centres in the world””.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 8.]" Hooper maintained his stance on those issues, but he came up with a different recommendation on the future of Royal Mail in proposing a 100 per cent sale. There are a number of elements in this Bill that we would broadly support, including employee share ownership. The possible mutualisation of the post office network deserves positive examination. We agree with the recommendation of Sir Richard Hooper, this Government and others that the historic pension fund deficit must be dealt with. We agree that regulation should move to Ofcom, but we fundamentally disagree with the 100 per cent privatisation of Royal Mail. Although Richard Hooper recommended the 100 per cent sale of Royal Mail in his 2010 report, he seemed less sure in giving oral evidence recently. On 11 November 2010 he said: "““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 Committee, 11/11/10; col. 108.]" We probably endorse that view, but it is an interesting shift from that previous rather firm statement. The debate over whether to privatise Royal Mail is about what kind of postal service the public want. We all want a strong, universal, six-deliveries-a-week, one-price-goes-anywhere service and a network of post offices at the heart of our communities. The universal postal service is a public service of vital infrastructure that supports the entire UK economy. Though the postal market might be changing, it remains central to businesses in the UK. A survey by the Federation of Small Businesses conducted by ICM found that 84 per cent of small businesses use Royal Mail to despatch parcels and express items; 88 per cent of small businesses send post every day; and 59 per cent deliver goods and services by mail. Clearly it is a vital part of our business community. If we are to deliver on growth in those local communities and encourage small businesses and entrepreneurial activity, the Post Office will be at the heart of that success. There are many similarities between the Bill that we proposed in 2009 and the Bill before us today, but there are also glaring differences. Moving from overall public ownership to 100 per cent privatisation of Royal Mail makes a massive difference. All that has been cast aside by the Government. Our Bill was a proposal for partnership. This Bill is a proposal for privatisation. We were in favour of employee shares, but in a different context. It is interesting that the majority of incumbent postal operators in western economies remain publicly owned. The United States, Canada, Australia, France, Italy, Spain, Switzerland, Ireland, Finland, Israel, Japan and Norway have all retained fully publicly-owned postal services, so this is a big and fundamental change. Some would say that it is a bit of a leap in the dark. Richard Hooper’s underlying point, which I do not fundamentally contest, is that additional access to capital is necessary, and that capital might well need to be private capital. However, that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government members need to justify and validate that stance. Royal Mail already has a substantial modernisation programme that is worth some £2 billion. It has reached an agreement with the workforce to implement modernisation, which everyone giving evidence to the Bill Committee in another place confirmed was an important landmark agreement and, as I have said, is making substantial and significant progress. Royal Mail’s modernisation programme is fully funded and expects to make normal profit levels by the end of the programme in 2012-13. Furthermore, it will benefit from the Government’s proposed action on pensions and hopefully from changes to regulation, which will provide a more substantial buffer during the current difficult economic climate. We also need to look at the consequences of 100 per cent privatisation. It is at the heart of our concerns about the future of the universal postal service and the future of the nation’s post office network. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business that is burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of the universal service. Noble Lords might recall that Pieter Kunz, the managing director of TNT, said that the universal service obligation was, "““a kind of Jurassic Park and we should get rid of it””." Clause 30 sets out the terms of the universal postal service obligation, which include the requirement to collect and deliver mail six days a week at one price anywhere in the country. The USO has other elements, including packet delivery, letter and packet collection, affordable and uniform tariffs, registered and insured items, legislative petitions and addresses. It also includes, as we agreed during the course of the last Bill, services for the blind and partially sighted. We know from the contributions of the noble Lord, Lord Low, how much they are valued, but this Bill, particularly in Clause 33, proceeds to provide for changes to the level of the universal service. Later we will look at the ways in which this Bill might deliberately or inadvertently open the door to the diminution of the universal service. Ministers have helpfully pointed out that the review that Ofcom will be obliged to conduct within 18 months is a market review rather than a review of the universal service itself. I am sure that the House would appreciate an elaboration of what limits will apply to that market review. However, it is clear that Ofcom may initiate, or be required by the Secretary of State to conduct, a review of the universal service obligation under Clause 33. This could begin at any time—18, 12 or even six months after the Bill becomes law. After that, the Secretary of State could by an order subject to the affirmative procedure instigate a reduction in the universal service. Ministers protest that they have no intention of reducing it, and I have no reason to doubt their good intentions, but if the Bill itself permits such a diminution, a future Minister might decide to use it to that effect. We will propose amendments that would give effect to the Minister’s stated wish to maintain the universal service at its current level. My point here is that the move to 100 per cent privatisation magnifies these concerns for the future. There are, of course, Members of this House who can trace their family tree back 350 years, but very few companies can do so. Royal Mail is the honourable exception. It is because of the move to 100 per cent privatisation that Part 4 has been drawn up to deal with potential bankruptcy and the administration of Royal Mail, something that was unthinkable under the 2009 Bill—and if anyone believes that it is an entirely remote possibility, I simply draw attention to the fact that the privatised Railtrack found its way into administration. What is more, in following the relentless logic of insecurity, the Bill provides for Ofcom to strip Royal Mail of its position as the universal service provider and give it to any other private company. The Bill could commence this process after three years. We are relieved that the Government have seen sense and decided at least to make that impossible for 10 years. The third major threat posed by 100 per cent privatisation is the threat to the national post office network. The elephant in the room is that nothing in this Bill will require a privatised Royal Mail to utilise the post office network to the same extent as now, and let us remember that Royal Mail generates a significant one-third of post office business. This Bill will sever the link between Royal Mail and post offices in a way that has never happened before in our history. Indeed, the National Federation of Sub-Postmasters has stated that we would be the only country in the world to separate completely its post office network from its primary mail service. That is a huge risk, especially to the future of the post office network. We know that the Government do not wish to see the demise of the post office network, and the subsidy will continue until at least 2014. Post Office Ltd is under an obligation to have 11,500 outlets open in that year, but Ministers have admitted they cannot ultimately stop the closure of sub-post offices if sub-postmasters do not see a viable business or cannot sell it on when they retire. The fact is that if a privatised Royal Mail, or a different company charged by Ofcom with meeting the universal service, were to pull the plug, probably after 2015, many local post offices would be in severe difficulty. We have approached this Bill in a constructive way. We have sought to strengthen the safeguards of the universal service and to make regulation fairer. We have argued the case for greater public accountability and have pressed for guarantees on the future of the post office network. We strongly support modernisation and we are not opposed to the injection of private capital, but we feel obliged, as we consider the initial clauses of this Bill, to point out the significant difference of opinion on the fundamental question of overall majority ownership of Royal Mail and the risks that come with 100 per cent privatisation. I beg to move.