Postal Services Bill

My Lords, this group of amendments covers matters relating to the employees of Royal Mail, without whom of course there would not be a Royal Mail. These matters are employee representation on the board, union recognition and employee training. I thank the noble Lords, Lord Kennedy, Lord Clarke and Lord Christopher, for tabling Amendments 4 and 10 relating to employee representation on the board of Royal Mail or any new successor body. I say this because, when we debated similar amendments tabled in Committee, it was clear to me that your Lordships had concerns about my response. These amendments give me the welcome opportunity to provide more clarity about the Government’s position on this issue. First, I should make it clear that the Government do not have any fundamental or philosophical objections to employee representation on the boards of companies, but we do believe that the make-up of any company’s board should remain the responsibility of the company and its shareholders. As many of your Lordships said in Committee and again today, employees will have a pivotal role in the future of Royal Mail, and there needs to be continual and meaningful interaction between the workforce and the management. In the CWU and Unite, the employees of Royal Mail have strong, active and effective unions. The business transformation agreement reached in March 2010 laid the groundwork for a new relationship between the management and the CWU. This was a ground-breaking achievement and, as recognised by the noble Baroness, we do not want to see the improvements set back. I have looked back at whether the Postal Services Bill 2009 contained provisions requiring an employee representative on the board. It did not. In fact, the previous Government rejected such amendments to that Bill. The noble Baroness, Lady Vadera, said in Committee debates on the Bill that the Government would have to be persuaded that direct worker representation on the board, "““would make a real difference to the transformation and modernisation of the Royal Mail and deliver the change that is necessary for the company””." She said that the Government, "““do not believe that that case has been made””.—[Official Report, 24/3/09; col. 612.]" While this Government have no objections to an employee representative being on the board of Royal Mail, we do not see that it should be a requirement laid down in statute. I do not believe that there is any precedent for this in any previous privatisation. Under the Bill, the employees will have a shareholding of at least 10 per cent. Whether there should be an employee representative on the board is a matter for the company and its shareholders, not something to be laid down in statute. The noble Lord, Lord Stevenson, referred to the clear example given in Committee by the noble Lord, Lord Myners, of why large shareholders should not have a representative on a company’s board. The noble Lord, Lord Myners, told us that it is quite customary for a body of investors which has a large shareholding, as will the employees under our Bill, to seek board representation. He gave the example of News International and the BSkyB board, but the lesson to draw from this example is that it was a decision taken by the company and was a circumstance of the size of News International’s shareholding. It was not a mandatory requirement. I do not see why Royal Mail should be treated differently from other companies in this regard. The noble Lord, Lord Stevenson, spoke also about the experience in Europe. There is a mixed picture there. Some member states have mandatory requirements for employee representation on boards in certain circumstances, but the majority do not. The Government consider that placing such a requirement on Royal Mail, when it is not a requirement on companies generally in the UK, is not appropriate. The wider issue of employee representation on boards is best discussed in the context of company law and not this Bill. Amendment 11 would place a duty on the Secretary of State to report on Royal Mail’s intended policies on training, apprenticeships and skills once a decision has been taken to dispose of shares in Royal Mail. I thank the noble Baroness, Lady Wall of New Barnet, for raising these vital issues. I know that she brings considerable experience to this debate through her work on the sector skills council and her contribution to the All-Party Group on Further Education, Skills and Lifelong Learning. The Government absolutely recognise the importance of training and believe that skills are key to economic competitiveness. Apprenticeships are our preferred vocational route for people of all ages to gain the skills they need to succeed and progress in their careers and for employers to build a workforce with the motivation and expertise they need to compete globally. We are committed not only to increasing the number and range of apprenticeships on offer but also to improving their quality. We want apprenticeships to become the gold standard for workplace training. We are determined to take real action to improve and expand the apprenticeships programme and create more apprenticeship opportunities than ever before. It has been recognised throughout the debates on this Bill that the workforce is vital to the success of Royal Mail. The company is introducing new working practices and new technology as it adapts to developments in the postal market. It is clear that, to make the modernisation of the company a success, it will need to ensure that its workforce is properly trained and has the right skills, as pointed out by the noble Baroness. Royal Mail recognises the importance of training, which is reflected throughout the business transformation agreement between the Royal Mail and the CWU. I have no reason to believe that the new owners of Royal Mail would take a different approach given the importance of the workforce. Why would it? The noble Baroness suggested that cost pressures might be an issue, but surely a business of this size must look to the long term and not take short-term decisions. If it did, it could adversely affect its own share price, sending entirely the wrong signals to the market. I turn specifically to the amendment. It is highly unlikely that the Secretary of State would be in a position to say anything about the future policies of Royal Mail on training, apprenticeships and skills at the time of the report required by Clause 2. The report is triggered by a decision to undertake a sale of shares and must state the kind of disposal that will be undertaken, together with the timescale. The new owners would, therefore, not be known at the time of the report. What we do know, however, is that thanks to the Bill, Royal Mail’s employees will be shareholders in the company and will have a minimum of 10 per cent of the shareholding as part of the privatisation process. Obviously, the employee shareholders will have an interest in future training in the company. Therefore, it is not necessary to include in the Bill the reporting requirement proposed by the amendment. No such reporting requirements exist in relation to other companies and there is no compelling reason to single out Royal Mail. I hope that, after the general comments I have made about the Government’s policy on apprenticeships, the noble Baroness will not press her amendment. Amendment 36, in the name of the noble Lord, Lord Clarke, places a duty on the Secretary of State to ensure that employees’ existing rights of recognition are maintained. We debated in Committee a very similar amendment in the name of the noble Lord, Lord Young. As I said then, the Government welcome the positive changes in the relationship between Royal Mail’s management and the Communication Workers Union since the signing of the business transformation agreement in March last year. We encourage both sides to continue to work together in this improved way. The representation of employees at Royal Mail by the Communication Workers Union and Unite is recognised in voluntary agreements between the unions and the company's management. Such voluntary agreements are common, and it is good practice for the employer to take full account of the views of employees when deciding to recognise, or continue to recognise, a union. The fact that union membership remains relatively high in Royal Mail suggests that most staff support union recognition, and I have no reason to believe that any new owner would seek to change any such agreements—provided, of course, that that is what employees want. As I said in Committee, I do not believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements at Royal Mail. This is primarily a matter for the employer and the trade unions concerned. The noble Lord, Lord Clarke, reminded us that we helped to set up the German trade union system at the end of the Second World War. It was pointed out to me during my training at Swiss Industries what a successful way this was to set up trade unions. This piece of history has been a positive lesson to me all my working life. Trade unionism can be very positive. The amendments in this group have given us the opportunity to discuss important issues relating to employees of Royal Mail. For the reasons that I have given, it is not necessary to include in the Bill the provisions set out in the amendments. I therefore ask the noble Baroness and noble Lords not to press their amendments.