Postal Services Bill

My Lords, I thank very much indeed noble Lords who have spoken before me. I particularly thank my noble friend Lady Kramer for the exposition that she has just given to sum up with. I shall leave as many of those comments aside because they speak well for what I would like to say. I shall address some of the comments from the Opposition and the Cross-Benchers who moved the amendments. The issue of the inter-business agreement between Royal Mail and Post Office Ltd is one of the issues which has stimulated the most debate throughout the passage of this Bill, both in this House and in another place. The noble Lord, Lord Razzall, summed up in his words the fact that all of us who have taken part in these discussions wish to see the same thing—this body established within the nation’s life to be continued in the best way possible. But we are going to do it in the way that we think will be effective; we have watched the Opposition try to do it in a different way and it was not effective. We are right to want to ensure the best possible future for the Post Office, which, as many noble Lords have pointed out, is a national institution highly valued by communities up and down our country. Before I turn to the substance of the amendments, I would like to respond to the comments of the noble Lord, Lord Stevenson, on the 400 long-term temporary closures. There are inevitably changes in the total number of post offices from month to month, as some offices close and others are reopened. In fact, there has been a net reduction of only 58 offices in the last nine months—and this is, of course, constantly in flux. The Government have committed to no new programme of post office closures, as noble Lords have kindly noted. Your Lordships are of course well aware of the fact that Royal Mail’s business is extremely important to the Post Office. This fact has not escaped us in government either, or the two companies themselves, as you have heard many times in our discussions. As your Lordships will by now be well aware, the chief executive and chairman of Royal Mail have pledged to ensure that the longest contract legally permissible will be in place before any sale. Edward Davey, the Minister in another place, and I have committed to both Houses that we will ensure that this pledge is upheld, and your Lordships have approved an amendment to the Bill to ensure that the report on the disposal of shares in Royal Mail will include details of the ongoing relationship between the two companies. The new contract between Royal Mail and Post Office Ltd is not yet finalised, and, as I have said before, it serves little purpose to focus on the duration of the contract alone. The contract, which we hope to be ready to be signed next spring, will contain far more complex details, such as pricing and service level agreements, volume commitments and exclusivity agreements. The final nature of all of those details will have a bearing on the longest legally permissible duration of the contract. These details should not be presided over by government, but must be agreed by the two companies and their advisers. They are the experts, they know the businesses best, and it is they, not we in Parliament, who should fine-tune the details of this contract. When this amendment was debated in Committee in this House, the noble Lord, Lord Young, posed various questions regarding what the longest legally permissible contract actually meant. I wrote to him following that exchange and, as I said in that letter, because the contract will focus on many other factors as well as duration, it is difficult to speculate on how long the longest permissible contract would be. We hope that the contract’s duration could be for as long as 10 years, or even more, but this cannot be finalised until all of the detailed negotiations are complete. The Government could not accept any contract between Royal Mail and Post Office Ltd which might be liable to legal challenge. Without a robust long-term contract between them, both companies would suffer commercially precisely the circumstances that noble Lords are seeking to avoid through their amendments. The Government could also not accept a legislative obligation which might lead to that very situation. As I have said repeatedly, the terms of this contract must be negotiated between those who know the businesses best. In response to the concern expressed by the noble Lord, Lord Whitty, about the impact that a potential bidder for Royal Mail could have on the terms of the inter-business agreement, I would like to reassure noble Lords that any investor will have no input into these terms. As the chair and chief executive of the Royal Mail has stated, the longest legally permissible contract will be put in place before any investment into the Royal Mail. We will of course ensure that that happens. As I have said previously, what the Secretary of State, and indeed the Government, can and will help to do is to ensure that there is a contract in place between the two businesses before separation, and its duration will be for as long as is legally permissible. But most importantly, government must also help to create the conditions in which both businesses will flourish in partnership with one another. 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. As my noble friend Lord Razzall, emphasised, operationally, these companies are reliant on one another. Post offices carried out over 3 billion transactions for Royal Mail in 2009, and they will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together. The noble Lord, Lord Stevenson, noted that that there are no international precedents for splitting a mail provider and retail arm. The Government are not aware of any international comparisons for the Post Office, which has such a vast branch network, offering a broad range of government, financial and mail services in the heart of communities. Separation from Royal Mail will give the Post Office the chance to focus on growing its revenue and getting the most out of its branch network. It will ensure that each organisation is able to focus more effectively on its own challenges and help to secure a sustainable network. The separation of Post Office Ltd from Royal Mail was welcomed during the Public Bill Committee evidence sessions in the other place by the consumer group Consumer Focus, the current regulator Postcomm, and the independent expert Richard Hooper. 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, to ensure 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. This Government have not given Post Office Ltd such a considerable sum of money for nothing. We will do all we can to ensure that Post Office Ltd has a vibrant future, and continues its valued relationship with Royal Mail. As I have said before, it is primarily 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 it will achieve. As such, I would ask the noble Lords to withdraw their amendments.