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Mr. Martin O'Neill (Ochil): I welcome my right hon. Friend's announcement, and emphasise that some of us who argued for according greater commercial freedom to the Post Office underestimated its management's lack of commercial awareness at the time. That is a major consideration in Allan Leighton's new approach, which most of us welcome.

Does my right hon. Friend appreciate that the redundancy targets are ambitious? In London or Edinburgh, which have a high staff turnover, it may be possible to

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secure the figures through voluntary redundancy or even early retirement. However, in places such as the town of Alloa in my constituency, where working for the Post Office continues to be regarded as a good job, albeit not an especially well-paid one, people will hold on to the jobs desperately. The package must contain far greater flexibility to ensure that the trust and commitment of people in areas of high unemployment, who look to the postal services for secure employment, will not be betrayed at the stroke of a pen.

Ms Hewitt: My hon. Friend makes an important point. This morning, Allan Leighton again underlined that he is determined to achieve the job losses through offering people other jobs in the company or through voluntary redundancies. We all know that the problems are not the workers' fault.

I understand the specific problem of securing the redundancies in more remote areas, where fewer alternative jobs are available, and I shall discuss it with Allan Leighton. However, he is confident that all the necessary job losses, though painful, will be achieved through redeployment and voluntary redundancies.

Indeed, because the union and management have quite rightly negotiated a generous redundancy package, he rather fears that, if anything, he will be oversubscribed in relation to the number of redundancies actually required.

Dr. Vincent Cable (Twickenham): I echo the earlier comment that our first concern should be for the families of the people who are to be made redundant. As it would appear that these redundancies will be funded from public funds, will the Minister give the House an estimate of the total cost of the redundancy package? Is it, as I believe, something of the order of £1 billion?

Is not the real scandal of today's statement the fact that the money that has been taken out of the Post Office in the form of dividends over a long period should have been invested to accumulate financial assets that are now going to be liquidated, not for investment purposes but to make people redundant? That is a terrible comment on the way in which the Post Office has been managed over many years through the Government.

I want to ask several specific questions. On the second delivery, why have the pilot studies not yet been conducted, in response to the petitions from small business? Can I have a reassurance that, when they are conducted, the concerns of many small businesses about the second delivery will be fully taken into account?

On the price increase, does the Minister acknowledge that one of the relevant factors is that the real price has actually been falling for some years? That now needs to be addressed. The price of stamps in British post offices is now significantly lower than the price in comparable European countries, including those with privatised postal services.

Does the Minister not now believe that the regulator's discussions about competition need something more radical than adjustment, and that they should probably be shelved? With the Post Office in its current dire position, it would be totally inappropriate for private sector companies to come into the industry, without paying an entry fee, and to cream off the few remaining profitable

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bits of the business. Does the right hon. Lady agree that it would be much more appropriate to allow the European Union liberalisation rules to apply?

Does the Minister acknowledge that the biggest losses—£160 million last year—occurred in the Post Office Counters network, and that, on top of that, there will be a further loss of £450 million next year because of automated credit transfer? Can she explain why the Consignia statement contains no estimate for banking income, and no mention of "Your Guide"? When do the Government intend to produce a clear business plan explaining where these additional sources of income are to come from, so that the counters network does not collapse in the same way as the rest of the Royal Mail system?

Ms Hewitt: First, on the issue of the use of the gilts and the cost of restructuring and redundancy, provision is made in the accounts that have just been published for £682 million in redundancy and restructuring costs. Further provision will be made in the current financial year's accounts, when they are published next year, for the additional redundancy and restructuring costs of the Royal Mail. The provisions in last year's accounts, just published, relate to the Parcelforce restructuring.

The hon. Gentleman's central point that the profits accumulated over many years of operation should have been used for investment and modernisation is absolutely right. On that we are completely at one. If the modernisation and restructuring had been done much earlier, the process might well have been less painful. We must recognise, however, that whenever the restructuring was done, it would have involved a certain number of job losses and redundancies in any case, because the process would have involved making the company more efficient. The important thing, however, is not to worry about the past but to determine how to get out of this situation and to ensure that the company now has access to those reserves—that £1.8 billion of gilts—to take forward its restructuring and to support the post office network.

So far as the price of stamps is concerned, we do, indeed, have almost the lowest postage costs in the European Union. As I suggested earlier, however, I do not think that there has been any justification for a price rise at a time when the company has shown itself unable or unwilling to deal with its underlying inefficiencies and with what were, frankly, appalling industrial relations. We have to remember that almost 1 million days were lost in strike action in 1996 and that there were very deep-seated problems, which I am glad to say that the company is now sorting out in partnership with its trade union. It is only now, in the context of the renewal plan, that the company can quite properly go to the regulator and seek a price rise.

On the broader issue of competition and market opening, I do not agree with the hon. Gentleman that the proposals and decision that Postcomm has made should now be shelved. I am surprised to hear him blowing hot and cold on competition. One might have thought that the Liberal Democrats were in favour of competition and of encouraging new entrants to the market in the interests of consumers. [Hon. Members: "That was yesterday."] However, as I hear Opposition Members saying, that was yesterday; today is today, and opportunism is never far away when the Liberal Democrats are present.

If the opening of the market, which is already taking place in many other European Union countries, is done sensibly and at a sensible pace, it will benefit consumers

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and also the Royal Mail, by ensuring that it does not fall back into the bad old ways of a protected monopoly that relied on price rises to cover up its inefficiencies. The hon. Gentleman has got the situation the wrong way around. One of the paradoxes of Royal Mail's current situation is that, in many cases, it is making a profit in the parts of its business that are open to competition, but has, extraordinarily, none the less succeeded in making a loss on its monopoly business. Of course, that will have to change.

On Post Office Counters, as I have indicated, we are on track to create and deliver the universal banking services. The Royal Mail and the Post Office are in discussion and reaching a conclusion to their negotiations with the banks and the Department for Work and Pensions. Those negotiations are commercially confidential, which is one reason why figures have not been published. On "Your Guide", as I have said, we will get the evaluation report very soon. We will then make a decision about whether rolling out "Your Guide" across the country as a whole would provide the value for money and new income for sub-postmasters, new customers and service to citizens that it has the potential to deliver.

As I said, the new chief executive, David Mills, is conducting a strategic review of the post office network and looking not only for opportunities to provide services for government, but for new commercial opportunities. It is quite extraordinary that the household insurance that sub-postmasters and sub-postmistresses are now selling very successfully is the first new product that the Post Office has rolled out since it invented postal orders decades ago. We will be looking to David Mills and Allan Leighton to come forward with a strategy for the network that includes a significant expansion of its commercial opportunities, as well as, quite properly, a role for government in supporting its social function.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The House has important business to transact this afternoon, so I appeal to hon. Members to put very brief questions. I hope that they may get brief answers.

Caroline Flint (Don Valley): The matter with which we are dealing goes back many years, and it is to this Government's credit that we have seized the issue since 1997 and tried year on year to tackle serious problems. May I ask my right hon. Friend about the provision of local post offices and, in the decisions that are being made, her views about how consultation with local communities should take place, bearing in mind low-income communities in which people do not have cars in which they can travel to the nearest urban centre? Also, can I ask her about the viability of post offices—


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