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Mr. Deputy Speaker: Order. The hon. Lady is not getting us off to a very good start, first with a prefatory statement and then two questions. I think that that is quite enough.

Ms Hewitt: The question is extremely important. In the reorganisation of urban post offices that has just begun, we have told the company that as the restructuring is taken forward, it must ensure that at least 95 per cent. of people living in urban areas are still within one mile of a sub-post office after the reorganisation. Of course, the majority should be within half a mile of a sub-post office. But no

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sub-post office in an urban area will close until there has been consultation not only with sub-postmasters, but with Postwatch and, above all, the local community.

Mr. John Redwood (Wokingham): Will the Secretary of State promise that there will be no further redundancies and no further reduction in service quality after this statement? When will the Post Office be back in profit? Does she agree that the third way idea of a not-for-profit corporation has been taken to extremes by Consignia?

Ms Hewitt: Allan Leighton made it clear this morning that there should be no further redundancies in the front line work force. He was not willing to make the same promise to management. The renewal plan that he announced this morning includes £100 million worth of savings in management and administrative overheads. I hope, and he expects, to be able to find further savings in that direction. Far from representing a reduction of service quality, the renewal plan will enable the Royal Mail to improve its service standards.

Many hon. Members know from their constituents' experience that, in parts of the country, the mail is not arriving on time and it is pretty haphazard as to whether people receive it within a few days or a few weeks. That has to change and the renewal plan will enable the company to increase its service standards, I hope dramatically, over some years. We expect the company to be back in profit by the end of this three-year renewal plan.

John Cryer (Hornchurch): Does my right hon. Friend accept that it is very difficult to see how the universal delivery service can be maintained on the back of thousands and thousands of swingeing redundancies of this type? Does she also accept that the difference between profit and loss in the Post Office is between 2p and 3p on a first-class stamp? She says that the director of Postcomm has been listening to the comments of hon. Members; you could have fooled me. Would it not be better to clear out the director of Postcomm and his loony plans and to bring in a regulator who cares about public service?

Ms Hewitt: There is no threat whatever to the universal service from the changes to the delivery specification and, in particular, the ending of the second delivery. The second delivery has never been part of the universal service. The union itself has been arguing for the ending of the second delivery, and quite right, too. As I have said, 4 per cent. of mail is costing 20 per cent. of the total cost and 30 per cent. of the hours walked by postmen and women. That is not sensible.

I do not agree with my hon. Friend's comments about the Postal Services Commission. I welcome the fact that, as it spelled out in its decision, Postcomm has clearly listened to the representations made to it. Although, as it says in its decision, Postcomm was reluctant to reward, as it saw it, an incompetent management by slowing down the introduction of liberalisation, it none the less appreciated the real risks of introducing competition too quickly and has therefore scaled back and delayed the introduction of that competition.

Mr. Peter Atkinson (Hexham): May I be certain that I understood the Secretary of State? Will she confirm that

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a business that receives an average of more than 20 items of mail per working day will receive early delivery? Will she confirm that that would apply to a sole trader and to businesses in rural areas as well as urban?

Ms Hewitt: I can certainly confirm that the early delivery—7 o'clock to 9 o'clock—will apply to a sole trader as well as a larger business. The size of the business is not the issue here. There are obviously greater difficulties, particularly in very remote rural areas, in making the delivery by 9 o'clock. That is one of the issues that the pilots in rural areas will be specifically designed to address to ensure that businesses and sole traders in our rural areas get the service that they need to succeed in their business.

Geraldine Smith (Morecambe and Lunesdale): Will the Secretary of State explain why the Post Office has been allowed to slip from being a very profitable business for many years? Despite poor management, bad industrial relations and lack of investment, it constantly made a profit until quite recently, when it became a loss-making industry. Does she share my view that perhaps it is easier for a loss-making industry to make huge redundancies and to sack 30,000 people than it would be for an industry that was seen to be in profit?

Ms Hewitt: As I explained a few moments ago, a number of different factors have contributed to those very large losses, and my hon. Friend has referred to some of them. In addition to a lack of investment over the years and bad industrial relations, there was also a failure to appreciate the effect of the growth in e-mail, faxes and courier services. The company did not anticipate the slow-down in the substantial annual growth in mail volumes on which it had relied for years. Above all, since being given commercial freedom it has simply lost control of its costs. At a time when revenue growth was slowing, costs were rising massively, and it has now to deal with that situation. The job losses, which will be achieved through re-deployments and voluntary redundancy, are the means of eliminating a large part of the company's underlying inefficiencies, and ensuring that it is once again the profitable business that it ought to be.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): The statement is rather disappointing, inasmuch as it appears to water down the idea of universal service obligation. [Interruption.] The right hon. Lady shakes her head, but in many areas in my constituency deliveries are not made before lunch as it is. With fewer postmen delivering, one wonders when—if ever—people will receive their post.

The right hon. Lady mentions redundancies. Echoing the comments of the hon. Member for Ochil (Mr. O'Neill), in areas in my constituency such as Bala and Llanrwst, the sorting offices are small, so there is no possibility of job transfers. What will happen when those employees refuse voluntary redundancy?

Ms Hewitt: As I said, today's announcement contains no threat whatsoever to the universal service obligation. As the hon. Gentleman has suggested, in his constituency the second delivery probably does not operate at all, and in any case it does not form part of the universal service.

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There is a very real problem with thoroughly unreliable deliveries in some parts of the country. In certain areas, the Royal Mail is perfectly capable of delivering not just 92.5 per cent. of first-class mail on the day after it is posted—the target figure—but 100 per cent. However, in many other parts of the country—sometimes because of industrial relations problems or logistical problems—nowhere near even 90 per cent. of such mail is being delivered. Reorganisation and the tailored delivery programme will ensure that customers get a much more reliable service, and that the universal service is delivered in every part of the country to the same high standards, which is what we all want.

The hon. Gentleman and my hon. Friend the Member for Ochil (Mr. O'Neill) mentioned the position of postmen and women in parts of the country where few other jobs are available. Management and unions are discussing that issue, and will take it forward as part of the consultations on the redundancy programme.

Mr. Dennis Skinner (Bolsover): Will this high-flying management of the Post Office, who have been running the show for the past few years and brought it to this sorry state, be awarded fat cat payments? My right hon. Friend referred to a fella called Roberts, who is packing it in. How much money will he get? Is this not the appropriate moment to say that, at a time when the taxpayer is having to foot the bill, the people who have managed the affairs in this way should not get fat handouts?

Ms Hewitt: There is no question of awarding fat cat payments or rewarding failure. Of course, John Roberts will receive an appropriate payment, in line with his contract. [Hon. Members: "Ah!"] We are putting in place for the new chairman and the new executive and non-executive directors salary packages with a very significant element of performance-related pay. Allan Leighton has set an example in this regard by taking no additional payment as new chairman, over and above the £20,000 a year that he received as a non-executive director. The whole of his pay as chairman will depend on his turning around the company and delivering on the targets that he himself has committed to. We will expect an equivalent emphasis on performance- related pay in the appointment of other non-executive directors. Of course, with the appointment of the new chief executive, we will need a package that can attract an outstanding manager to lead the organisation through the renewal programme, but it will also have a large element of performance-related pay.

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