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If that can be done and a privatised Royal Mail can be expected to honour the existing agreement, what has the Minister done to explore the option of putting in
place a longer-lasting inter-business agreement, such as a 10-year agreement? Perhaps he will be able to tell us later what he has done. What will he do to put that in place before privatising the Royal Mail? Has he looked at examples of business takeovers where the buyer has taken over the existing commitments of the company that it has acquired? Simply telling the Committee and now the House that it cannot be done, albeit without exploring the options, suggests a fundamental unwillingness to take every possible step to secure the future of the post office network.
"I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement". --[ Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 121-22, Q244.]
However, what has the Minister done to turn that good will into practical action? Has he had talks with the chief executive and chairman of Royal Mail about securing a longer inter-business agreement between Royal Mail and Post Office Ltd before privatisation? What mechanisms has he explored for doing that? It also has to be said that Moya Greene may not be there for ever. What happens if we have a new chief executive or chairman? I have every belief in the sincerity of their words, but we all know that words are not enough. What we need in business are agreements in writing, so that we know what we are talking about.
The Minister also said that consideration had not been given to the matter before. No, it has not, quite simply because when we were in government, we always intended to keep Royal Mail in majority public ownership, so it would not have been separated from the post office network in the way that it will be if the Government privatise it. Therefore, there was simply no need to consider the future of the IBA in that way.
The National Federation of SubPostmasters is clear that it needs a 10-year IBA as an absolute minimum. That will be fundamental to providing security, so that business will be viable for the 97% of post offices that are owned by a sub-postmaster or sub-postmistress. They are the people who have taken on post offices, investing considerable amounts of their own money to set them up at a time when the inter-business agreement between Royal Mail and Post Office Ltd was taken for granted. They would never have dreamt that post offices could face losing Royal Mail business and, with it, the money that accounts for a third of their revenue.
Sub-postmasters and sub-postmistresses will have welcomed the Government announcement to continue the subsidy of the post office network. Indeed, they may be hoping to benefit from some of the money that is being put aside for the refurbishment of post offices. However, they will also be scrutinising the BIS document "Securing the Future of the Post Office in the Digital Age" to see whether they can find anything that guarantees more Government business to post offices, when we have PayPoint challenging the Post Office for the Department for Work and Pensions contract for benefit checks. Sub-postmasters and sub-postmistresses will
also be looking carefully to see whether there are any strategies for channelling new types of business through the Post Office, now that the Government have abandoned Labour's plans for a people's bank at the Post Office-yet another Lib-Dem manifesto promise broken.
Most of all, however, sub-postmasters and sub-postmistresses will be worried about the future of the IBA, because they know how much the future viability of their business depends on their continuing to provide services for Royal Mail. Indeed, the IBA covers more than just the counter services. As the hon. Member for Northampton South (Mr Binley) pointed out, it deals with sorting facilities in shared premises in some areas. Specific guarantees that business with the Royal Mail will continue are wanted. If someone has invested considerable amounts of money in a business that included Royal Mail services, they would be concerned about whether they could sell their business as a going concern when they decide to retire or move on. They would be very worried about the price they might get if there were no IBA with the Royal Mail, and there would be a real problem in attracting new entrants.
Even without considering the potential loss of the IBA, the Rural Shops Alliance, in the winter edition of its journal Rural Retailer, expresses this view of Government plans to convert post offices to the Post Office local model:
"The logic of this is obvious, but it will involve a reduction in product ranges, longer PO opening hours and a reduction in income-not a model that will encourage subpostmasters to remain as part of the network. It is great that the Government is promising a no closure programme-it cannot however promise that it will be financially worthwhile for anybody to provide PO services."
George Thomson of the National Federation of SubPostmasters told us that there are currently 900 vacancies where Post Office Ltd is struggling to find someone to take on a local post office. It is no good dismissing this as just the regular turnover. I know for a fact from my own constituency-I am sure that other hon. Members do, too-just how long some of those vacancies have been there and how depressing it is for those local communities without their post offices, with some pensioners having to face very awkward and time-consuming bus journeys to access their pensions.
With the prospect that the Post Office could lose the IBA, how on earth is Post Office Ltd going to attract new entrants? Why would anybody want to undertake the not inconsiderable task of establishing themselves as a sub-postmaster, with all the training and investment involved, with the prospect of the Post Office losing the IBA hanging over them?
"following privatisation of Royal Mail, subsequent contracts would require a competitive tender process with no guarantee that Post Office Ltd would retain this contract".
"for the foreseeable future, the loss of the mail's contract, even on a partial basis, would significantly undermine the integrity of the post office network. Even if the Royal Mail continued to use the
PO in rural areas only, the ability of the network to cross-subsidise from its profitable urban branches would be lost. The future of many post offices, particularly the 6,515 post offices in rural areas, would therefore be in doubt. This would not only threaten access to mail services, but also to the range of services of economic and social interest available through the PO network."
Many hon. Members have made some good and useful points today. My hon. Friends the Members for Linlithgow and East Falkirk (Michael Connarty) and for Blaydon (Mr Anderson), who both have an excellent track record in standing up for post offices, each made a vigorous and impassioned defence of the post office network.
The hon. Member for Northampton South mentioned the importance of the social role of the Post Office-how people get help from it and how community networking and social work take place. He also mentioned that it is not only older citizens, but young mums who can benefit from the community and help that can be found through the post office. The hon. Gentleman said, "Woe betide any elected Member who ignores the importance of the local post office to the fabric of the community." He also mentioned the role of the additional 900 post offices that act as mail sorting areas and the problem of post office vacancies and the difficulty of finding new entrants to take on post offices.
My hon. Friend the Member for Edinburgh South (Ian Murray) reminded us that there are other countries where the Post Office is protected in law. The hon. Member for Solihull (Lorely Burt) raised the issue of the need for regulatory reform-something on which we would all agree. The hon. Member for Angus (Mr Weir) said that everything simply cannot be left to warm words. He pointed out that we simply do not know how long the current managers will remain in their posts. He also drew attention to the staggering range of products and services that are now available through supermarkets, which would not have been dreamt of only a few years ago.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), supporting his hon. Friend the Member for Colchester (Bob Russell), explained very clearly why he considered it necessary for the Bill to provide for a guaranteed IBA. He cited many examples of agreements, including non-compete clauses, which it was not impossible to provide and to carry over.
My hon. Friend the Member for Islwyn (Chris Evans) emphasised the importance of post offices to the community, and the extra mile that so many sub-postmasters and sub-postmistresses are prepared to go to help to look after members of their own communities. My hon. Friend the Member for Glasgow East (Margaret Curran) spoke of the hardship that would be caused by mass closures of post offices in deprived urban areas. The hon. Member for Foyle (Mark Durkan) challenged the idea that it was "unthinkable" that Royal Mail would abandon the Post Office. He said that, far from being unthinkable, it was quite predictable, and that it was all about pleasing potential purchasers.
My hon. Friend the Member for Glasgow South West (Mr Davidson), the Chair of the Scottish Affairs Committee, reminded us of the recommendation in his
Committee's report that the Government should take a more proactive approach to facilitating a long and robust IBA by removing any obstacles-practical, legal or otherwise-that might exist. My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a comparison with the 10-year rail franchises. The hon. Member for Folkestone and Hythe (Damian Collins) stressed the unique reach of the post office network, as well as the importance of the certainty represented by the IBA.
Last but not least, let me refer to the hon. Member for Colchester, who tabled the new clause and who spoke so eloquently in moving it. I take issue with him on only one point: I think that he needs to challenge his own Government about what additional Government business they intend to put through the post offices. We have seen fine words in the document produced recently by the Department for Business, Innovation and Skills entitled "Securing the Post Office network in the digital age", and we have also seen a copy of the letter sent by the sub-postmasters to the Department for Work and Pensions. However, we have not heard about any additional business so far, and I think that the hon. Gentleman would do well to pursue that. Nevertheless, I thank him for tabling the new clause, which we shall be pleased to support.
Many Members have presented compelling arguments for the inclusion of a guarantee of an inter-business agreement between Post Office Ltd and Royal Mail for at least 10 years. They have pointed out to the Minister that the obstacles are not insurmountable, and that if he has the will to include an IBA in the legislation, he should be able to find a way of doing so. They have said that he really must do that, or he will be remembered as the Minister who refused to take the opportunity to safeguard the post office network, and who left the way open for Royal Mail to abandon it.
Mr Davey: I thank my hon. Friend the Member for Colchester (Bob Russell) for sparking the debate, and particularly for the way in which he introduced it, in his unique style. I thank him for his practical approach to the issue, and for his support for the mutualisation and employee share ownership provisions. I hope I shall be able to reassure him that new clause 2 is not needed, and that our policies for the Post Office will ensure that some of the more scaremongering predictions that we have heard will not come to fruition.
Members who have spoken in support of the new clause have expressed the fear, which has been debated at length in Committee and in other forums, that taking Post Office Ltd out of the Royal Mail group of companies will put the commercial relationship between Royal Mail and Post Office Ltd at risk, and thence pose a risk to the post office network. I share my hon. Friend's laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd. However, the approach taken in this new clause, of legislating a contract of a certain length, is not the way to achieve our shared objective.
In the evidence given to the Bill Committee, we heard strong backing for the separation of Royal Mail and Post Office Ltd. These are different businesses, which will benefit from focusing on the different challenges
they face. It is worth keeping in mind that postal services account for only about a third of Post Office total revenue, as post offices undertake many other activities. Evidence to the Committee from Richard Hooper-the last Government commissioned him to report on Royal Mail, and this Government asked him to refresh his report-and from Consumer Focus and Postcomm all supported the separation of ownership of the two businesses. I was grateful for the support for this from my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso).
Let me reassure Members, however, that the separation of Post Office Ltd and Royal Mail will not lead to the dangers for the post office network that people have talked about. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners, because there will remain an overwhelming commercial imperative for the two businesses to work together.
"the best and strongest network in the country, by any yardstick" --[ Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18.]
"There is already a very strong and enduring commercial relationship between the Post Office and Royal Mail. It is clearly in the interests of us all that this strong relationship is maintained in the future. We are committed to securing as long an agreement with the Post Office as we are legally able to."
That confirms what Donald Brydon, the Royal Mail chairman, said in his evidence to the Committee. These are very strong pledges, and both Moya Greene and Donald Brydon make them not for sentimental reasons, but because they are businesspeople and they know this relationship makes commercial sense.
Mr Davey: I will, of course, address that in detail, if the hon. Lady will let me. However, I first want to stress that it is the commercial incentive in the relationship that is so important. The Labour party forgets that commercial rationale is what makes people work together and what makes partnerships successful, not regulation.
I invite Members to consider the counterfactual of why Royal Mail would end its relationship with the post office network. Many of us fought the previous Government's post office closure programmes precisely because the public value their local post offices so highly and see them as the natural place for high-quality postal services. As I asked on Second Reading, why would Royal Mail walk away from the Post Office, leaving a vacuum which its competitors would willingly fill? That would be commercial nonsense, and it will not do it.
The new clause would put the contract between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 10 years. Let me
explain why I am opposed to this suggestion. I do not believe that legislation is appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. I am unaware of any statutory precedent for the Government requiring particular commercial terms between two independent businesses. When we debated this in Committee, I appealed to Committee members to tell me whether they could find such a precedent. None has appeared, and for good reason. These negotiations are best left to the businesses themselves, who know far better than we in this House their customers, the markets they serve, the products and the services they require of one another.
Mr Binley: I noted that the Minister said, "I do not believe" and not, "It is a fact". His not wishing to include this provision in the Bill is a matter of judgment, not a matter of law. May I add something on the matter of there being two independent businesses? In reality, the nation has a sizeable holding in them, so we are not quite talking about two businesses that are quoted on the open market. Would he therefore confirm that there is no legal reason why this arrangement cannot happen, even though it might be breaking new ground?
Mr Davey: I reassure my hon. Friend that I will be coming to this legal point and that I wish to address the remarks made by the hon. Member for Llanelli (Nia Griffith), but I stress that we were not given any statutory precedent for this arrangement. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volumes, service levels and duration. If we adopted the new clause, there is a real danger that we could end up with an IBA that would damage the post office network. That has not been discussed at length and we should concern ourselves with it. The new clause focuses on the duration of the contract and, thus, would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts-the businesses and their advisers-should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us here in Parliament.
On the key issue, Donald Brydon made it clear in his evidence to the Public Bill Committee that Post Office Ltd and Royal Mail would sign an agreement for the longest legally permissible period before a future separation. As shareholder, the Government will ensure that that commitment is met before any separation. I hope that the House will welcome this new commitment; we are making it very clear that we will ensure that Royal Mail delivers on the commitment that it has given, repeated and outlined to the Committee.
Let me just finish the point, because there is a legal barrier. This also addresses the point made by the hon. Gentleman, who asked whether the European
Union was involved in creating problems for legislating in the way proposed in the new clause. The legal barrier to legislation requiring an IBA is the EU's competition framework. Legislation providing an exclusive arrangement between Royal Mail and Post Office Ltd would face a significant risk of legal challenge as being incompatible with competition law. Article 101 of the treaty on the functioning of the European Union contains rules prohibiting anti-competitive agreements between undertakings. Article 4(3) of the treaty on European Union obliges member states not to jeopardise the attainments of the objectives of the treaty. The effect of those provisions, together with article 102 of the treaty on the functioning of the European Union, is that member states cannot introduce measures that would render the competition rules ineffective-that is clear. In addition, legislating for Post Office Ltd to have a guaranteed income stream would risk a successful state aid challenge being mounted. There are real barriers to doing what new clause 2 seeks to do.
However, I can assure the House, as I have done previously, that we, as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee-that it would conclude the longest legally permissible contract before separation-is fulfilled.
Mr Weir: I understand that after the Bill is passed, if that indeed happens, one company-and only one-that has a statutory universal service obligation will be entering into a contract with Post Office Ltd. I fail to see where the competition problem lies, because nobody else is offering a universal service obligation to challenge that.
Mr Davey: Let us be clear that the commitment that Royal Mail has made is that the refreshed or new IBA would be entered into before separation. We, and the EU legislation that I mentioned, say that there is a problem if the Government legislate for such a long contractual arrangement. The hon. Gentleman is not paying attention to the constraint on the Government.
Malcolm Wicks (Croydon North) (Lab): Let us put to one side the earlier amusing moment where a radical said that he needed a precedent before acting-fortunately, that did not stop Lloyd George in 1906 with old-age pensions. The Minister has read the careful legal advice from departmental lawyers. Are they saying that it would be difficult to accept the new clause, or have they ruled it out entirely as clearly illegal? Will he tell us what the advice is?
Mr Davey: I have made it very clear that it would be open to serious legal challenge and I believe that we must take that into consideration. Let us remember that this agreement is not negotiated by the Government, as some hon. Members seem to think. It is negotiated by two independent bodies. The right hon. Gentleman, as a former Minister, ought to realise that for a Government to intervene in negotiations that involve commercially sensitive terms and to follow that by putting it in the Bill is completely the wrong way of going about things.
As a former Minister in the Minister's Department, although not one with responsibility for this area, I can recall many occasions on which one was
given legal advice and difficulties were presented. Unless a provision is clearly 100% ruled out as completely illegal, Governments must govern, at the end of the day, and Ministers must act in the interests of the democracy.
Mr Davey: This Government are governing. It was the previous Government who moved away from taking action on Royal Mail, who closed post offices and who did not take action. The right hon. Gentleman is absolutely right that we must make judgments and we are making judgments. I can tell him the judgment that we will not make: the judgment that the previous Government made, which was that the way to sort out the post office network was to close thousands of post offices. We will not do that. The Government can and will help to create the conditions in which both businesses can flourish in partnership with one another.
One thing is certain. A struggling Royal Mail will lead to problems for the Post Office. The Bill introduces the ability to bring in much needed private capital for Royal Mail to invest in its transformation, so that it can offer the best service to its customers. It is important, too, that the Post Office continues to offer the best possible service to Royal Mail as well as to other current and potential clients. I am sure that hon. Members are well aware following the debate that we have committed funding of £1.34 billion, so that Post Office Ltd can invest in its network to ensure that that happens. For example, Post Office-
For example, Post Office Ltd is piloting branches that offer greater flexibility and convenience in customer services, such as longer opening hours. The Committee heard evidence from Paula Vennells, the Post Office's managing director, that those branches offer customers opening hours that are between 40% and 60% longer than current opening hours. That is the real change that the post office network needs. That is the change that will attract more customers and will mean that we do not repeat the appalling closure programmes that we saw under the previous Government.
Mr Binley: I want to pin the Minister down, because it is vital that we do. He said that there was a "significant risk" that we might be challenged by the European Courts on competition matters. Yet the two organisations have agreed that it is vital that they have an agreement. How can the EU challenge the Government on that matter when there is an open statement to the effect that it is what is needed and what is good?
Mr Davey: Let me take my hon. Friend back to the point I was making about articles 101, 4(3) and 102. The point I was making was not that the two businesses cannot have an IBA. That is clear-they have one now, and they have committed to refreshing it or to creating a new one. I gave the commitment to the House today that we, as shareholder, will ensure that that happens before there is a separation. I hope that my hon. Friend will welcome that. The risk is about legislation and I hope he understands that point.
Sir Alan Beith: The more I read the new clause, the objective of which I fully support, the more concerned I am that if it were in the Bill the Minister would be open to judicial review from an aggrieved party who made an unsuccessful bid to buy Royal Mail and wanted to judicially review the Minister's unreasonableness in going ahead with a sale on the basis of an agreement between Royal Mail and the Post Office.
Mr Davey: My right hon. Friend is absolutely right. Let us be absolutely clear: the problem with Royal Mail has been the inaction, particularly from the previous Government, that has led to its parlous state. We do not want to create significant risks of legal challenge that would undermine the modernisation and investment process that Royal Mail needs to deliver on the universal postal service and that we need to ensure that the post office network does not have to face the closure programmes we saw under the previous Government.
Mr Davidson: Could we possibly agree, first, that the EU is a bad thing? Secondly, is the Minister telling us that he does not wish to have the new clause in the Bill in case the EU steps in, while also promising us that he is going to do all this anyway?
Mr Davey: The commitment that I have given today is what the hon. Gentleman and his Select Committee were seeking. That is what I understood from his very well informed remarks earlier. Now that he has intervened, let me tell him that his point about mobile vans is dealt with in Government amendment 5, which I hope we will get to. There are currently 39 such vans serving 240 communities, and Post Office Ltd has no plans to increase its fleet of vans. I hope that gives him some reassurance on his very detailed point.
Anas Sarwar (Glasgow Central) (Lab): Following on from the hon. Member for Northampton South (Mr Binley) in wanting to pin you down-the Minister that is, not you Mr Evans-if the legal advice from civil servants is so clear, will the Minister publish it?
Our policies on post offices will ensure that people will continue to see their local post office as the natural and convenient place to access Royal Mail products, and Royal Mail's management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government's funding and support, as laid out in our policy document, which sets out a whole range of ideas for new Government services, we will be able to achieve those objectives.
The new clause tabled by my hon. Friend the Member for Colchester is well intentioned and I have always been impressed by how he, the voice of Colchester, campaigns for his constituents, not least for important services such as local post offices. I hope that I have reassured him that his new clause is not needed to support our precious post office network.
It still is not at all clear what the Minister is giving away. We have absolutely no idea what agreement he is planning and he has given absolutely no indication
that he has had any talks with Royal Mail. He is talking about some sort of negotiation that might take place, but he is not telling us why he cannot explain what the legal problem is. We are not the slightest bit convinced, so will he explain exactly what he is doing to secure the Royal Mail business that provides a third of the post office network's income? No organisation can survive without a third of its income, so what is he doing to ensure that it does not lose it?
Mr Davey: The hon. Lady cannot have been listening. What I have said today is absolutely clear: a commitment has been made to the Committee on which she served by the chairman and the chief executive of Royal Mail that they will refresh the IBA or have a new one before the separation. I am saying that the Government, as the shareholder, will make that happen, and she ought to welcome that.
Sarah Newton: I am very much reassured by the clear commitment we have heard today that it is the Government's intention to support the post office network. To convince our colleagues on the Opposition Benches, would the Minister be kind enough to share with us the conversations he has held with the chief executive about what she thinks is the longest legally possible period for the new agreement?
Mr Davey: I think I should definitely be advised to share neither those private conversations nor the legal advice that may or may not have been given to Moya Greene and that she may or may not have shared with me.
The wider policies of the Government for the post office network will prevent major closure programmes. We have heard no apology today for all the closures of post offices under the previous Government. We saw 7,000 post offices close under the Labour Government. This Government have policies to make sure that that will not happen again, and I urge my hon. Friend the Member for Colchester to withdraw the new clause.
Bob Russell: When we read Hansard tomorrow, we shall see that there was at least one commitment-if not more-in the Minister's response. Whatever the outcome of the vote, the fact that we have held the debate is worth while.
To be told four hours into the debate that my new clause may not be lawful was a little strong. I am pretty sure that, if the proposal were not lawful, somebody, somewhere, would have drawn it to my attention, if not when I tabled it, certainly in the few weeks since the Christmas and new year period. When I am told that there could be a serious legal challenge, all I can say is that nobody has challenged me as to the legality or otherwise of new clause 2.
Although I am grateful for all the contributions to the debate, I am disappointed. Had this been a boxing tournament, the ref would have ended the bout at least two hours ago. If this were an Oxford Union debate, the vote in favour of new clause 2 would have been overwhelming, because the case against the new clause is not very strong. It may be that all the Members who oppose new clause 2 are not present, and only the minority who support it have come to the Chamber to speak, but I am grateful to Members on both sides of
the House. I think that we all agree that our sub-post office network is a vital part of our communities. Whether it is sustainable communities or localism, all Governments come up with such ideas and then promptly do things that do not appear to be community oriented.
It is on record that I am opposed to the privatisation of Royal Mail, but I accept that it will happen, so it is a question of what is best. I genuinely feel that new clause 2 is a way of taking things forward.
It is less than nine months since the utopian era of 13 years of new Labour came to an end; of course, it was a golden era for Royal Mail and the Post Office, so although I welcome the support that has been given we need to put it in historical context. The closures under the previous Government were the greatest of any time in the history of the Post Office and Royal Mail. I believe that the coalition Government have proposals-
Nia Griffith: The hon. Gentleman needs to remember that when we debated how to support the post office network and how to put in the extra subsidy that enabled us to keep open 11,900 post offices, the Minister of State, Department for International Development, who was then the shadow Minister speaking for the official Opposition, made it absolutely clear that the Conservative party would not have put in the amount of money that we were prepared to put in. Of course, the Liberal Democrats were not then promising anything because they never thought that they would have to deliver.
I am disappointed that the Minister has not accepted new clause 2. After all, over Christmas, the Government accepted another of my proposals-that a picture of the Queen's head must remain on stamps-although if we reach that amendment later on, it refers only to Her Majesty, and we need to tighten up the wording because the monarch may not always be female. I wish to press new clause 2 to a Division.
'Any company providing a universal postal service must, prior to selling any part of its business to another entity, first report its intention to Ofcom who must certify the sale does not in any way reduce the company's ability to deliver its universal service.'.- (Mr Weir.)
'but not before the date five years after this Part comes into force'.
'but not before the date five years after this Part comes into force'.
'may by order amend section 30'
'shall as soon as reasonably practicable after the review of minimum requirements of the Universal Postal Service under subsection (1) has been carried out lay before Parliament a report which shall include a copy of the review.'.
'it has been commercially negotiated and'.
Mr Weir: New clause 4 and amendments 11, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill's passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail's privatisation, the universal service obligation, which is so important to my constituents, is maintained.
Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope-a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.
The new clause is an attempt-perhaps not a triple, but at least a lock-to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the
organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.
What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.
I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.
The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company-albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.
"The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail's existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create 'any significant risk that the necessary resources will not be available' to enable it to continue its business." --[ Official Report, Postal Services Bill Public Bill Committee, 18 November 2010; c. 289.]
I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.
The hon. Gentleman will know from the debate in Committee that there is the potential for Ofcom to put a fine on the universal service provider of
up to 10% of its turnover. At the moment, that would be a fine of £650 million. Does he not think that that is a disincentive?
Mr Weir: The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.
Tony Lloyd: As the hon. Gentleman is helping the House, will he help me by saying whether there is a duty on Ofcom to insist on the universal service provision? If not, it makes no real difference whether there is the capacity to levy a fine or not.
Mr Weir: There is a duty on Ofcom to ensure the universal service. However, as I was trying to explain, the problem is that Ofcom's only sanction is to act after something has happened. If the conditions have been breached, Ofcom can take action-it can fine the company a very substantial amount or it can impose other conditions. That is very much a reactive rather than a proactive sanction. If there is nothing there to fine or there is nothing left, it makes no difference whether the fine is £650 million or £20 trillion.
Mr Weir: Indeed. I would put it a different way. There is no effective sanction available to Ofcom to deal with something after it has happened to the detriment of the USO. It is only able to impose conditions or a fine, and fining a shell company is no good. Ofcom cannot prevent the sale; it can react only if what is happening turns out to undermine the ability to provide the USO. As I said, if the company has already sold off all its profitable parts leaving only a shell, what is the point of a large fine that it is not in a position to pay?
The Bill must provide the power to allow Ofcom to take action before a sale is proceeded with and to ensure that the privatised company cannot dispose of all profitable assets to avoid the duty of the USO. I am sure that the Minister will say that that is a burdensome hurdle, but it is not. It is not the first sale that would be required to clear a regulatory hurdle before going ahead-indeed, many deals are done subject to regulatory approval. I am sure that the Secretary of State for Business, Innovation and Skills is only too well aware that the BSkyB case had to go to the European Commission to determine whether it would be blocked at that level before the remaining shares could be put forward.
If the new clause was passed, Ofcom could look at the proposal and ensure that the assets of the company remained sufficient to meet the needs of its social obligation. In most cases, that would be a relatively quick process. However, it would give the reassurance that once there is a privatisation-if that disaster should happen-there would at least be something in place to ensure that the universal service continues in all circumstances. I ask hon. Members to support the new clause to give that extra protection.
"the needs of small business users in rural and remote areas"
and make it a specific matter to which Ofcom must give concern in considering the USO. The reason is simple. We need to ensure that the universal service obligation is secured for small businesses in rural areas if we are to have any chance of creating new employment opportunities in our rural communities. On Second Reading, Scottish National party Members tabled an amendment supported by Plaid Cymru and all the parties of Northern Ireland because of our huge concern that the Bill would have profound implications for that ability to continue the USO.
It is vital to bear in mind that not only residential but small business customers rely on Royal Mail. They do not have any real options and cannot access the deals that may be on offer from alternative carriers. In the parcels market, if one can get anyone to deliver to large parts of Scotland at all, it is only at a vastly increased price. Not so long ago, the then management of Royal Mail proposed a zonal pricing structure that would have created different prices for different areas of the United Kingdom. In the recent spate of bad weather in Scotland, many of the alternative carriers simply gave up, and several publicly stated that they would not attempt deliveries in Scotland at all.
Throughout this time, Royal Mail did its best to ensure that the mail got through, with postal workers struggling in very difficult conditions to ensure that the mail was delivered. Although there were delays and although, for obvious reasons, some areas could not get mail, most of the mail got through. We should congratulate Royal Mail and its workers on doing that. It shows the difference between a dedicated public company service and the privatised services that operate elsewhere. Amendment 11, allied with the others in the group, is simply an attempt to ensure that if the disaster of privatisation befalls Royal Mail, as much as possible is done to ensure that the USO is watertight and that the interests of all users are adequately protected.
Mr Alan Reid (Argyll and Bute) (LD): The hon. Gentleman has a point. Although the USO for parcels is currently only five days, and the Bill does not change that, I hope that the Minister will consider increasing the USO to six days for parcels. He has improved the USO in many ways in the Bill, but I ask him to take this away and look at it again, because I am concerned that if we do not have a six-days-a-week USO for parcels, Saturday parcel deliveries in the highlands and islands will end.
Mr Weir: The hon. Gentleman is perfectly right. I hope that he will follow up that strong support for the proposal by coming through the Lobby and voting for it in order to send an additional message to his Minister.
As the Bill stands, we have a six-day service for letters but only a five-day service for postal packets. I am at a complete loss as to the logic behind the differences between the two. One thing that came through loud and clear from Richard Hooper's report, on which the
Government have relied, is that the market for letters is declining substantially. The bulk of private letters are now being sent around Christmas, and they will mostly be Christmas cards. I suspect that I am not the only one who has noticed that the rise of the e-card is biting even into this market, with fewer cards being sent through the post, or perhaps it is just that I have fewer friends this year-I do not know. In any event, the one area where there is real scope for building the business is what we are now told we should call e-fulfilment-in effect, the delivery of orders made over the internet. This is a two-way process. In my constituency, for example, there are businesses in rural areas who sell over the internet and send out packages on a regular basis. They rely on the universal service obligation to ensure that they have access to the postal service at a reasonable cost and that allows them to operate at a reasonable cost.
Interestingly, in research on the business market carried out by Postcomm, more than half the businesses surveyed were of the opinion that they will use the internet more in future, but the vast majority-93%-believe that they will always need to send some things by post. Half of businesses expect more customers to order products online in future, indicating a belief that the market will grow further. Digging down into the figures, it appears that of those who spend between £100 and £500 a month on mail-basically small businesses-72% have either stayed at the same level of usage of Royal Mail or have increased it in the past year.
That is the one growth area within Royal Mail, and not having the universal service obligation cover it in the same way as in the letters market does not appear to make any great sense. Again, I point out that if we are to grow private businesses in rural areas, we need to have the infrastructure to allow them to flourish, and that includes a reliable six-days-a-week postal service.
Mr Reid: I am grateful to the hon. Gentleman for giving way again. I reinforce my earlier point that I am concerned that if the USO for parcels is not extended to six days a week, parcels will not be delivered in the highlands and islands on Saturdays. As he said, the delivery of parcels in response to internet selling is such an important growth area that the highlands and islands would miss out if parcels were not delivered on Saturdays.
Goods not only go out by post, but are received by post. Raw materials may come in by post. For many constituents, no one is at home during the day from Monday to Friday. I am sure that such people would like packages to be delivered on a Saturday, when they actually might be in and would not have to travel to collect them at the nearest sorting office, wherever that may be after privatisation. If we are serious about increasing business and ensuring that every area of the country has access to a reliable, reasonably priced postal service, it would be daft to exclude from the universal service the one area that has potential for substantial growth.
Finally, amendment 14 would remove Ofcom's ability to use geographical criteria to suspend the universal service. That has long been a contentious issue, even
under the current framework. Households that are difficult to reach can have delivery suspended. The condition in the Bill is far too wide and could result in whole isolated mainland or remote island communities being removed from the universal service. That would be a travesty and lead to a huge increase in costs for such communities. There may always be some individual dwellings where the mail simply cannot be delivered, but those should be looked at on an individual level.
I urge all hon. Members to support the proposals, which all attempt to strengthen the USO and to recognise that the highest priority for the Royal Mail, whether it continues as a publicly owned company, as I hope, or becomes a privatised company, is to deliver to all our citizens.
Mr Reid: As I said in my interventions on the hon. Member for Angus (Mr Weir), I hope that the Minister takes away the proposal in amendments 12 and 13 to extend the universal service obligation for parcels to six days a week. As I said, I am concerned that parcels will not be delivered on Saturdays in the highlands and islands without such an extension. Apart from that one remaining concern, I think that the Minister has done a great job in the Bill to strengthen the USO in many ways, which is so important for the highlands and islands.
Amendment 14 deals with the hon. Gentleman's concern that the geographical exceptions clause will be used to remove large parts of the highlands and islands from the universal service obligation. I do not share that concern. The wording is the same as that in the Postal Services Act 2000. The regulator, Postcomm, has used that exception only in a small number of cases, such as for islands that do not have a daily ferry service. Obviously, it would be nonsense for Royal Mail to charter a boat to an island to which Caledonian MacBrayne does not have a daily ferry service. The solution is for Caledonian MacBrayne to improve the service so that islands such as Tiree, Coll and Colonsay have a daily ferry service, but it is not for Royal Mail to charter special boats. Postcomm has also introduced exceptions on health and safety grounds, such as dangerous dogs. Under amendment 14, Royal Mail would have to deliver to houses with a dangerous path or animal. The wording in the Bill, which is taken from the 2000 Act, is satisfactory. I questioned Postcomm and Ofcom in the Scottish Affairs Committee and Ofcom gave an assurance that it will maintain Postcomm's regulatory regime for geographical exceptions. Given those assurances, amendment 14 is not necessary.
Gordon Banks: I wish to speak to amendments 23 to 26, which we have tabled. Amendments 23 and 24 are similar to those tabled in Committee and are intended to ensure that no review of the universal service obligation can take place for at least five years after the date of clause 33 being enacted. I note that the hon. Member for Northampton South (Mr Binley) tabled a similar amendment that was not selected, and I commend him for doing so. I trust that he will be able to support us in our aspirations tonight.
The minimum service requirements laid out in clause 30 are exactly the same as those set out in the Postal Services Act 2000. However, as my hon. Friend the
Member for Llanelli (Nia Griffith) said in Committee, clause 33 will allow them to be eroded. The Bill sets in train a range of processes to reduce the universal service obligation, and I imagine that many Members fear that we cannot even be sure to which Secretary of State the powers in clause 33 will fall. Perhaps it will not be the Secretary of State for Business, Innovation and Skills, and who knows, it may even be the Secretary of State for Culture, Media and Sport. Perhaps, if time allows, the Minister will be able to tell us which Secretary of State will inherit those powers if the Bill is passed, and then I will leave it to my hon. Friends to determine whether that is a good thing.
Mr Reid: I point out to the hon. Gentleman that clause 33(7)(a) states that the review of the minimum requirements would be subject to the affirmative procedure, so it would require a vote of both Houses of Parliament. The Secretary of State could not take the decision on his own. Is that not adequate security?
Gordon Banks: No, it is not, and I will come to that if I have time. The Minister will be aware of my office's deliberations with him on parliamentary scrutiny when the Bill was in Committee, and I will deal with that matter if I can.
We believe that it would be better to relieve both potential contenders of the powers to be granted under clause 33(5). At least the current Secretary of State for Business, Innovation and Skills would then know about that change in advance, and it would have been made through the democracy of Parliament and not by the Prime Minister as punishment.
In a letter to the Public Bill Committee, the Minister mentioned the failsafe of clause 29(5), which is relevant to clause 33. However, that failsafe could work only if one had faith in the actions and intentions of the relevant Secretary of State, and we do not.
Restrictions to ensure that there could not be a review before five years had passed would provide important stability to both the business and customers following privatisation. The universal service obligation is of such immense importance that it will need that period to bed down under a new, private provider. I am afraid that throughout the Committee stage, the Minister was unable to convince my hon. Friends and myself of why a review should take place after 18 months. We want a statutory period of five years, during which everyone would know that today's universal service obligation was in place. We want the consumer to be protected. As it stands, the inter-business agreement could be subject to review after 18 months, when an Ofcom review of the USO could also be ongoing. That would mean turmoil. As the Minister heard in Committee and from some of my hon. Friends today, we have only his best interests at heart. I am trying to save him from that turmoil and that caused by the Secretary of State.
"The Bill will maintain the universal postal service at its current levels...I have no intention of downgrading this service."-[ Official Report, 27 October 2010; Vol. 517, c. 360-361.]
That does not square with the Bill's contents, and the Secretary of State needs to come clean. If he has no intention of downgrading the service, why does he need a review within 18 months? In fact, the Bill is riddled
with review opportunities. There are three-in clauses 29, 33 and 42. It is obvious that the Secretary of State's actions in promoting the Bill do not live up to his words. Maybe, in line with other matters that he has promoted, he does not really support the Bill anyway.
We would argue that the modernisation programme under way in Royal Mail needs to be completed and bedded down before any review of the USO takes place. It is only a few months since Postcomm and Consumer Focus completed a review of customers' universal service needs, and it is against that backdrop that the Government are proposing the minimum service levels in the Bill. There is therefore no good reason to recommence the review process within 18 months of the Bill being passed.
We do not believe that such a review at this time would be in anyone's interests other than those of the provider, who may want to downgrade the service for a bigger shareholder return. More than anything, we want to protect the interests of the consumer. I believe that, in principle, the amendments have cross-party support. Whereas our appeals to the Minister and his colleagues in Committee fell on deaf ears, I am a little more hopeful today. Indeed, in accepting our amendments 23 and 24 today, the Minister would be committing himself to recognising the value of the current USO, while also alerting potential bidders of his clarity on the matter-after all, we are always told that that is what business wants these days. Our amendments will offer that.
It would be wrong for a business to purchase Royal Mail with the intention-or should we say the hope?-that a quick review by Ofcom and a stroke of the pen by the Secretary of State, or perhaps by some other Secretary of State, would lead to a better deal. Why do we have such fears? It is because we can see how committed the private sector is to the universal service obligation.
The Minister regaled the Committee on more than one occasion with his international understanding of postal services. I would therefore like to refer him to an article in Holland's De Telegraaf on 9 June last year, so that he can test his Dutch reading skills, as opposed to his usual double-Dutch Government jargon. In that article, Pieter Kunz-I do hope that I have pronounced that gentleman's name accurately-who is the managing director of TNT's European mail networks, said that his company planned to cut 11,000 employees from its Dutch mail operations and wanted to move to a three-day-a-week delivery service. Mr Kunz went on to say that collection and delivery services would be outsourced, and that TNT would become managers of mail. However, the worrying bit about how the private sector sees the USO in the round came when Mr Kunz stated that the universal service obligation was
"a kind of Jurassic Park and we should get rid of it".
Although Mr Kunz might think of the USO in such terms, my constituents and the businesses in my constituency see it as a valued, necessary and fundamental service. We want to prevent any such erosion wherever possible. I wish that we had an opportunity to guarantee the current service levels indefinitely, but I recognise that this is not the Government's will. However, we want the
minimum five-year period to be included in the Bill, I suppose for the very same reasons that Mr Kunz-and perhaps the Minister-do not.
Amendments 23 and 24 would allow the newly privatised Royal Mail to be secure in the current service delivery levels for the next five years without change. As the Bill stands, the first review could come along at any time and have far-reaching effects. I referred earlier to our time in Committee, where my hon. Friend the Member for Kingston upon Hull East (Karl Turner) said that a similar amendment was
"a reasoned amendment that turns on the issue of speed versus proper consideration." --[ Official Report, Postal Services Public Bill Committee, 7 December 2010; c. 592.]
He recognised that such a safeguard would prevent Royal Mail's new owner or owners from exerting any pressure on Ofcom to re-examine the minimum requirements straight after a sale, as a way of trying to secure bigger returns for shareholders. However, he and other members of the Committee recognised too-I hope that other Members will recognise this today as well-that such a safeguard would also prevent Ofcom from undertaking a hasty review before the full effects of privatisation and modernisation were understood and their impact on the service evaluated.
"must be protected and services must not diminish",
"Any change to the scope of the USO could have a negative impact on small businesses."
Indeed, FSB members have shown their further concern, in that 82% of small businesses want to keep the single UK-wide pricing structure. Then we have the National Federation of SubPostmasters, which has said that
"communities across the UK depend"-
"on the six-days-a-week collection and delivery at a uniform and affordable price".
"the Bill's requirement for Ofcom to review the minimum requirements for the USO within 18 months. We fear this may be seen as an opportunity to decrease the requirements of the USO."
Many Opposition Members get fed up with listening to the Government telling the country what they are doing to help small business, when there is precious little sign of such help in the real world. Here is an opportunity for the Government to do just that-help small business, support these amendments and support the Federation of Small Businesses.
The Minister's previous argument that clause 30 enshrines the minimum requirement and clause 33 enhances the safeguards against changes to those minimum requirements is, quite frankly and at best, smoke and mirrors. He said in Committee that under the European Communities Act 1972, the Government already have the power to change the minimum requirements of the universal service to the level required by the directive, which is five days a week, by way of negative resolution. Of
course, he is correct, but he went on to say that that was not acceptable. Quite frankly, the change he proposes in the Bill is little better.
We believe that our amendment 25 is just, as it prevents the Secretary of State from moving changes through this Bill as a result of Ofcom's reviews. It would empower the Secretary of State only to lay the report before Parliament, whereas amendment 26 would remove the need for any approval process as the power to amend section 30 through this Bill would be removed by amendment 25. This would, we calculate, lead to the need for new primary legislation, with all the necessary parliamentary scrutiny that accompanies it, before any Ofcom-proposed service reductions could be instigated.
The Minister will remember that I tried on numerous, if not dozens, of occasions in Committee to enhance parliamentary scrutiny of these proposals, but he chose to ignore my good and kind offers. He has another opportunity here tonight to add parliamentary scrutiny to the Bill and he should do so by accepting amendments 25 and 26.
Other hon. Members are waiting to speak on these and other amendments, so I would like to speak very briefly about amendment 29, particularly about what we call the final mile. We moved a similar amendment in Committee and we will support this amendment tonight.
The hon. Member for Angus (Mr Weir) has regaled us with the reasons behind new clause 4. I am glad that he has had that opportunity, which he did not have in Committee, as his was the only new clause that we were unable to discuss because we ran out of time on the final day. The proposal is of merit; it provides another opportunity to protect the universal service obligation. The hon. Gentleman put forward a strong argument. Anything that protects the USO can only be a positive proposition.
To conclude, amendments 23 and 24 would provide a five-year buffer before any Ofcom USO review, and amendments 25 and 26 would remove the Secretary of State's ability to alter the USO through the powers in this Bill. If the Minister believes the words of his Secretary of State that he has
"no intention of downgrading this service"-[ Official Report, 27 October 2010; Vol. 517, c. 360.],
he must accept these amendments. He will have an opportunity to vote for amendment 23, which we intend to press to a Division if he does not accept it. If he does not accept and support these amendments, he will be saying that one of two things will apply. Either the Minister does not believe the Secretary of State or the Secretary of State's words are an empty promise-which is it?
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. There are just a couple of minutes before I will invite the Minister to speak. I am sorry that there is not much time left for Katy Clark to speak, but I must bring the Minister in at 5.50 pm.
Katy Clark (North Ayrshire and Arran) (Lab): Thank you, Mr Deputy Speaker, for giving me the opportunity to speak to amendments 29 and 30. I fully appreciate the time constraints, given that the Minister must be brought into the debate.
The amendments are designed to look at the issues surrounding regulation, particularly at the legal requirements that oblige Royal Mail to process and deliver its competitors' mail. Many hon. Members will be fully aware of this problem as whenever they attend a postal delivery depot, postal workers will advise them forcefully about it. At the moment, the reality is that on average every letter that Royal Mail delivers for its competitors leads to a loss of 2.5p to Royal Mail. Amendment 29, which was tabled with the support of communication workers and which I would like to put to the vote if given the opportunity, is designed to address that issue.
Briefly, we have a fully liberalised market, but the way the current system operates goes way beyond that required by the European directive. It requires compulsory access to competitors to every point of the Royal Mail's network and it provides a guaranteed margin for them. Amendment 29 would ensure that the regulator no longer had the power to set that price. There would be a commercial negotiation, and the price established would mean that it was in Royal Mail's interest to deliver the correspondence.
At present, a competitor will collect letters from customers who make bulk postings. Those letters will be part-sorted, and branded with the competitor's stamp. The competitor will then drive the letters to a Royal Mail sorting office, where Royal Mail will sort them and deliver them at a loss.
I know that we have a problem with time, so I shall end my speech now. I ask the House to support the amendment, which seeks to ensure that Royal Mail is able to negotiate freely and deliver letters at a profit.
The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.
I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail's existing licence. That prevents Royal Mail from doing anything-such as transferring assets or paying out dividends-that
"creates any significant risk that the necessary resources will not be available"
If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman's speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal
Mail's current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention-although I had told him in Committee-that there are additional protections in company law relating to what the pensions regulator can do.
In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom's actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of
"the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas".
"persons living in rural...areas",
On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.
This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.
I was grateful to my hon. Friend the Member for Argyll and Bute (Mr Reid) for his welcome for most of the aspects of regulation in the Bill and for how we have sought to ensure that remote rural areas, particularly in Scotland, have the protections they need. However, I gently say to him that there is the requirement for letters to be delivered six days a week. If a parcel is ready to be delivered on a Saturday, Royal Mail will deliver it because a postman or postwoman would be going to that address anyway to deliver letters. I ask him to think about the practicalities of that. Where they are delivering in remote places to remote addresses, they deliver letters in vans. Where they are delivering in towns, increasingly in future, because of the roll-out of this programme, posties will use delivery trolleys. Those are being introduced as a deliberate reform in the way that letters and parcels are delivered. They are being brought in partly to ensure that posties can deliver parcels as well as letters. Given that there is already the minimum service requirement of six days a week for letters, I think my hon. Friend will be reassured on this point.
Amendment 14 to clause 32 is unworkable. It would add disproportionately to the burdens on the universal service provider and it would put at risk the health and safety of hard-working postmen and women. I am surprised the hon. Member for Angus wishes to do that. The exception in clause 32 has been in place for many years. It is in the European postal service directive. Removing it would put at risk the health and safety of Royal Mail men and women. I think he should think very seriously about that.
On amendments 23 to 26 to clause 33, the Bill is about protecting the universal service. Clause 30 enshrines the same minimum requirements in this Bill as are in the current legislation. The power in clause 33 to review the minimum requirements enhances the safeguards against changes to those minimum requirements. As the hon. Member for Ochil and South Perthshire (Gordon Banks) had to admit, at the moment-his Government failed to acknowledge this-there are powers for the Government in this regard. We could, by negative procedure, move the current minimum service requirements down to the level of those in the European postal service directive. I think that is unacceptable, however, which is why we have added extra safeguards to the Bill. They include the requirement that should Ofcom make a judgment that it is in the consumer's interests for there to be changes, and should the Secretary of State accept that, there would have to be votes in both Houses of Parliament. That is a very strong protection, and he ought to welcome it. Is he going to welcome it?
Gordon Banks: No, but what I am going to do is ask the Minister whether he agrees with the Secretary of State that he has no intention of reducing the level of service. If that is the case, the Minister should support our amendments, not talk about what he has put in the Bill.
The problem with the hon. Gentleman's amendments is that they are very confused. For example, in proposing a review after five years in respect of
Ofcom, rather than 18 months, he does not seem to understand how the universal service regulations work. We have the minimum service requirements in clause 30, but there is also clause 29, and the reason why there is an 18-month review is to allow the universal postal service order to be brought in so that the sorts of requirements and the level of universal service that exist at present can be introduced quickly. I would have thought that the hon. Gentleman would welcome that. The fact that he does not shows that, despite all our work together, he still does not understand the Bill.
Amendments 29 and 30 are very important, but I am not going to be able to give them the time that they deserve. I simply say to the hon. Member for North Ayrshire and Arran (Katy Clark) that if we were to accept them, they would remove important safeguards for competitors and consumers, and that would not be welcomed by people at large. It would undermine competition and the incentives for efficiency. Our Bill, unlike the one in 2009, seeks to change the regulatory system-
We have had an excellent debate on the Bill, not just today but throughout its passage through the House. Hon. Members have rightly spent a lot of time scrutinising the detail of our proposals, but I would ask all of them to stand back and remember what we are trying to achieve. We are trying to preserve two great British institutions-the Royal Mail and the Post Office. As we heard from Richard Hooper in his reports, both to the previous Government and to this one, unless we take urgent action, the future of the universal postal service is at severe risk.
Letter volumes are declining faster than anyone predicted-15% in the past five years alone-and some estimates suggest that they could decline by up to another 40% over the next five years. Is Royal Mail yet ready for this most challenging of business trends? Without the Bill, I believe not, for despite some progress on modernisation, Royal Mail has not adapted sufficiently to that market decline. Unless we take action, that will only worsen and Royal Mail's position will become even more precarious. Let all hon. Members be in no doubt: doing nothing is not an option.
The previous Government recognised that, for in many ways the Bill is similar to that which was put before the other place by the previous Government in 2009. The previous Business Secretary was aware of the need for urgency. He said:
"We cannot simply ignore these facts, or put our plans in a bottom drawer".-[ Official Report, House of Lords, 10 March 2009; Vol. 708, c. 1068.]
Unfortunately, the previous Government ended up ignoring the facts. As they oppose the Bill, I suggest that the Opposition ought to go back to that bottom drawer. If they look hard enough, they might find the bottle that they lost in 2009.
The present Government are aware of the urgency. That is why we have pressed ahead with the Bill so early in the Parliament. We will send to the other place a Bill that is significantly better than the previous Government's 2009 Bill. It is better for employees of Royal Mail, with employee shares to give them a genuine stake in the future of the business. It is better for the Post Office, setting it free and creating the possibility for a mutual ownership model in the future. Above all, it is better for the universal postal service and Royal Mail, as our Bill takes a more flexible approach to regulation and is much better structured to attract the private investment that this business desperately needs.
The House should have no doubt about the overriding aim of the Bill. It is to protect the universal postal service. I do not believe it is possible to protect that in the public sector any longer-at least, not without ever-increasing levels of taxpayer subsidy, which even Lord Mandelson, as he doled out largesse in the run-up to the last election, would have baulked at.
Royal Mail needs to modernise. Its business is changing with the impact of the digital world. I am sure that I was not alone among hon. Members in paying a Christmas visit to local delivery offices in my constituency. Not only was I impressed by the hard work of Royal Mail employees, dealing with some of the worst weather
conditions in living memory, but I was staggered by the huge increase in the volume and size of parcels. No one, none of the posties there, had seen anything like it.
In recent years, the volume of internet shopping has been increasing, especially items such as books and CDs, but now it seems that the British consumer's confidence in internet shopping has grown dramatically. That is good news for the longer-term future of Royal Mail. Although the increase in parcels will not offset the decline in letter mail, and the parcels sector is intensively competitive, there is a chance-an opportunity-for Royal Mail to grow.
The other dramatic impression that one has after visiting Royal Mail sorting and delivery offices and then visiting similar sites elsewhere-as I did in Berlin, visiting a Deutsche Post sorting office-is the lack of capital investment in Royal Mail so that it can make the best of this opportunity. Since Deutsche Post shares were first sold in 2000, it has invested the equivalent of £11.7 billion and about half of that investment has gone on modernising its parcels and express business because it knows that that is the future for its organisation.
We need to give Royal Mail that sort of freedom to invest in the delivery businesses of the future. We need to ensure that it can access capital, not just for its immediate modernisation plans, but well into the future. I do not believe that if it remains constrained by Treasury borrowing, it could ever access the right amount of cash, with the commercial speed needed.
As we privatise, we are ensuring that the employees get a good deal. Our pension plans and our employee share plans must represent the best deal on offer to any large group of employees in the UK today. I am immensely proud that Liberal Democrats in government with our coalition partners are delivering the deal on pensions that Labour failed to deliver, and I am immensely proud of the strongest legislative commitment to employee shares in any major privatisation.
Given the time, I want to say something about post offices, but before doing so I shall comment on stamp design. The amendments passed by the House will ensure that Her Majesty's head will appear on stamps in the future.
Mr Davey: Let me anticipate the hon. Gentleman, because the concerns that the nationalist parties expressed in their amendments are unfounded. The Bill will ensure that nationalist emblems can be placed, and be required to be placed, on stamps in future. I hope that he is reassured by that.
Some people have concerns about the wording of our amendments, which ensure that Her Majesty's head will be on our stamps in future. I can assure hon. Members
that, under section 10 of the Interpretation Act 1978, "Her Majesty" can be taken as
"a reference to the Sovereign reigning at the time of the passing of the Act"
May I turn to the Post Office? There has rightly been a lot of debate about the impact of the Government's proposals on the network of post offices. First, I want to be absolutely clear that we are talking about a sale of shares in Royal Mail, not in the Post Office. They are both cornerstones of British life, but they are different businesses facing different problems, and that is why separation has been so widely supported by the experts. Of course, their futures are closely linked, and we expect that they will always have a strong commercial relationship, but securing the future of Royal Mail will of course help to secure the future of the Post Office as the natural outlet for purchasing Royal Mail services.
I shall say again something that I have said many times before. There will be no programme of post office closures under this Government. I have been very clear on that, as has my right hon. Friend the Business Secretary. That is why we have pledged £1.34 billion of funding to support the post office network, funding that will ensure the continuation of at least 11,500 post office branches throughout the United Kingdom.
Ian Murray: The debate about new clause 2 was certainly robust. Can the Minister give the House a cast-iron guarantee that, as a result of the decisions he is just about to take, no post offices will close?
Mr Davey: If the hon. Gentleman had been present for our debates in Committee, he would have found that his Opposition colleagues understand that it is impossible for any Minister in this or previous Governments to say that no individual post office will ever close. Why? Because in large part they are private businesses, and individuals can retire, decide to close their business or, of course, die. So, it is impossible to give him that reassurance. The reassurance I can give him, which his colleagues could not during the previous Parliament, is that no programme of closures will be driven by this Government. That is why we have secured the money, and the deal-the contract signed by the Government with Post Office Ltd-ensures that there will be a network of at least 11,500 post office branches throughout the United Kingdom.
When the Opposition scaremonger on that issue, we simply need to remind ourselves of their record on post offices. When urgency was needed to invest in Royal Mail, the only urgency the previous Government demonstrated was an urgency to close post offices. The numbers do not lie. The number of days the previous Government were in office: 4,753. The number of post offices closed in their two major closure programmes: 4,854. That is a strike rate worthy of an English batsman, not of a Government seeking to protect communities, small businesses and the most vulnerable throughout our country, yet we have had no apology for that appalling record.
Through this Bill, the Post Office also has the opportunity to move to a mutual ownership model, which would give employees, sub-postmasters and communities a
real stake in their post office network. With our work to pilot more and more new Government services, both national and local, through the post office network, such new ideas will give local post offices a fighting chance.
Let me end by returning to the universal postal service. I reiterate that this Government are fully committed to that service: six-days-a-week collection and delivery to the UK's 28 million addresses at uniform and affordable prices. This Bill gives Ofcom an overriding duty to secure the provision of the universal service, and the tools that it will need to do so. It gives greater safeguards to the minimum service levels for the universal service, with parliamentary protections, and it creates a new regulatory regime that can bring rapid deregulation for the universal service provider where there is effective competition in the market. Ofcom has a statutory duty to deregulate where it can, and we are giving Ofcom the tools to do so for the postal sector.
I would like to thank all those who have been engaged in the Bill's passage through the House, particularly Bill Committee members for their work over the past couple of months. We have certainly had some lively discussions. I would also like to thank the hon. Members for Llanelli (Nia Griffith), for Ochil and South Perthshire (Gordon Banks) and for Angus (Mr Weir). Although we may not have always agreed, I am grateful to all of them for the detailed scrutiny that they have given the Bill.
The coalition Government have not shied away from grappling with this issue, which has defeated two one-party Governments. This shows the Government at their strongest and most radical. This Government are taking decisive action to tackle the problems that the previous Government ducked. I commend the Bill to the House.
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