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Academic and Academic-Related Staff Pay and Conditions Bill [H.L.]

Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

The Post Office

3.34 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, with the leave of the House, I shall now repeat a Statement on the Post Office which has been made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

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    "The White Paper therefore proposes a reduction in the monopoly from the present £1 to 50p or 150 grammes with effect from 1st April 2000. A new independent postal services regulator will promote consumer interests, regulate prices and ensure that the Post Office provides a high level of service to all households and businesses. And consumers' views will be championed by a greatly strengthened Post Office Users National Council which will have the power to refer poor performance by the Post Office to the Regulator and will be able to recommend the levels of fine to be imposed for bad service.

    "The Post Office Counters network, which plays such a valuable role in local communities, particularly for the less mobile, will be strengthened by our decision to put the Horizon project back on track. We shall equip all 19,000 post offices with a modern, on-line computer system.

    "It will enable the Post Office to modernise and improve the service it gives to existing clients and customers, and to win the new business on which the future success of the Post Office network will depend.

    "For the first time the Government will lay down minimum criteria in order to ensure that everyone in the UK has reasonable access to post office counter services particularly in rural parts of the country and areas of social deprivation. The new regulator and the users' council will monitor the network against these criteria.

    "We have agreed arrangements with the Post Office for maintaining a network of Crown offices which will handle at least 15 per cent of the total counters' business. Where appropriate, new Crown offices may be opened.

    "The Government will set out clear objectives for the Post Office, but they will not be involved in day-to-day business operations. The Post Office board will be responsible for running the Post Office, based on a rolling, five-year strategic plan, agreed with the Government.

    "Clear duties, real powers and the necessary resources to promote the consumers' interests will be given to the independent regulator and the users' council. Annual reports will be published by the Government, by the Post Office, by the regulator and by the users' council on their roles and their performance during the year.

    "We will implement as much of this package as possible through administrative action and secondary legislation. However, primary legislation will be needed as soon as parliamentary time permits to complete the full package of reforms.

    "Primary legislation will be necessary to transform the Post Office into a public limited company which will both underline the new commercial freedoms and help to establish clearly the separate functions of ownership and management by subjecting the Post Office to the full range of company law. In particular, the directors will owe their duty to the company--not directly to the Government.

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    "There have been suggestions from some quarters that this is part of a plan to privatise the Post Office by stealth. There are no such plans. As we said in our manifesto, we intend to provide commercial freedom while retaining the Post Office in public ownership. I can therefore inform the House that the Act of Parliament to create the Post Office as a plc will make it clear that we would not seek to dispose of Post Office shares without further primary legislation.

    "Of course, we cannot ignore the possibility that the Post Office might wish to enter into a joint venture or strategic alliance with another company and might wish to cement this with a limited sale or exchange of equity. In such cases it would not always be sensible or practicable to seek parliamentary approval through a separate Act of Parliament. However I can assure the House that any such proposal would be debated and voted on in both Houses.

    "To ensure that the Post Office can compete in the fast moving domestic and international postal market, we will give the Post Office the greater commercial freedom it has long desired. This will help the Post Office to be more competitive and more responsive to market developments and evolving customer demands.

    "The Government's financial demands on the Post Office will be reduced to match commercial dividend rates. From April next year, it will be cut to 40 per cent of post-tax profits--more than half the rate at which profits have been removed from the business in recent years. This will be worth an estimated £150 million a year going directly to the Post Office.

    "We will also allow the Post Office to borrow at commercial rates for growth investments up to £75 million a year without approval from the Government. This will give the Post Office greater freedom to enter into acquisitions, joint ventures, alliances and partnerships.

    "But the Government recognise that the Post Office has been starved of resources as a result of the approach of the previous government. The Post Office cannot wait until April next year for the additional resources necessary to ensure that it can compete in the modern postal market. We therefore intend to take action immediately.

    "I am pleased to inform the House that in this financial year we shall reduce the Government's financial demand on the Post Office to 50 per cent of post-tax profits and will allow borrowing of up to £75 million. This will provide an immediate cash boost to the Post Office of £175 million.

    "Taken together, our proposals for greater commercial freedom will bring over £600 million into the Post Office over the next three years.

    "I am confident that this White Paper maps out a future for the Post Office that will allow it to compete and win. We have a clear vision of a British Post Office which is world class and which aims to be among the most successful in the world.

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    "This White Paper gives the Post Office management the commercial framework they need to turn this vision into reality. It is now up to them, working in partnership with the workforce, to respond to the exciting challenges ahead.

    "This White Paper will put right the neglect of the past and deliver a Post Office which is fit for the 21st century. I commend it to the House."

My Lords, that concludes the Statement.

3.45 p.m.

Baroness Buscombe: My Lords, I thank the Minister for repeating the Statement regarding the long-awaited White Paper on the future of the Post Office. While we welcome the Government's support for improved services, for greater competition, for more postal services and more flexibility for the delivery of those services, we are disappointed that the Government have effectively backtracked from the proposals clearly set forth in a Statement made by Peter Mandelson in another place in December last year.

The reason for the backtrack is, in our view, quite clear. It is because of the continuing, awkward power struggle between New Labour and the trade unions, with the inevitable result of a halfway house--an unsatisfactory and, we now hear, for many who work in the Post Office, an alarming and disturbing compromise. This is not full liberalisation of the Post Office, although I predict that it is an important first step to privatisation--a mere temporary measure.

The Secretary of State seems almost offended in his Statement that this is a route to wholesale privatisation by stealth. However, he cannot be surprised when, in his Statement in another place in December last year, Peter Mandelson stated:


    "I should make it clear that we certainly do not rule out the possibility of introducing private shareholding into the Post Office--for example, through the sale of a minority stake in it--at a later stage".--[Official Report, Commons, 7/12/98; col. 21.] Further in the Statement he said:


    "[But] at present wholesale privatisation-- favoured by the Conservative Opposition--


    "would not be a realistic option". But the White Paper goes far beyond measures proposed by the previous government which looked to freeing up the Royal Mail alone--a measure which was strongly resisted by this Government when in opposition. Now they are in government, I suggest that we shall privatise every part of the Post Office.

I wish to place particular emphasis on the future for post offices in rural areas. We are especially concerned following the Secretary of State's clear statement in another place earlier today in response to a question in relation to the Post Office network that,


    "I cannot guarantee that every network facility that exists today will remain for the future".

In that regard I am concerned with the minimum criteria which the White Paper mentions wherein the Government will seek to develop criteria for the Post Office network to ensure that the network is reasonably accessible to all.

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We welcome the Government's intention to equip post offices with the latest technology, providing access for everyone to an increasing range of services. But we are concerned about the true meaning of "reasonably accessible." We hope that access will not be dependent on the recipient also being equipped with the latest technology, for example e-mail, as opposed to a Post Office counter within a reasonable distance of one's home.

While we greatly appreciate and welcome the strengthened Post Office Users National Council, we have other concerns with regard to the ability of the council to respond to individuals and their wish and will to have redress against poor performance by the Post Office.

This Statement raises many questions for the future of the Post Office. I put the following questions to the Minister. How does the noble Lord expect the Post Office to compete effectively in world markets without the full commercial freedom that the privatised Dutch and German post offices enjoy? To what borrowing restrictions will the Post Office be subject? Will taxpayers' money be at risk? Further, what guarantees can the Minister give that rural post offices will not close? Does he agree with the fears of the National Federation of Sub-Postmasters that one-third of post offices are under threat as a result of the Government's abandonment of the benefit payment project?

3.50 p.m.

Lord Razzall: My Lords, I echo the words of the noble Baroness on the Conservative Front Bench in welcoming this extremely significant Statement on the future of the Post Office. The noble Baroness was quite right to focus on two main issues that emerge from the Statement. The first is the absolute determination of everybody on this side of the House to ensure that the key paragraphs on page 3 of the Statement, relating to reasonable access to post office counter services in rural parts of the country and to areas of social deprivation, are carefully monitored. We must ensure that the programme of post office closures, which was started and accelerated to a great extent by the previous government, does not continue under this Government. I am sure that everyone in the House would like an assurance from the Minister that the deterioration in rural services and areas of social deprivation will not be allowed to continue.

The second critical issue on which the noble Baroness touched was privatisation. For those who have studied this matter, clearly there has been a big row. That is not surprising given that the proposed public limited company structure is different from that which we all thought would be adopted for the Post Office. It would be helpful if the Minister could confirm that there is no intention to privatise the Post Office. A clear statement to that effect would go a long way towards diminishing people's fears. In the Statement one sees the phrase "there are no such plans". I suspect that when British Telecom became a plc, as it did before privatisation, the government could legitimately have said that they had

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no such plans to privatise it. We do not want to know whether there are any plans but we do want an undertaking that that will not happen.

To transfer the whole of the assets of the Post Office--its property, undertaking and employees--will be a massive legal and financial task. First, does the Minister, via his officials, have any idea of the professional costs, which will be borne ultimately by the new plc, involved in performing that transfer? Secondly, has the noble Lord any comment to make on the potential criticism following the Statement in December that, while the Post Office would be given commercial freedom, it would be subject to public sector control with regard to salaries and pay? Concern was expressed in a number of quarters that if the Post Office wanted to compete on an international basis, but was subject to public sector principles related to pay and salaries structures, the freedom of its board to manage it in the way it thought fit would be impeded.

Thirdly, is it correct that, following the creation of Post Office plc, the company will be subject to all the transparency to which any other UK listed company is subject, in particular the disclosure of prices paid for significant acquisitions which currently are not disclosed? Finally, does the Minister accept that the borrowing limit of £75 million which has been lifted is a relatively small amount of money to free from public sector controls? Does it not need to be kept under review? It may well be that that limit needs to be significantly higher.

3.57 p.m.

Lord Sainsbury of Turville: My Lords, the Opposition must decide whether they are accusing the Government of back-tracking or wholesale privatisation. They cannot have it both ways. I humbly suggest that the reason for this confusion is the same as that which has dogged the Conservative Party for the past 18 years, with the result that it is paralysed in dealing with this issue. Quite simply, this is exactly in line with what Peter Mandelson said in introducing this matter in December. We have created a company that will have commercial freedom. To do that we have adopted the structure of a plc, which we believe to be the best form, but the body will remain in public ownership. We do not rule out the introduction of private equity at some time in the future, but we have no plans to do so. That was exactly what we said on the previous occasion.

As to rural sub-post offices, for the first time clear criteria are being laid down for access to the network. We cannot say that no rural sub-post office will ever close. The fact is that they are private commercial businesses and we cannot guarantee that they will remain open. For the first time we are laying down clear criteria for accessibility which we believe should give people confidence that we take this matter very seriously. The regulator will also have a role in monitoring the network and seeing that those criteria are applied.

The noble Lord, Lord Razzall, asked about the cost of the task of turning the Post Office into a plc. I cannot give any figures, but I do not believe that the cost will

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be huge because the basic structure already exists. What will be changed are the financial structures and those related to governance. The assets are already allocated to that body, and we do not believe that that will be a hugely complicated task.

I was asked about the freedom of the new body in terms of salaries and pay policy. We have said that this must be taken into account in public sector policy and have resonance with it. At the same time, we will probably introduce new parameters so that there is greater flexibility. Therefore, salaries and pay will not be controlled in exactly the same way as in the public sector. We believe that that will give the Post Office all the flexibility that it needs to pay the necessary salaries and wages to motivate staff and acquire the people they need to carry out its new tasks. The new body will have the transparency of a plc, and that is the reason for using that structure. That is a standard, agreed format which will be clear not only to the workers in the organisation and everyone in this country but elsewhere. Everyone will know the basis of the organisation with which they are dealing.

As far as concerns borrowing, the new body will be able to borrow £75 million each year. If any project is over £75 million, the body will have to obtain government permission for it, but we have made it very clear that we shall look at major projects that are in the strategic plan and that if they meet the criteria that we have set out, in terms of robustness, no undue risk and being commercially sensible, we shall allow them to go ahead. This gives the Post Office the freedom it requires.

4 p.m.

Lord Molyneaux of Killead: My Lords, the Statement seems strangely familiar to those of us who went through this debate about a decade ago, and for that reason one must support the whole project.

Can the Minister clarify one point? He referred to the office of regulator, apparently in singular form. In the office of the regulator will there be subordinates with special knowledge of the four areas of the United Kingdom?

Finally, if a post office, great or small, is listed for closure, at what level will the consultations take place?


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