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Baroness Sharples: My Lords, how much has the New Deal cost over the past two years?

Baroness Blackstone: My Lords, the average cost of a New Deal place is £2,000. The average cost of a young person getting a job through the New Deal is £4,000.

Baroness Sharp of Guildford: My Lords, is the Minister aware that the New Deal has been least successful in some of the inner London boroughs in bringing young people back into stable employment? Has she any explanation for that?

Baroness Blackstone: My Lords, I do not quite know what the answer is, or why youth unemployment in London has proved to be more intractable than in some other parts of the country. Youth unemployment is particularly high in London, as is unemployment generally. It is sometimes thought that unemployment is especially high in the north-east, for example, but London is one of the blackspot areas. The situation is being evaluated and examined. I shall be happy to write to the noble Baroness if we have any further information about the specific case of London and why the problem is greater there.

Combined Universities in Cornwall

3.1 p.m.

Lord Alexander of Weedon asked Her Majesty's Government:

The noble Lord said: My Lords, I beg to answer the Question--ask the Question--standing in my name on the Order Paper.

Baroness Blackstone: My Lords, the noble Lord might have an answer to the Question too!

We welcome the collaborative approach taken by higher and further education institutions within the Combined Universities in Cornwall initiative. I understand that the CUC partners are in consultation with the Higher Education Funding Council for England in developing their plans for a higher education hub in Falmouth or outside Falmouth linked to developments in further education colleges. Match funding from all potential

2 May 2000 : Column 929

sources, including the private sector, can only be properly addressed when there are fully developed project proposals.

Lord Alexander of Weedon: My Lords, I thank the noble Baroness for most of that Answer. My interest is as Chancellor of Exeter University--of which the admirable Camborne School of Mines is a part--and which, together with Plymouth University and the Falmouth College of Art, is a leading partner in the project. Do the Government accept that the combined universities are a core project for Objective 1 funding for Cornwall--a county which has no university--in order to "dynamise" education as a catalyst for business? In view of the last part of the Minister's Answer, do the Government recognise that a proportion of the Objective 1 funding needs to be allocated in each year of the planning period, and that it is therefore crucial that a decision by the Government on match funding is taken early, preferably in the comprehensive spending review this July?

Baroness Blackstone: My Lords, I accept that Objective 1 funding for Cornwall can, and should, be used for a project of this kind. There are rules and regulations regarding the application of Objective 1 funding and some aspects of the overall proposals made by the CUC may not be eligible for Objective 1 funding; but from a general point of view, there is no reason why it should not be used, and indeed the Government welcome its use.

On the noble Lord's point about funding from elsewhere, funds may be raised from a whole range of different sources: from the private sector and from local organisations of one kind or another, as well as possibly from government. It is difficult for the Government to make any commitments until there is a carefully worked out proposal as to exactly what the capital funding in particular will amount to.

Baroness Wilcox: My Lords, does the Minister agree that many major companies seeking to invest in the UK require a location close to an established higher education centre, in order to have access to well qualified staff and an appropriate range of people, before they will even invest? I admit to an interest as a governor of Plymouth University and as one who is hopeful about the project going forward. One difficulty already established is that, as a very poor county, Cornwall has been accorded Objective 1 status because it cannot raise funding locally. Will the Minister therefore think specially of Cornwall in this case? The county will find it very difficult to raise any private investment funding, given that it does not already have an educational establishment.

Baroness Blackstone: My Lords, I entirely accept that universities can have an important role in helping to provide highly skilled graduate employees for an area where the private sector may wish to invest. However, many young people go to university in an area where they have no intention of remaining.

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We cannot assume that all graduates from a university in any part of the country will remain there. At the same time, the Government are grateful to the University of Plymouth, Falmouth College of Art and the University of Exeter for the work that they are doing. I think that funding must be a matter for those institutions, for local interests and for the private sector, as well as for the Government. It would not be right for me to make a commitment that Cornwall should receive more favourable treatment than some other parts of the country which also do not have a local university.

Lord Roberts of Conwy: My Lords, why are the Government so reluctant to commit themselves to match funding for Objective 1 areas when they are ready to commit themselves to increased spending in the future for departmental areas such as health and education? Surely Objective 1 status and the money that flows from it are of value to those areas.

Baroness Blackstone: My Lords, the Government do not in any way deny the value of Objective One funding for the areas that are eligible for it. However, they also believe it right that the areas concerned should attempt to raise match funding from a variety of different sources rather than automatically assuming that the money should come from the taxpayer via central government.

Baroness Nicholson of Winterbourne: My Lords, I congratulate the Minister on her work in regard to Objective 1 funding and the joint university project in Cornwall. She is, of course, aware that the Open University is another growth area of which the United Kingdom has great reason to be proud. Will she support the Open University's push to assist the enlargement countries of the European Union by bringing the very real benefits of the Open University to extremely poor countries such as Romania?

Baroness Blackstone: My Lords, I have long been an admirer of the work that is done by the Open University, not just in the UK but overseas. The OU has an international reputation, and it is extending its overseas work. If it can operate in countries such as Romania, where there is a desperate need for higher-quality higher education, that is all to the good, not just of the UK but of Romania.

Business

3.7 p.m.

Lord Carter: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord Bach will, with the leave of the House, repeat a Statement that is to be made in another place on the demonstrations in central London.

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European Union Committee

The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Lord Grenfell be appointed a member of the Select Committee.--(The Chairman of Committees.)

On Question, Motion agreed to.

Postal Services Bill

3.9 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I beg to move that this Bill be now read a second time. This Bill is a key element in the Government's programme for the modernisation and reform of public services. The Postal Services Bill will ensure that the country has both a Post Office and postal services fit for the nation's needs in the 21st century. The Bill will establish a modern Post Office that is able to develop its business and grow as a significant global player so that it can meet the enormous challenges and take advantage of the opportunities which now arise in the rapidly changing national and international markets. It will provide a firm basis for greater competition in the postal services market and a better deal for all consumers. All this will ensure that we have a strong Post Office that is better able to serve each of its customers in all parts of the country.

The Post Office has for too long been denied the opportunity to develop and modernise itself. The plans of the previous administration to modernise the Post Office and postal services came to naught. All that the previous Conservative government did was to extract greater sums from the Post Office to support the debts that they had incurred. The Post Office was denied the opportunity to invest and grow, in marked contrast to the way in which the Dutch Post Office has been given the opportunity to buy one of the world's leading carriers, TNT, and the German Post Office has been allowed to acquire the shares of several important businesses, notably 25 per cent of one of the other major carriers, DHL.

The Government are determined that the Post Office should have the opportunity to compete with the leading players in the market so that this country can benefit from having one of the leading postal operators in the world. This is vital not just for the Post Office in its own right but for the country as a whole because of the way in which so much of our business and social life is highly dependent on efficient postal services. This Bill will enable us to complete the package of reforms which I outlined to the House in December 1998 and described in greater detail with the publication of the White Paper Post Office Reform in July of last year. We have already taken steps to allow the Post Office to invest more, having reduced the "dividend" that the Government effectively take out of the organisation to 40 per cent of post-tax profits from

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the 75 to 90 per cent taken by the previous government. In addition, we have allowed the Post Office to borrow up to £75 million without specific permission from the Government with further sums to be approved on a case-by-case basis.

We have already seen the benefits of these changes in the acquisitions made by the Post Office since the end of 1998. It has acquired 100 per cent stakes in German, Austrian, Irish and Dutch parcel companies and the US company Citipost. This will help the Post Office to grow its business by entering new markets. The Bill will give the Post Office greater commercial freedom without removing it from public ownership. We have seen this model adopted successfully elsewhere. Sweden and Denmark have shown that it is possible to give post offices commercial freedom, while keeping them in the public sector. At the same time, the new independent regulator will increase competition and guarantee a universal service.

The Bill before your Lordships has four main objectives. It will put consumers first by establishing a new independent regulator and a new consumer council, both with strong powers to protect and promote the interests of the users of postal services. The Bill will also further consumer interests by placing duties on the regulator, first, to ensure the provision of the universal postal service and, secondly, otherwise to promote the interests of the consumer wherever practicable through greater competition. This can be achieved by reductions in the scope of the licensed area or by the granting of licences to compete within the licensed area. The Bill will give the Post Office scope to modernise and run a fully commercial business in the 21st century. We shall achieve this by converting it from a statutory public corporation to a public limited company with ownership remaining with the Crown. A plc is a well understood commercial structure which is more appropriate to a forward looking business; and it will also complement the greater financial flexibility that we shall give the Post Office. Lastly, the Bill will reinforce the Government's commitment to a modern counters' network, with powers to ensure reasonable access to Post Office counter services.

Part I of the Bill creates a new independent regulator, the postal services commission. This part also creates a new consumer council, to which I shall refer later. It will be the duty of the commission, as detailed in Clause 3, to ensure the provision of a universal postal service at a uniform tariff, as set out in Clause 4, and to look after the interests of consumers. It will do this wherever possible by promoting effective competition. The commission will be responsible for a new licensing regime for postal services within the reserved area. The arrangements are detailed in Part II of the Bill. Through this licensing regime the commission will regulate prices, enforce high quality standards and improve choice through greater licensed competition.

It is anticipated that the first licence will be granted to the Post Office company, but others will be able to apply for licences to carry out services within the reserved area, as described in Part II of the Bill, in what is at the moment effectively a monopoly area for the

2 May 2000 : Column 933

Post Office. In addition to being able to promote regulated competition, the commission will be able to propose reductions in the scope of the reserved market area. Such changes will be subject to approval by a resolution of both Houses. By introducing competition in this way, we shall stimulate greater innovation, lower prices and promote better services for customers.

In passing, perhaps I should say that in all the changes that we make we shall endeavour to ensure that the Post Office meets the needs of all its customers. Much of its business will come from large-volume users, and the organisation needs to be free to provide services which are commercially attractive to them. But the needs of individuals must also be fully provided for, and under the provisions of Clause 5 in performing its duties the new regulator will be required to have regard to the interests of those who live in rural areas, the disabled or chronically sick, pensioners and those on low incomes. In addition, under Clause 43 we shall issue social and environmental guidance of which the regulator will be required to take account. That will help to ensure that the benefits of a modern post office are available to all users throughout the UK.

In Clause 41 the Bill also gives the Secretary of State power to direct the commission to impose a licence condition which requires the licensee to provide free postal services for blind and partially-sighted people. This will ensure the continuation of existing non-statutory practice by the Post Office to convey certain items free of charge for blind and partially-sighted people, known as "articles for the blind".

Where competition does not provide effective protection of consumer interests the Bill will give the regulator new duties and powers to promote consumer interests, regulate prices and ensure a high level of service to all users. Part I of the Bill thus imposes a duty on the new regulator to ensure the delivery of the universal service at a uniform tariff. The postage will be the same regardless of the distance of delivery within the UK. Whether one is talking of the Isle of Dogs, the Isle of Wight or the Isle of Skye, the cost will be the same and will be guaranteed in law. Through a licence condition the Post Office will be required to provide the universal service which will include daily delivery to all addresses at an affordable, uniform tariff.

The commission will have responsibility for setting quality standards and regulating prices. To police these the commission will also be given powers of investigation and enforcement, including the power to impose monetary penalties for breach of licence conditions. Licensees will be required to achieve quality of service standards or risk being fined by the regulator.

Part III of the Bill provides further protection for consumers through the replacement of the Post Office Users' National Council with the new consumer council for postal services. This will be given the same powers as the new consumer council that is being established in the energy market, including wider access to relevant information from the Post Office to

2 May 2000 : Column 934

enable it to do its job effectively. For the first time there will be a single national body for postal users. Within that national framework the Bill also requires the consumer council to set up separate committees for Wales, Scotland and Northern Ireland and allows for regional committees to be set up in England. These measures give consumers the powerful watchdog that they have lacked for so many years.

Part IV of the Bill will provide a modern framework to enable the Post Office to deliver a world-class service and compete with overseas competitors. The time has come to give the Post Office more freedom and enable it to meet the challenges and opportunities of the changing market, increasing competition, technological change and substitution and changing customer needs.

Britain's Post Office has great achievements to its credit and it is one of the country's most recognised and valued brands. But to build on these achievements in the future the Post Office will need to meet four major challenges. It will need to respond to the growth of e-mail and other forms of electronic communication as an attractive alternative to the traditional letter. It will need to meet the challenges of the liberalisation of postal markets in Europe and elsewhere. It will need to meet the growing competition for the business customers who provide the most profitable parts of the Post Office's business and who will increasingly look to service providers to offer them a full range of express, parcels and logistic services as well as the traditional delivery of letters. And it will need to adapt to the emergence of new business opportunities as e-commerce expands.

All postal administrations face these challenges and each of them faces the need to become more commercial, to improve its productivity and working practices, to establish new alliances or joint ventures, to make strategic acquisitions to link up with other logistics and express carriers and to offer a wider range of services. Throughout Europe change is now taking place and the pace is likely to accelerate rapidly in the next few years.

Already the Post Office faces competition in the UK from overseas postal administrations and delivery companies, some of whom are ahead of the game. This Bill will provide the freedom to enable the Post Office to develop to its full potential while maintaining it within the public sector and delivering our promises about share disposals.

The provisions of Part IV of the Bill reinforce our manifesto commitment to give commercial freedom to the Post Office within the public sector. They will convert the Post Office into a public limited company, able to be more responsive to market developments and customer demands.

The plc model is widely understood and clearly sets out the duty of directors to the company; it helps establish the clear separation of the functions of ownership and management; and also enables Government to receive a proper dividend rather than the Post Office having to build up cash deposits on its balance sheet. The new Post Office company will be

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governed by normal company law, making much clearer the responsibilities of Government, as owner, and the Post Office Board, as managers of the business. Any special arrangements that the Government may need to make to protect the public investment in the Post Office company will be entirely transparent.

The Bill delivers, through Clauses 65 and 66, our promise that there would be no general sale of Post Office shares without primary legislation. Disposals may be made only in the limited circumstance where the Post Office company enters a joint venture or other working arrangement, and the disposal is part of that deal. Such a disposal must be in the commercial interests of the Post Office company.

The commercial future of the Post Office depends on its being able to compete effectively with other global players. The Post Office must be equipped, therefore, to develop its business, and this may well involve forging alliances and commercial partnerships with those having complementary skills and franchises. We need to ensure that the Post Office has the freedom and commercial flexibility to do this. But under Clause 67 any share sale or swap, to cement a commercial alliance between the Post Office company and a partner, requires approval from both Houses of Parliament. Similar restrictions apply to the disposal of shares by the Government or the Post Office company in any subsidiary company engaged in providing the universal postal service.These provisions underline the transformation of the Post Office into a more commercial, though publicly owned, organisation. They will enable the Post Office to realise its ambition to become one of the top global distribution companies.

The new framework for the Post Office will put it in a position to develop all aspects of its business, including the counters' network. We fully recognise that the network of post offices has never been static, and over the past 20 years it has slowly reduced in size as people's lifestyles and buying habits have changed. But the network of post office counters is a cherished and socially valuable national asset, performing a vital role in local communities especially in rural and deprived urban areas. We are therefore making some specific provisions in the Bill to help ensure the maintenance of the network, and the continuation of the important community and social role played by post offices.

In the first place, the social and environmental guidance that the Government will issue to the regulator, in accordance with Clause 43, provides the vehicle for ensuring reasonable access to postal services. The regulator and consumer council will closely monitor the network against this guidance and advise the Government on the accessibility of public post offices. The regulator will be required to take account of the social and environmental guidance when carrying out its duties, in particular its duty to monitor and advise on the number, location and accessibility of public post offices.

2 May 2000 : Column 936

The Government are helping the Post Office develop the counters' network. We are investing nearly half a billion pounds towards equipping all post offices--over 18,000 of them--with a modern on-line computer system, called Horizon, to enable them to provide a wider and better range of services. This will enable the Post Office to extend substantially its arrangements with banks and building societies which should greatly extend the banking facilities available to bank customers generally, especially in rural and some urban areas from which the banks have withdrawn. The Horizon platform should also enable the Post Office to improve the service it gives to existing customers and open up exciting opportunities for attracting new business.

This new on-line system will enable post offices to attract new business and improve their commercial viability. The Post Office is an under-utilised resource. Its services need to be enhanced and more widely advertised.

Already the Post Office is changing. The provision of 3,000 new cash machines at post offices up and down the country is indicative of the new opportunities the business is exploiting. In addition, a bureau de change service is available at all post offices throughout the country. Over 4,000 post offices have National Lottery on-line terminals, including 1,500 in rural areas. The number of post offices providing vehicle licences has doubled in the past 20 years. And mobile phone pre-payment cards are available from nearly 5,000 post offices--rising soon to over 6,500.

We are also taking a radical look at the viability of the post office network so that it can face the future and no longer have an unhealthy over-reliance on Benefits Agency work. That is why the Prime Minister, last October, asked the Cabinet Office to carry out a special study of the network, reporting directly to him. But in case this is not sufficient, the Government have, as a safeguard, made provision, in Clause 102, for financial assistance if this should prove necessary at some point in the future. It is an enabling provision, which is not intended to presuppose that financial assistance will be needed. But it would have been irresponsible of us not to make provision in this Bill for the possibility of some sort of Government intervention at some time during the lifetime of this legislation.

The Bill modernises much of the existing body of law relating to the Post Office--and in Parts V, V1 and V11 we are updating many of the provisions of the 1953, 1969 and 1981 Acts which will still be needed in future.

This is a comprehensive piece of legislation which is designed to enable the Post Office to move boldly into the 21st century in such a way that it can win new business, expand into new markets and create jobs and wealth in Britain while maintaining high standards of service and protecting disadvantaged groups and communities.

The Bill provides for strong consumer protection, wherever possible through competition, and ensures that the benefits of a competitive, modern postal

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service are available to all. The Bill provides for a Post Office with a modern, commercial structure without removing it from public ownership. It provides the commercial freedom, backed up with greater financial freedom, which will enable the Post Office to become a major global player, while ensuring that we retain the important social obligations that make the Post Office such an important part of the social fabric of our country. I commend the Bill to the House.

Moved, That the Bill be now read a second time.--(Lord Sainsbury of Turville.)

3.30 p.m.

Baroness Miller of Hendon: My Lords, I thank the Minister for the careful way in which he explained the Bill, even though at the beginning he was somewhat selective in glossing over the opinion of his party when it was in opposition. However, that is politics and therefore I shall excuse him!

At the headquarters of the postal workers' union, there is on display a silver salver presented by me on the occasion of the delivery of the 5 millionth package on behalf of my former United Kingdom mail order business. When I decided to move my posting department from Lewes in Sussex to Newport, the district postmaster came to see my co-director to ask what he had done wrong--absolutely nothing, as it happened.

In Newport, those working for the Post Office helped me with the design of my factory to ensure that its vans could drive right inside the building. They did their sorting inside the building and many a time when a van was full they drove off with an extra sack or two on the lap of the driver's mate. I tell your Lordships that to show that I appreciate at least as well as anyone in the Chamber both the value of an efficient Post Office which puts service to its customers high on its list of priorities and also the hard work of the postal workers.

We give the Bill a cautious welcome. The reform of the Post Office, giving it commercial freedom to compete in the marketplace, is an objective which we fully share, especially the continuing commitment to the universal delivery. Indeed, we wanted to bring in suitable legislation as long ago as 1994, but we were thwarted in our aims by our thin parliamentary majority and, as I said, by the implacable opposition of the party now in government. However, we recognise the key reforms set out in the White Paper and agree in part with some of them. I notice that the noble Lord, Lord Razzall, who will forgive me for saying so, is again starting on me as soon as I get to my feet.

In the midst of the conflicts between government departments and the U-turns, such as over the level of the monopoly, there seems to be a recognition that restructuring is the only way to improve the efficiency and competitiveness of the Post Office. The Bill creates a new Post Office regulator and a new consumer council for postal services, but this is the first time that a 100 per cent government-owned industry has had both a regulator and consumer body. It is therefore essential that their relationship with the Post Office is clearly defined.

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However, we are concerned that the powers given to the commission, especially over the production of documents, will result in creeping regulation of the unlicensed area. Similarly, the Bill provides for the consumer council to have power to make proposals to businesses operating outside the licensed area. It is our view that minimal interference in the intended new commercial freedom of the postal services is absolutely essential.

The Bill presents two main objectives. One is to enable the Post Office to adapt itself to modern methods of delivery of communications and to compete not only with the quicker and cheaper faxes and e-mail, but also with private commercial firms and some foreign post offices, particularly the German and Dutch. The commercial activities of the Post Office include providing services at commercial prices to the Government, including the Benefits Agency and various organisations such as the BBC and the DLVA via Post Office Counters.

The other objective is to run the vast network of privately owned and operated sub-post offices spread across the country, which not only provide all the services of Post Office Counters, but in many cases are the focus of the local communities. I refer to the 18,500 local shops to which no doubt many references will be made during today's debate.

One-third of their income is derived from the services they provide for the Benefits Agency and the DSS, and a large part of the remaining two-thirds comes from the customers who spend some of the money in the shop while they collect their pensions or allowances. They represent an investment by their owners of some £2 billion. During the Third Reading debate in the other place, the Minister for Competition and Consumer Affairs disputed that figure and suggested that it was only £1 billion. Well, £2 billion divided by 18,500 is about £108,000 per unit. Taking into account the value of the buildings, stock and goodwill, I suggest that £2 billion is probably closer to the mark.

That is the kind of money that is at risk in the Government's proposals to take the profitable business of the payment of benefits from the sub-post offices and make a present of it to the banks. I wonder what your Lordships think of the possibility of a sub-postmaster who wants to retire getting a decent price for his business today. That aspect is the single greatest cause of concern among Members of the other place and I have no doubt that it will be of concern to many of your Lordships.

I want to deal first with the so-called "solution" which the Government came up with at the 12th hour of the matter being before the other place. Despite promising the Opposition that provisions would be introduced at the Committee stage to provide a subsidy for sub-post offices, the Government failed to do so until the final stages of the Bill. In introducing it, the Secretary of State had the good grace to apologise for the fact, saying that they did not have the opportunity to introduce the amendment in Committee. The more likely reason was that there was a furious argument between the DTI and the Treasury.

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The Secretary of State went on to say that some honourable Members might criticise him for that. He got that right! He claimed that he deliberately chose to delay the new clause (Clause 102 in the Bill before us today) so that it could be debated by the whole House instead of only by its Committee--and, naturally, I believe him--and that it was nothing at all to do with preventing the clause receiving the scrutiny that its vagueness, loose drafting and ambiguities demanded. I can assure the Minister that your Lordships' House will take the opportunity to give it the attention it absolutely requires.

In order to help the Minister--as he knows, I always try to do so--I shall indicate the matters in the clause that need to be clarified so that he may prepare himself to deal with them either today or, I suspect more likely, as the Bill progresses through the House.

The subsidy is a discretionary one, which I believe makes the whole exercise completely meaningless. We do not even know whether the subsidy is to be permanent or transitional; we do not know the criteria for providing it; and we do not know whether it will be automatic according to some transparent and uniform arm's-length formula. We do not know who is the mysterious person, referred to in Clause 102(2), who shall decide to make the payments, or who is the other person, referred to in subsections (3) and (4)(c), who shall pay the money, or whether they are one and the same other person. The Ministers in the other place failed to explain that. Who are the persons to whom such subsidies will be paid? How are we to ensure that the subsidies will not be used as another piece of political bribery--perish the thought? We especially do not know how much the subsidy will be.

The Secretary of State was not able to say how much is available to save about 9,000 sub-post offices which are likely to go to the wall and deprive their communities of what he described as their,


    "important community and social role".--[Official Report, Commons, 15/2/00; col. 808.]

I should like to offer him a suggestion. The interest on the interest on the incredible windfall of £22.5 billion from the sale of digital telephone licences would produce more than £80 million a year. We shall most certainly want a detailed reason for the final subsection (6), requiring Treasury consent, which makes the whole ramshackle scheme even less plausible and lifts the art of gesture politics to new heights.

It is obvious, really. If the Treasury saves £400 million, somebody else will have to lose it. The whole problem of the sub-post offices is caused by the Treasury's desire to grab an extra £400 million a year--not just a one-off--from the pockets of the sub-postmasters at the expense of the whole social structure of our small communities. It is not yet clear how the Treasury's overriding sanction is to be operated; whether there will be a blanket consent or a case-by-case award. If the sub-post office of Mudbank-on-Sea needs £1,000 a year to keep going, is the whole panoply of interdepartmental consultation

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going to be gone through by two bands of civil servants while in the mean time the problem solves itself because the poor sub-postmaster goes bankrupt?

The Secretary of State could provide no answers in the other place. All he could do was to offer discussions with interested parties, including the representatives of sub-postmasters and sub-postmistresses. Who else does he consider is interested? There is no movement by customers to close sub-post offices.

It was impossible for the other place to examine Clause 102 properly because of the late stage at which it was introduced. It is equally impossible for your Lordships to do so unless the Government clearly spell out the detail of what they have in mind, and unless the report of the Performance and Innovation Unit is published at an early stage of the Bill's progress through your Lordships' House. The sub-postmasters want income, not subsidies, and we support them. But of course in this case subsidies are the last resort.

The whole scheme is nothing but a sticking plaster to attempt to patch up the gaping wound that will be inflicted by the Government if they introduce the automatic credit transfer system. On the one hand, the scheme will certainly save the Treasury money, but another department will have to find that money in order to pay the dole and income support to thousands of people who will lose their jobs and businesses as a result.

I make one final point before I leave the important subject of subsidies. I should like the Minister, either in replying to the debate or, if he cannot do so, by writing to me, to give me an assurance that any subsidy will not fall foul of EU rules.

I make no apology for having spent so much of my time on the issue of sub-post offices. It is absolutely no use to promise, as the Bill does, a universal postal delivery if the customer has nowhere to go to buy a stamp. That is the essence of the whole matter. The dilemma faced by the Government has been to find a way to give the Post Office the greater commercial freedom that everyone agrees it urgently needs. The solution that we favoured--privatisation of 51 per cent--has been rejected by this Government because of the continuing objections of the unions. This is certainly not the time and place to rehearse that debate again.

However, perhaps I may touch on some of the other problems that your Lordships will be asked to solve. The status of being a publicly-owned company will do little, if anything, for the commercial freedom of the Post Office. The Times' City commentary describes the proposals as granting the Post Office,


    "bogus new commercial status within the state's maw".

That article was written--and I wrote my speech (or, at least, thought about it)--before it became politically incorrect to use the word "bogus", and I saw noble Lords' concern.

The bogus status is emphasised by the Post Office's limited borrowing powers: a derisory £75 million a year without extra Treasury approval. I, in common with the rest of your Lordships, regard £75 million as

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more than pocket money. However, in the world of the communications industry, that sum is peanuts when the kind of deals that are done involve, if noble Lords will excuse the pun, telephone numbers--hundreds of millions of pounds at a time. The Post Office was given permission to spend £300 million on German Parcel. The Dutch Post Office bought a mere 25 per cent of DHL for a secret figure that we can assume was well above £75 million. The Secretary of State has power to make loans to the Post Office or its subsidiaries from the national loans fund. But the question is: at what rate of interest? The Government assured the other place that it would be at commercial rates, but that is not set out in the Bill.

A problem also exists in that, if the Post Office borrows from outside sources, the Government will be seen as a guarantor and that would also give an unfair commercial advantage. Then there is the question of VAT. Pursuant to EU directives, the Post Office does not have to charge VAT on its parcel service but its competitors do. Sweden and Finland charge VAT on parcel services. I ask the Minister to tell us in his reply how the Government propose to level the playing field for the Post Office's commercial competitors in this area. The Post Office itself is profitable, but Parcel Force is less so. The EU directive on postal services requires the keeping of separate accounts to enable cross-subsidy between the reserved and the non-reserved areas to be detected. The regulator has given a welcome assurance that the licence will contain a provision to that effect. Indeed, I understand that a draft licence has been circulated, although the DTI has certainly not sent me a copy. The Minister for Competitiveness told the Committee in the other place:


    "We want to ensure that there is no cross-subsidy between reserved and non-reserved areas".

However, again, that is not in the Bill, and I ask the Minister why not.

My honourable friend the Member for Rutland and Melton raised the same issue in Committee in the other place but was persuaded by the Minister to withdraw his amendment. He did so, as he said, in order to give the matter further consideration. Well, we have done so carefully and are convinced that this is a matter which must not be left to the possible changing view of the licensing authority. It must be enshrined in the Act. Therefore, this is an area that we shall certainly wish to probe as the Bill continues through the House.

Your Lordships will have noticed that during this rather long speech I have not yet mentioned the Horizon project for automatic credit transfer, although I dwelt on the disastrous effect that it will have on local sub-post offices. The problem that will hit the post office network is generated by the activities of two other departments that are not really involved in this Bill; namely, the Treasury and the DSS.

However, two questions as yet have not been answered by the Government. First, how will pensioners and recipients of benefits collect their money if there is no local post office or, indeed, no bank? In other words, physically what will they have to do, where will they have to go and what

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identification will they have to produce once the benefit books are phased out? The Minister of State for Social Security admitted as recently as 29th March in the other place that the Government did not have the answers to all the questions.

Secondly, to the extent that the Government hope to involve the banks in handing over the cash by one means or another, how can we be sure that the banks will be persuaded to be benevolent enough to provide that service for nothing and that they will not be a major recipient of the proposed subsidies?

The Government have rushed this Bill before Parliament before the effect of ACT and the access aspect have been evaluated fully. The report of the Cabinet Office's high-sounding Performance and Innovation Unit is long overdue, and I await its findings with considerable impatience.

I began by giving a cautious welcome to the objectives of the Bill. I conclude by saying that we have considerable misgivings about some of the details, and we shall explore them very carefully in Committee. However, I can assure the Minister that we shall explore them not only carefully, but also constructively, during the remaining stages of the Bill.

3.46 p.m.

Lord Razzall: My Lords, I join the noble Baroness in thanking the Minister for the clear way in which he explained the Bill. I am sorry that the noble Baroness is sensitive with regard to the apparent opposition from the Liberal Democrat Benches to some of the remarks that come from the Tory Benches. I can assure her that that has nothing whatever to do with her personality, which I have always found exquisite; it is entirely to do with the fact that very often she says things with which I disagree.

For her elucidation, when she became slightly over-sensitive on the novel constitutional doctrine that she seemed to be putting forward, I was commenting to my colleagues that in 1994 the then Tory government did not see fit to bring forward the legislation to regulate the Post Office that they would have liked to do because they did not have the necessary majority. It was my belief that in those circumstances the natural constitutional doctrine was that a government resigned and tested the opinion of the electorate as to who should be running the country. But there we are!

Again, like many noble Lords, I am sorry that what is, on many issues, an important Bill has to some extent been side-tracked by the issue of sub-post offices. Both the Minister and the noble Baroness addressed most of their remarks to the issue of sub-post offices. I am second to none in recognising that it is a most significant issue. However, it is only part of the very important debate on which we in this House are now embarking with regard to the future of the Post Office.

It is particularly unfortunate that the debate regarding sub-post offices has coincided with the events that are to take place on 4th May. I suspect that a number of the comments made by all political parties on this issue have been dictated more by electoral necessity than determining the right solutions for the

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sub-post offices network. I do not wish to spend a great deal of time discussing that issue on Second Reading. The subject has been well debated. At a very late stage the Government introduced recommendations for a subsidy. Like the noble Baroness, we on these Benches wish to test exactly what the Government have in mind with regard to the importance and detail of what we had believed would be Clause 1 but is now Clause 102. Clearly, a number of decisions taken both by the previous government and this Government have had a seriously deleterious effect on the sub-post office network. I know that several of my noble friends will wish to touch on that matter in more detail.

The fundamental issue enshrined in the Bill, which has been the subject of debate and lengthy battles with governments of various political hues for a number of years, is how to reconcile the Post Office having the commercial freedom, which all parts of this House recognise it should be given, and public ownership. I suspect that the Tories consider it an easy issue and that, if only they had had the votes, privatisation would have taken place in 1994. The issue for the present Government, as I expect will be demonstrated by a number of speeches from members of the government party today, is finding a satisfactory compromise between giving the Post Office the commercial freedom which everyone recognises is essential and the factors of ownership, control and democratic accountability. It seems to many on these Benches that the compromise, as reflected in the Bill, is an uneasy one.

First, we have a plc, with its connotations for the financial community. But, of course, there is no ownership change. That remains with the Government. The Bill proposes that the external finance limit under which the Post Office currently operates should be replaced, as the Minister indicated, by a new, commercially-based shareholder dividend at an agreed percentage. That, of course, is not a dividend which is subject to the commercial realities of the Post Office. It is a dividend imposed on the Post Office plc by the Government.

The Government also propose that the Post Office should have the freedom to borrow--but only up to £75 million per annum. In reality, does that represent commercial freedom and commercial freedom to borrow? The Government are proposing that if a subsidiary supports the universal service obligation, the Post Office can conduct a future share sale or swap. Is that commercial freedom? Is it commercial freedom to say to a subsidiary, "You can do a share sale or a share swap"--some form of disguised privatisation--"provided it comes into Parliament for approval"?

On this fundamental issue, it seems to many of us that we have a structure under which the Government are edging forward three steps towards privatisation but taking two steps backwards. That is perhaps an uneasy compromise on the face of the Bill. A number of commentators, particularly the report of the Trade and Industry Select Committee of September 1999, have raised a number of questions that must lie

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uneasily with the Minister if his argument is that total financial freedom has currently been given to the Treasury.

First, the case made by the Minister is that, with new borrowing facilities at commercial rates and the Treasury forgoing the excessive dividends previously taken, the Post Office will be adequately funded. However, the Trade and Industry Select Committee suggested that no case had been made that by these mechanisms the Government were providing vast sums of extra money for the Post Office.

Secondly, to reiterate points made when the Government brought forward the White Paper for consideration by this House, if the Post Office is being given proper commercial freedom, is it to be permitted to create a salary structure for its executives that is commensurate with international companies operating on a world scale, or are the Government saying, as they are perfectly entitled to, that those salary structures need to be in line with Civil Service salary structures and approved by the Treasury?

Thirdly, the Government are giving the Post Office the power to borrow £75 million per annum. Is it seriously suggested that £75 million per annum will give the Post Office the commercial freedom to compete on the major scale that your Lordships' House would want?

Finally, on this issue, if the Post Office is to be given commercial freedom to conduct its activities, are those activities to be conducted according to the obligations to which commercial organisations are subject? For example, will there be the transparency, under this Bill, that would apply to any multinational company? If a multinational company in the private sector were to make a major acquisition overseas, it would be subject to the transparency and the approval process in the public arena to which all multinational companies are subjected. The Post Office, under this Bill, as was seen in its recent major acquisition in Germany, would not be subject to that scrutiny and transparency--another unhappy compromise between public accountability and public ownership.

We on these Benches are entirely clear that what has led to this uneasy compromise is the Government's mistake in having failed to accept the original recommendation of the Trade and Industry Select Committee that the Post Office should have been transferred into an IPOC, an independently publicly owned corporation, with complete commercial freedom but also 100 per cent public ownership. The uneasy compromise that has emerged as a result of the Government's mistake is demonstrated by all the difficult circumstances that I have outlined and the contrast between what should happen and what will happen in the future.

I have two important points of detail to make before I ask the Minister two very fundamental questions on the Bill. The first--and no one has referred to it--concerns the role of the postal services commission. With regard to the Government's perceived role vis-a-vis the Post Office, there is a major issue with regard to whether the monopoly on postal services is to be left to

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the regulator or to the Government. Are the Government simply going to leave to the postal services commission the question of whether the monopoly will come down from £1 to 50p, or are they going to lead the debate? As we know, the Post Office would like a move in line with European practice. Are the Government simply going to say to the regulator, "We have no view. You, the postal services commission, will decide on the extent of the Post Office monopoly in this area"?

Secondly--a fundamental point to which the noble Baroness referred--are the Government going to let us see at some stage, before the Bill passes through this House, the report of the Performance and Innovation Unit? In another place, Mr Byers promised that that report would be available before the Bill was sent to the Lords. Is it proposed that we in this House should see the report before the legislation passes through this House? It appears to be yet another example of the Government's problem in getting through 32 or 33 Bills without taking into account promises made in order to ensure that the legislation is correct. The Performance and Innovation Unit report was promised in another place. We need it in this House before we can pass the Bill.

In conclusion, I ask the Minister to give an unequivocal undertaking that, whatever happens to Clause 102 dealing with subsidies to the Post Office, this Government are committed to operating a policy that will ensure the basic maintenance of the sub-post office network. That is what people in the country and your Lordships want to hear. Forget the detail. Will he say that the Government are committed to maintain the sub-post office network in more or less its current form?

Secondly, will the Government give a categorical assurance that the Post Office is to remain in public hands? Again, that is the assurance which noble Lords and the public require. They want to know that this Bill is not the first step to privatisation of the Post Office.


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