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Baroness Miller of Hendon: I have to say that I shall read yet again the remarks made by the Minister. I am not sure if what he has stated in fact guarantees that the Government will table an amendment on Report. He referred to a point that was mentioned on the last occasion; namely, that the Government expect the Post Office to be transparent and to release information according to the rules of the London Stock Exchange. But the Bill does not require that.

So far as concerns this side of the House, it is essential that this provision is written into the Bill. Perhaps the Minister did not hear what I said in my earlier remarks. I said that the amendment I have tabled today is not the amendment that I would bring back at the next stage. This amendment is rather wider than the London Stock Exchange rules. If it is necessary for me to return to this matter, I shall bring back an amendment that reflects exactly those rules so that a level playing field is established, not only for the Post Office but also for any other company that wishes to compete in this area.

I hope that the Minister will bring back a government amendment on Report, but I shall ensure that I have an amendment prepared. While not wishing to sound in any way threatening—I would not dream of doing such a thing—I shall have my amendment ready. At the appropriate time—

Lord Skelmersdale: Before my noble friend withdraws her amendment, the Minister has said that at the moment the Post Office abides by the Stock Exchange rules as a matter of form. However, is not that a voluntary action? Does the Minister agree that the Post Office should be made to do that by law? Given that, I wish only for more power to my noble friend's elbow.

Baroness Miller of Hendon: My noble friend has stated in a clearer form exactly what I was trying to say. The difference between what the Post Office may do according to custom and practice or on advice and what it would have to do according to the law are two quite different things. On that basis, I shall withdraw the amendment.

Amendment, by leave, withdrawn.

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3.45 p.m.

Clause 68 [Loans by the Secretary of State to the Post Office company and its subsidiaries]:

Baroness Miller of Hendon moved Amendment No. 70:

    Page 42, line 32, after ("rates") insert ("(being not less than the commercial rates generally payable in the financial markets at the time of making the loans)").

The noble Baroness said: This is a short and simple amendment that seeks to carry into law what the Government have already stated in their White Paper. For that reason, I believe it to be a very important amendment.

The White Paper recognised that retained earnings would be insufficient to finance new investment. There would therefore be two means of borrowing open to the Post Office. First, up to £75 million a year for the next five years from the Government with minimal ministerial approval being required. Secondly, for anything in excess of £75 million per annum, the Government have promised,

    "a fast track, but rigorous, Ministerial approval process",

to be completed within 28 days so long as it poses no undue risk to the taxpayer. Here I detect the ability for a ministerial get-out—a large loophole—but that is not what I intend to discuss today.

The Government have argued that this additional larger-scale funding should come from the National Loans Fund, not from the commercial markets. In the White Paper the Government argued that, even though borrowing from the commercial markets would impose additional disciplines, the markets would regard the borrowing as being underwritten by the Government. Although the Government believe that borrowing from the National Loans Fund,

    "will be more cost-effective for the taxpayer"

they conceded that,

    "in order to ensure that the Post Office competes fairly with other postal operators in the private sector; and to reinforce commercial disciplines, the Post Office will borrow at a rate which is broadly comparable to the rate it would be charged in the market without an ... explicit guarantee".

The terms of borrowing were discussed at some length in Committee in the other place. The Minister for Competition reasserted that:

    "Borrowing from the National Loans Fund will be at commercial rates to ensure fair competition with private sector companies. There will be no hidden advantage for any of the subsidiaries".

Later in the same debate the Minister reiterated that:

    "We will set a commercial rate through the National Loans Fund".

From the White Paper onwards, including all that was said in the other place, it is absolutely clear that the Government want the borrowing to take place at commercial rates. However, although the Government have stated that, the Bill says something else. Clause 68(2) provides that:

    "interest shall be paid on loans ... at such rates as the Secretary of State may, with the approval of the Treasury, direct".

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Here there is no mention at all of the unsubsidised commercial rate that was referred to elsewhere, only such rates as,

    "the Secretary of State may, with the approval of the Treasury, direct".

The amendment that I ask the Government to accept today simply puts into the Bill what the Government have on numerous occasions promised Parliament that they would do. I beg to move.

Lord Sainsbury of Turville: As the noble Baroness said, the Government set out very clearly their policy on lending to the Post Office in the White Paper. In order to ensure that the Post Office and its subsidiaries compete fairly with other operators in the private sector, and to reinforce commercial disciplines, they will be required to borrow from the National Loans Fund at a rate which is broadly comparable to the rate that would apply in the market.

The Government are currently taking independent advice on the appropriate credit rating that would apply to the Post Office without an explicit or implicit government guarantee and on the appropriate borrowing rates. The rate will be applied in accordance with the provisions of Section 5 of the National Loans Act 1968 which gives the Treasury the power to set a commercial rate for sums lent from the National Loans Fund. We shall continue to take advice on the appropriate rate to set as necessary in the future and to make the necessary adjustments in the light of market changes.

The rate of interest set by a lender for a commercial company seeking to borrow would depend on the credit rating of the organisation, the exact nature of the borrowing proposal, the current situation in the market and the size and duration of the loan. We intend to replicate that commercial approach and to take these factors into account when determining the appropriate commercial rate for Post Office borrowing.

Therefore, we are already giving effect to the intent of the amendment of the noble Baroness, as we are following commercial practice in order to ensure that neither the taxpayer nor the Post Office's competitors are disadvantaged. At the same time, there is a case here for some flexibility to be available in situations where non-commercial considerations, or social considerations, could be envisaged. In such cases, we would need flexibility. That is why we are not putting this provision on the face of the Bill. However, I hope that I have reassured the noble Baroness that our existing policy achieves her desired intent. In those circumstances, I ask the noble Baroness to withdraw her amendment.

Viscount Goschen: I wonder whether the Minister could expand on the requirement for flexibility that he identified and used as his defence against putting my noble friend's specific provisions in the Bill. I trust that he will accept that having a commercialised, government-owned company such as the one that we are discussing raises a number of concerns among potential competitors because it seems that this

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company is to be given an unfair, state-sponsored advantage, which may cause real competitive difficulties. Does the Minister accept that that is a by-product of the approach that this Government have pursued on the matter?

What real comfort can be given to potential competitors that the Government will not pursue the easy option and let the Post Office borrow in these circumstances on favourable rates, with an implicit government guarantee that will not be available to competitors?

Lord Sainsbury of Turville: I do not accept that there are reasons why other operators in this field feel concern about the matter. We have made our policy absolutely crystal clear from the beginning of the process; and, indeed, right throughout it. I have reiterated that policy and said that that is the basis upon which this will be done. I see no reason why there should be concern about the policy. I believe that a degree of flexibility is required in such an organisation.

Viscount Goschen: I apologise to the Committee for taking a moment or two longer on the matter. Can the Minister explain what circumstances he has in mind where such flexibility would need to be given in order to allow the Post Office to borrow on more favourable terms than those which would otherwise be available within the commercial markets? My noble friend's amendment would put what the Minister has expressed as his intention very clearly on the face of the Bill. Noble Lords on this side of the Committee would like to know under exactly what circumstances the noble Lord would need to be flexible. He has his policy, and my noble friend merely wishes to write that on the face of the Bill. The noble Lord said that competitors should not have concerns in this respect, but we need to know why not.

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