House of Commons Hansard Debates for 12 Jul 1994

Mr. Sainsbury : The hon. Lady refers to the Crown conversion programme and, interestingly, to what is clearly a commercial decision of the Post Office. One of the many points left unresolved by the hon. Member for Livingston is the extent to which he would seek to interfere with the existing freedoms of the Post Office. The Government are not consulting on certain aspects of the Green Paper. Those involve the Government's absolute commitment to a number of basic postal services, which we have described as the non-negotiables. The three important commitments are : a universal letter and parcel service ; a uniform and affordable tariff structure ; and a nationwide network of post offices.

Lady Olga Maitland : Does my right hon. Friend agree that the scaremongering stories whipped up by Labour have only served to worry and frighten elderly people all over the country ? Will he confirm that the services provided by Post Office Counters will continue ? In particular, how does he propose not only to maintain a uniform stamp price--regardless of where the letters are being sent--but to ensure that that price remains affordable ?

Mr. Sainsbury : I shall come to the last point in a moment. I certainly agree with my hon. Friend about the scaremongering : it has a long and well-established history, which is presumably approved of at the very top--or, at any rate, what we expect to be the very top soon. I note that, in December 1988, the hon. Member for Sedgefield (Mr. Blair) said :

" . . . the idea that we will have an influx of power stations, all competing on the grid, is nonsense."--[ Official Report , 12 December 1988 ; Vol. 143, c. 683.]

I wonder what the hon. Gentleman thinks about that particular scare story now.

Mr. Bruce Grocott (The Wrekin) : Will the Minister give way ?

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Mr. Sainsbury : I think that I ought to make a little progress. I have given way three times. I may give way to the hon. Gentleman later.

The commitments of which I have just reminded the House were first made in the citizens charter, were repeated in the Conservative party manifesto and the announcement of the Post Office review, and have been reiterated many times in the House. The hon. Member for Livingston, however, has never been one to let the facts get in the way of a good story.

Mr. Grocott : Will the Minister give way ?

Mr. Sainsbury : The hon. Gentleman is very persistent. All right, I will give way.

Mr. Grocott : I am grateful to the Minister. Will he answer a simple question ? Should the British public give more or less credence to the "absolute assurances" that he has just given about the universal provision of the Post Office than to the "absolute assurances" that he and his colleagues gave before the last election that they would not raise taxes ?

Mr. Sainsbury : The hon. Gentleman's fairly predictable question has been covered in the House so many times that I think we would do better to get on with the matter in hand. Undertakings on taxation are a familiar topic, but not one that need concern the Post Office. Let me deal with the substance of the Green Paper. One fact about which the hon. Member for Livingston and I may agree is that the Post Office is a very successful business, providing a daily letter service throughout the nation at a uniform tariff and with ever-improving standards. It supports 20,000 post offices, providing pensions and similar public services from city centres to the remotest parts of the country. It has just announced its 18th year of subsidy-free profit. It is thus no surprise that the Post Office is highly popular with the public, bracketed with Marks and Spencer--or, perhaps, other private-sector suppliers of life's essentials such as food and clothing.

Despite that success, however, the Post Office faces new challenges. Its markets are changing, and changing fast. The hon. Member for Livingston seems not to recognise that both Post Office Counters and Royal Mail, the main constituent businesses of the Post Office, are faced with increasing competition. For example, virtually no services are now available only at post offices. Stamps are sold in all sorts of places ; pensions can be paid directly into bank accounts or building societies--40 per cent. of new pensioners are choosing that option--and television licences can be, and often are, paid for by direct debit.

Royal Mail is under similar pressure. It faces increasing competition from the fax machine, electronic mail and, of course, its traditional rival, the telephone call. The real cost of telecommunications is falling fast, making those rivals ever more competitive. Royal Mail has been developing the direct mail market, but faces strong competition from other forms of advertising. Mail services are becoming more and more internationally-- rather than nationally--based.

I am not suggesting that the business is about to collapse, but the fact that the volume of mail posted in pillar boxes fell last year for the first time in more than 10 years is a disturbing sign. Conservative Members believe

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that diversity of choice for the consumer is to be welcomed, not feared ; we neither could nor wish to resist the developments that I have mentioned.

Mr. Malcolm Bruce : What assurances can the Minister give that Sunday collections will continue after privatisation ? Sunday collections were introduced only after an extensive campaign in the House. I doubt very much that they are profitable, but they are very much appreciated, especially by people in rural areas who write to their families and friends. It is not the commercial mail that the Post Office is seeking, but the public service which many of us are seeking to protect.

Mr. Sainsbury : I suspect that the hon. Gentleman knows that Sunday collections are by no means universal ; they are at the discretion of the Post Office. It is a matter for its commercial judgment and it assesses them on an efficiency basis. It is interesting to note--I suspect that I am wrong--that the Liberal Democrats would, like the Labour party, seek always to interfere. That is one of the reasons why the Post Office wants freedom. Public ownership does not come without constant interference or the pressure for interference. Mr. Peter Hain (Neath) rose

Mr. Sainsbury : I must make some progress. I have been generous in giving way.

Common ground is shared on many of the background facts. I hope that it is also common ground to think that change is necessary to ensure that the Post Office can respond to the challenges and the opportunities that it faces. In particular, it is increasingly clear that the conventional public sector or nationalised industry approach to the management of the business is insufficiently flexible to allow the management to respond properly to the competitive pressures to which I have referred. The report earlier in the year by the all-party Trade and Industry Select Committee concluded that the various public sector constraints on the Post Office's activities were

"having a detrimental impact on the Post Office's ability to act as a commercial organisation, to deliver an ever higher quality of service to its customers and to meet the challenges and opportunities of international competition."

The Government, therefore, make no apologies for having launched the Post Office review and concluding that the status quo is not an option. Indeed, the Select Committee itself, chaired by that noted privatiser the hon. Member for Sheffield, Central (Mr. Caborn), agreed that

"the Post Office cannot be retained in its present form". Let me now turn to the individual post office businesses, beginning with Post Office Counters. Counters provides the co-ordinating and managerial support services for the network of 20,000 post offices. That network has effectively been run as a separate business within the Post Office since 1986. It has important trading relationships with Royal Mail and Parcelforce, but I should stress that those trading relationships are on an arm's length basis. The most striking feature of the business is that it is based on a combination of public and private sector investment. Approximately 19,000 of just under 20,000 outlets are run

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as private businesses by sub-postmasters and sub-postmistresses, whose own investment has been estimated to be in excess of £1 billion--well in excess of the public sector investment in the business.

The Government have, of course, considered whether there is a case for changing that structure. They have concluded, however, that no change is necessary. As the National Federation of Sub-Postmasters has made clear, the key issue for the future of the post office network is not its ownership, which is already predominantly private sector, but the need to generate higher turnover for the network and to offer a more efficient and automated service to its clients. The Government accept that view. We have, therefore, concluded that the co-ordinating business of Post Office Counters should remain in the public sector, but that it should be given greater freedom to take on board new clients for the network, thus enabling it to spread its costs over a wider range of activity. The Green Paper contains guidelines setting out those new arrangements, with the necessary safeguards to ensure fair competition.

In addition, the Green Paper confirms the intention to invest at least £130 million in the automation of the benefit-payment system at post offices, enabling Post Office Counters to provide a more efficient and secure service, initially for its major client, the Benefits Agency, and thereafter for other clients.

The House may wish to know that the general secretary of the National Federation of Sub-Postmasters, Colin Baker, has written in the federation's newspaper, saying that

"the Green Paper should be welcomed by members of the federation . . . It proves that the Government has listened to our advice". Before moving on to the subject of Royal Mail, perhaps I may deal with one little scare story that has already been raised--the hon. Member for Livingston has referred to it again today--that Post Office Counters could not possibly survive under separate ownership from the rest of the Post Office. It is baloney. There is no cross-subsidy between Royal Mail and Post Office Counters. While there are important trading links, they are based on commercial terms, negotiated on an arm's length basis. The Green Paper makes clear that the Government will continue to require Royal Mail and Parcelforce to offer the full range of public letter and parcel services at post offices.

Dr. Hampson : Is it not ironical that Opposition Members are keen to praise the private-public relationship on the counter side, where there are 19,000 or 20,000 privately owned businesses, yet they are denying the opportunity of the same participation for Royal Mail ? Our proposals enable the work force to have a shareholding in the Royal Mail for the first time. That seems bold and imaginative, but Opposition Members have not mentioned it once.

Mr. Sainsbury : My hon. Friend is being rather uncharacteristically kind to the Opposition in saying that it is ironical. I just think that it is contradictory and typical. In no way is Post Office Counters a weak and feeble creature dependent on the charity of big brother Royal Mail. That would be an insult to a successful retail business and I would never insult successful retail businesses. It certainly does a disservice to 19,000 sub- postmasters.

I shall now turn to Royal Mail. The Green Paper sets out three options for the business, which are all designed to give it the commercial freedom that it is universally agreed

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is necessary. First, the Green Paper discusses the option of giving the Royal Mail the freedom it needs within the public sector. It identifies a number of difficulties, however, in reconciling the scale and scope of the commercial freedoms that the company needs, with the appropriate and responsible control of public sector organisations, relating to public-sector finances and fair competition with the private sector.

Secondly, the Green Paper sets out the case for a conventional 100 per cent. privatisation of the Royal Mail backed by independent regulation. Clearly, that would deliver the Royal Mail the commercial freedoms that it needs. But the Government recognise that many people would prefer to see a closer link with the Government than full privatisation would provide. The Government have, therefore, proposed a third option--at this stage it is their preferred way forward--under which shares in Royal Mail would be sold to the public and to its employees and sub-postmasters, but under which the Government would retain a significant shareholding of 49 per cent. of the shares. Parliamentary approval would then be needed before any sale of those shares.

The Opposition have responded with their traditional, predictable knee-jerk reaction to those three options. First, they have argued that all the necessary commercial freedoms can be given in the public sector, so that there is no need to consider private-sector options. We heard that again today from the hon. Member for Livingston. Secondly, they have suggested that any sale of shares in the company would immediately lead to one of their most distasteful categories of people : rampaging capitalists, inevitably, as they see it, slashing services and destroying communities. Their reaction is entirely predictable : public sector good, private sector bad. Kim Il Sung come back, all is forgiven. Their reactions are entirely predictable, entirely irresponsible and entirely wrong.

Mr. Nicholas Winterton (Macclesfield) : I hesitated to intervene because I wanted to hear the Government's case. Would my right hon. Friend give me an assurance that if, after what I hope will be meaningful consultation, there is a substantial view in favour of option one--that the Post Office should have commercial freedom--which can be given without too many difficulties, he would support that option ? Does he accept that there are a number of Members on the Government Benches who do not wish to see the Post Office put into the private sector because we know the problems that the fragmentation of it would create ? Will he give me an assurance that, if there is the widespread support from individuals, in the House and outside

Madam Deputy Speaker (Dame Janet Fookes) : Order. The hon. Gentleman is making a very long intervention. I think that he has made his point. I call the Minister.

Mr. Sainsbury : I am happy to reassure, if necessary, my hon. Friend the Member for Macclesfield (Mr. Winterton) that, of course, we shall listen extremely carefully to the response to our consultation paper. I hope that he will listen with equal care to what I am about to say about the difficulties associated with the public sector option.

I deal first with the argument that the necessary freedoms can be given in the public sector--the crux of the argument of the hon. Member for Livingston. To listen to some of the statements by the Labour party, we could

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almost believe that controls on the expenditure of nationalised industries were an invention of this Government. The hon. Member for Livingston must have a short memory. He was in the House, supporting the then Labour Government in 1976, when the investment programmes--much needed investment programmes--of the nationalised industries were slashed by the Chief Secretary to the Treasury, his noble Friend Lord Barnett. It is worth remembering that the hospital building programme was cut by a third. In the Post Office itself, investment nearly halved between 1976 and 1978. As a result, Post Office investment in 1978 was, in real terms, only about a quarter of what it is today. That is why we are not disposed to take lessons from the Labour party on running public industries.

We realise that a business in the public sector has the taxpayer standing behind it. As long as the state owns a majority of the shares in Royal Mail --I say to my hon. Friend the Member for Macclesfield that it does not matter whether that stake is 51 per cent., 70 per cent. or 100 per cent.-- it is in the public sector and falls within the public sector borrowing requirement. We recognise the vital importance of controlling the PSBR. We will not sacrifice our belief in the sound management of public finances on the altar of political expediency.

Mr. Robin Cook : I am sure that the Minister would not wish to describe the Government's White Paper on the BBC as political expediency. Can he now explain to the House why all the difficulties that he adumbrated in relation to the Post Office staying in the public sector and commercial freedom apparently do not apply to the BBC and why his Department cannot get the same deal out of the Treasury as the Department of National Heritage can ?

Mr. Sainsbury : I suggest that the hon. Gentleman reads carefully the Green Paper on the Post Office and that he reads the document on the BBC equally carefully. Having read those documents, he will, I hope, immediately recognise that whereas the Royal Mail wants to enter joint ventures where it is the controlling shareholder and the controlling operator, the BBC is seeking not to do that, but to enter joint ventures where it is the minority partner--a very different circumstance. There is, of course, a wide range of other difficulties which are obvious to most of us.

Mr. Cook : The Minister has mentioned one difficulty. Let us, for the purposes of hypothesis, agree on the following. Let us suppose that the Post Office said that it was willing to be a minority shareholder in joint ventures. Would that remove the Minister's objection ? What is his next objection ?

Mr. Sainsbury : I do not want to be driven entirely into discussing the BBC. I merely say to the hon. Gentleman that the BBC's commercial freedom, as set out in the White Paper, is entirely consistent with the general rules on public sector freedoms, which we have set out in the Green Paper. The Government are encouraging the BBC to develop its commercial activities with private sector partners and finance under the private finance initiative.

The Green Paper makes it absolutely clear that the Post Office, too, could benefit from that initiative. The question is whether that would meet the commercial needs and opportunities facing the business. In the case of the BBC, as I have said, it does because it enables it to operate through the joint venture companies I have described.

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What the Royal Mail needs is something different. It wants to be able to compete with other Post Offices and to put more business through its own network. It is not looking for partners who will control any joint venture with majority stakes ; it is looking for full commercial freedoms. I say again to the hon. Gentleman that the two cases are entirely different.

However, I recognise that there are some freedoms that are compatible with pubic sector status. We are giving greater freedoms, for example, to Post Office Counters to take on new clients. However, the differences between the Royal Mail and Post Office Counters are considerable. Counters has a unique combination, to which my hon. Friend the Member for Leeds, North- West (Dr. Hampson) referred, of public and private sector investment.

The freedoms which the Royal Mail is seeking, however, go much further. It wishes to borrow, possibly extensively, on private capital markets. It wishes to offer new services to the private sector, based on its existing skills, but developing new skills and services. It wishes to operate in the international as well as the domestic market, striking new partnerships with the private sector, but also competing head on with it. It needs to compete to forge its own role in a rapidly changing and developing communications market against major international competition. It needs real management control over these activities.

The Government wish to see the Royal Mail go down that route. It does not follow that such a route is compatible with the public sector. The public ownership option, clearly dear to the Labour party, leaves three unanswered questions. First, how can competition with the private sector be fair ? Secondly, will there be any Government interference in commercial matters ? The signs from today's debate are that there would be. If there was no interference, what would be the purpose of public sector status ? Thirdly and most importantly, with Treasury controls and the straitjacket of the annual expenditure round, how could the Royal Mail fund its long-term investment requirements ?

Mr. Ken Purchase (Wolverhampton, North-East) : More Government investment.

Mr. Sainsbury : The hon. Member for Wolverhampton, North-East (Mr. Purchase) seems to overlook--he was not here at the time--what happened between 1976 and 1978, under the then Labour Government, to investment in the Post Office ; it was halved. I suggest to the House that we should think long and hard before we leave the Royal Mail subject to the restraints that go with the public sector.

Mr. Purchase : The Minister is right to say that I was not in this place then. However, I recall those events. Why does the Minister now talk about the management of this enterprise as though, at present, there is no proper management control ? Yet from what we have heard, the Post Office is an immensely successful enterprise.

Mr. Sainsbury : The management are asking for commercial freedom. If we are serious about commercial freedom--I make this point to my hon. Friend the Member for Macclesfield as well, if he will kindly listen--we must realise that it is clear that only in the private sector can that freedom be found. For the Post Office to be in the private

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sector, the Government must reduce their stake in Royal Mail below 50 per cent. The Government believe that doing that will provide the best prospects for the future of Royal Mail. We believe that, without commercial freedom, there is a risk of long-term decline. The Green Paper makes it absolutely clear that the legislation authorising any sale of shares in the Royal Mail would also establish a postal regulator and regulatory system which would be expressly designed to ensure the maintenance of the key public service elements. There would be, for example, an absolute requirement on the new company to deliver mail to every household in the country, six days a week, and to maintain a uniform tariff structure--my hon. Friend the Member for Macclesfield asked about this earlier--so that a letter sent from Westminster to Victoria would cost the public the same as one sent from Cornwall to the outer Hebrides. There will also be tariff control, with the Government confident that tariffs will continue to be reduced in real terms.

The Green Paper also makes it clear there will be additional obligations on the company to continue to provide free services for the blind, to provide redirection services and to offer recorded delivery, registered post and a full international service. If the consultation exercise persuades us that we should lengthen this list, we shall do so. In all these areas, the regulator will be empowered to ensure that the Royal Mail meets all its obligations to an ever higher standard.

Mr. Nicholas Winterton : My right hon. Friend has outlined many social obligations which will be imposed on the Post Office and, no doubt, enforced through a regulator. Is not that Government interference ? How does that lie with the strictly commercial criteria that the Government are outlining to the House ? To my mind, the public sector, with commercial freedom, is where the Post Office should lie because of its substantial social obligation and responsibility.

Mr. Sainsbury : I make the same recommendation to my hon. Friend as I made to the hon. Member for Livingston--that he carefully reads the Green Paper and then considers the position of British Telecom. I hope that he supports its being in the private sector. The social obligations we are talking about in the Green Paper are those that are imposed on British Telecom.

Mr. Andrew Welsh (Angus, East) : Will the Minister give way ?

Mr. Sainsbury : I must make progress. I have been over-generous and I know that many hon. Members wish to speak.

I should also briefly mention Parcelforce. The Government have decided that, if they are to sell shares in the Royal Mail, it would be a rather pointless step to insist on separating out the parcels business while giving Royal Mail greater commercial freedom. The Royal Mail management has made it clear that its customers would wish it to offer a parcel service to complement its letter services. With appropriate safeguards to ensure fair competition, the Government are content for the two businesses to remain together.

The Green Paper also makes it clear that the Government continue to be committed to the development of greater competition in postal services. In particular, any

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legislation following the Green Paper will allow the Government to fulfil their commitment to reduce the level of the monopoly closer to the price of a first class stamp.

The Green Paper also sets out a number of other areas in which the Government see scope for greater competition. The guiding principle will, however, continue to be that the Royal Mail must continue to be able to provide a universal service at a uniform tariff. Some degree of monopoly will therefore be necessary to ensure that. The Green Paper also covers a number of other issues of importance to the users of the Royal Mail. It makes clear, for example, that the traditional royal associations will remain and that VAT will not be charged on stamps in the future.

I congratulate the Opposition on choosing the Post Office for today's debate--despite, incidentally, their claim that no debate is needed because everyone agrees with them. The debate is well timed because it is absolutely essential that the way forward we finally choose for the Post Office commands public confidence. May I emphasise again that the Green Paper is a consultative document ? We hope, therefore, that today's debate will help to focus on the rational arguments, the real points, that are discussed in the Green Paper and not on the absurd allegations that are propagated by the Opposition.

If the Opposition parties wish to put forward constructive comments--an unlikely contingency perhaps--on any of the options or have concerns about the safeguards we propose, let those points be made. Let us accept, however, that change is necessary. The debate is about how that can be best brought about.

I believe that the combination of our proposals for Post Office Counters and our preferred option for Royal Mail would provide an appropriate and exciting way forward for the future. It would give the Post Office's businesses the real commercial freedom that they need. It would provide opportunities for those directly involved with the future of Royal Mail to take a direct stake in the company--in many cases on special terms. It also would protect the public through a strong and independent regulatory structure, while offering scope for greater consumer choice both in post offices and in the letters market.

We believe that the customer has everything to gain from our policies and much to lose from the Opposition's policies. I commend the amendment to the House.

5.1 pm

Ms Kate Hoey (Vauxhall) : I am pleased to have the opportunity to participate in this extremely important debate on an issue that concerns millions of people.

It is rather sad that the President of the Board of Trade is not here, particularly as it is quite clear that Post Office privatisation is on the right hon. Gentleman's personal agenda. I am sorry that he did not have the opportunity to hear the excellent speech made by my hon. Friend the Member for Livingston (Mr. Cook), who put the argument against privatisation clearly and incisively and explained why Opposition Members and, given what the hon. Member for Macclesfield (Mr. Winterton) said, perhaps many Conservative Members want to keep the Post Office together in the public sector and stop its being privatised.

It is clear that the Government have no mandate to conduct even a debate on the proposed privatisation of the Post Office--there was no mention of such privatisation in their election manifesto. As my hon. Friend the Member

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for Livingston said, privatisation of the Post Office was a privatisation too far for the leader of privatisation, Mrs. Thatcher. It is strange that the President of the Board of Trade is pushing for a privatisation that, even at the height of privatisation, the then leader of the Conservative Government, Mrs. Thatcher, was not prepared to make.

The Minister has said that the Green Paper will be treated as a consultation document, but we already know what people think about the proposal. In March 1994, the first MORI poll found that 68 per cent. of people opposed privatisation and, as has already been noted, 53 per cent. of those polled were Conservative voters. The same poll discovered not just that people are opposed to privatisation, but that 81 per cent. of the public want the Post Office to be offered more commercial freedom while remaining in the public sector. The Opposition and 81 per cent. of the public are therefore in favour of the commercial freedom option offered in the Green Paper. The consultation exercise will last just three months and during most of that time the House of Commons will not be sitting. I have not the slightest doubt, however, that the vast majority of responses received by the Minister will be opposed to privatisation. Will the Minister tell us what criteria the Government will use when making judgments during the consultation exercise ? If between 90 and 99 per cent. of the public responses oppose privatisation and support giving the Post Office more commercial freedom, will the Minister give a commitment that that will be the end of the matter ? As my hon. Friend the Member for Livingston has said, if we want commercial freedom, we can have it today. The two Front Bench teams could get together and, in agreement with the Liberal Democrats and all other parties, work out the rules to give that freedom to the Post Office.

Mr. Malcolm Bruce : We must also consider what will happen to the Post Office during the privatisation process. It is asking for commercial freedom now and everyone except the Government, who insist on delaying matters for another 18 months to get unnecessary legislation through the House, agrees that it could be given commercial freedom. Does the hon. Lady agree that the Minister should consider the effects of the Government's policy ?

Ms Hoey : I agree absolutely. The Government are holding back the country because they are holding the Post Office back from being able to compete internationally and on the European market. It is ludicrous that we have been waiting two years for the Green Paper, especially as it includes an option that all the Opposition parties can support. If today's debate does anything, I hope that it will show that there is cross-party support for keeping the Post Office in the public domain while offering it greater commercial freedom. Why are the public so opposed to privatisation ? It is not as though there has been a huge Labour party campaign to try to get people to oppose privatisation. We will launch such a campaign, but we already know that there is great support for retaining the Post Office in the public sector because the vast majority of people are quite happy with it. They know that it gives them a good service. They know that it is making a profit--little in this country makes a profit today--and that a large proportion of that profit is given back to the Government to be used for other

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purposes. There is no widespread dissatisfaction with the service offered, which was not always the case in previous privatisations. We all rely on an efficient, trustworthy Post Office. It is worth remembering that about 25 million households are visited by a postman or postwoman each day. That represents terrific contact between postal workers and the public. People care about the service. Such strength of feeling does not exist only in inner-city areas. It is particularly strong in rural areas, where for many people the arrival of the postman or postwoman on a bike or in a van is a real link with civilisation. I come from a rural area in Northern Ireland that is just the same today as it was in my youth. One of the key events of the day was the arrival of the postman--in those days there were no postwomen--because he did not bring just the hoped-for letters from relatives abroad and all sorts of other people, but the local paper. If the postman did not arrive, we did not get the local paper. The postman also brought messages and all manner of other things, which was probably not in his job specification but it was part of the social service that he provided. That still goes on to a greater or lesser extent in parts of the country and it would be a tragedy if it disappeared.

None of us has confidence in the Government's commitment to a nationwide letter and parcel service with daily delivery to every address in the country. The problem is that the people simply do not believe them, just as they did not believe what the Government said or the commitments that they gave previously.

There is no commitment not to transfer to an Americanised system in which people must go to the bottom of their high-rise block of flats or to the end of their lane to collect the mail. There is no reason for such a reduction in service, but that is what would happen if the Post Office were privatised.

The Government have made no commitment to a second delivery which, as it does not make a profit, is a service. It continues because it is a public service. It is one of the social commitments and extras that the Post Office has been able to provide. Only public ownership has prevented the Post Office from abolishing the second delivery.

Dr. Liam Fox (Woodspring) : During Report stage of the Telecommunications Bill, the Opposition spokesman said that, after privatisation, people in rural areas would never be connected to the telephone system. Labour was wrong then--why should the hon. Lady be right now ?

Ms Hoey : If the hon. Gentleman reads in Hansard tomorrow what my hon. Friend the Member for Livingston said, he will see that my hon. Friend answered that specific point, so I shall not go over it again.

A cross-subsidy amounting to about £30 million a year is provided to keep less viable post offices running. I shall not go into too much detail about other services such as the 180 post buses, which provide the only form of transport in some rural areas, as I am sure that others will want to mention them.

Mrs. Angela Browning (Tiverton) : Will the hon. Lady give way ?

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Ms Hoey : No. Eighty per cent. of those post buses are already subsidised. If we lose that opportunity

The Parliamentary Under-Secretary of State for Technology (Mr. Patrick McLoughlin) rose

Ms Hoey : I suppose I had better give way. Are you in charge now ?

Madam Deputy Speaker : Order. I am in charge.

Mr. McLoughlin : And the hon. Member for Vauxhall (Ms Hoey) should always remember that. Can the hon. Lady tell me a little more about the subsidy for rural services that she is talking about ? For example, where does it come from ?

Ms Hoey : On the whole, it comes from local authorities, but if there were no cross-subsidy there would be no opportunity to transfer extra money from one part of the Post Office to another.

Another matter that must be mentioned again is the revenue provided by the Post Office to provide the articles-for-the-blind service. I do not believe the commitment that has been given with regard to that service either. I do not believe that, once the Post Office is placed beyond democratic accountability to Parliament, such a service will be allowed to continue. The profit margin of the Post Office is usually about 5 per cent. of the gross turnover. If there is any change which results in the Post Office being taken out of the public service, what are considered as necessities for some people will be seen as extras by a private company and they will be dropped. I know that this is an important day for some hon. Members from Northern Ireland and that, therefore, the attendance of hon. Members from Northern Ireland is not very high. Northern Ireland has a particular difficulty with its postal service because of the peculiar nature of the political situation there. I pay tribute to the dedication of the postal workers in Northern Ireland, who have continued to provide a service throughout the great difficulties of the security situation across the sectarian divide. They are a special part of the public service in Northern Ireland.

In terms of unemployment and the economic situation in Northern Ireland, any reduction in postal jobs would be absolutely terrible for the economic interests of that community. Belfast has the return letter section of the Post Office. At present, some 300 jobs are provided in that section. If the Post Office is put in the private sector, one of the first things that will happen is that the return letter section will get the chop. If it does not get the chop, people will certainly have to pay a large amount of money to get their letters back. That is another area that must be examined. I mentioned earlier the way in which communities are linked to the postal service. When I first came to England as a student, my mother, at 4 o'clock on a Sunday afternoon--there were Sunday collections in those days ; they then stopped but, fortunately, they have resumed--would post whatever they had for lunch that day, either a piece of chicken or perhaps some bacon, in a letter sealed in whatever way she thought best. It was delivered to me at 7 o'clock on Monday morning, not quite still warm but certainly fit to be eaten. I have had an affection for the Post Office ever since. The miracle of someone being able to put something in the post at 4 o'clock on Sunday afternoon that could be eaten in north London at 7 o'clock the next

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morning is something of which we should be proud-- [Laughter.] Hon. Members may laugh, but that is precisely the emotional attachment which people have for the Post Office and postal workers-- [Interruption.] Some may say that it is irrational.

Tory Members are silly if they underestimate the feeling--it is almost love --that people have for the Post Office. There are many reasons why the Government will lose the next election, but if they go ahead with privatising the Post Office, that will certainly be one of them. They should not underestimate the power of the people on this issue. Thousands of people will be writing letters. The consultation exercise will give the Government one result. Today, I want to hear the Minister pledge that he will fulfil whatever the people decide on the issue.

5.17 pm

Dr. Keith Hampson (Leeds, North-West) : The problem with the speech of the hon. Member for Vauxhall (Ms Hoey) is that it conveyed, above everything else, total and utter complacency. The hon. Lady started by saying that people are happy with the Post Office. That is currently true. But the President of the Board of Trade is trying to secure change, reform and, in particular, new private investment to ensure that we have a better tomorrow--that we improve the situation, rather than let it deteriorate. If people realised what we identified in the Select Committee report, they would also realise that there are many serious threats to the happiness that they currently experience with the Post Office.

For the first time, there is a potential decline in the standard of service. One of the reasons for that is the level of investment on the one hand and competition on the other. To meet the increasing competition that the Post Office faces, not only from private sector companies in this country but from postal services in other countries, there must be more investment.

I do not think that a single person in this country or a single hon. Member believes that a Labour Government would be more generous in terms of public sector investment than anything that we have seen so far. Would a Labour Government seriously stop the external financing limit ? Is Labour saying that if the Post Office is profitable, will not take money back into the Treasury ? Labour never did that with any nationalised industry. Would it seriously do it now ?

Of course, if Labour does do that it will face exactly the same problems as those faced by the management of the Post Office this very year. Managers cannot invest in post buses on the scale that they would like ; they have had to cut their investment in postal vans and other equipment because the Treasury has taken more and more of the Post Office's profits. No matter what Government are in power, that is what the Treasury will always do. Perhaps the Labour Front-Bench spokesman would like to announce that the Opposition will scrap the external financing limit system and the Treasury will no longer take the money

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