House of Commons Hansard Debates for 12 Jul 1994

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receive no support from the Opposition parties who cynically exploit the anxieties of the vulnerable for political gain at the expense of British business.

7.52 pm

Mr. Ken Purchase (Wolverhampton, North-East) : I have heard today a great deal of justified congratulation of the Post Office on the excellent way in which it runs its business and services--the public services that it has provided for 150 years.

I add to those congratulations by saying--no doubt hon. Members will want to join me in saying it--that during the summer we shall expect our huge bundles of mail to be delivered to our offices and homes, with ever heavier sacks of mail arriving on the shoulder of, in my case, the postwoman, and I greatly value the service that she provides. Hon. Members will receive the same quality of service, whether they represent a constituency in the far north of Scotland or the far south-west of England. That service is guaranteed : it will happen--we need not worry about it. [Interruption.] I am being prompted from the wings to say that that guaranteed service will also be provided in Wales ; I am happy to add the Welsh contingent to my thanks and congratulations.

Some years ago, my wife was a postmistress. We ran a small post office in an inner-city area with predominantly 19th century housing built by brewers and other organisations. The population were elderly and relied on the post office for the services that they needed in terms of pensions and other bits and pieces. They valued the commercial side, which my wife ran : envelopes, writing pads, sweets and all the things that we generally now take for granted in a sub-post office, all of which help to make the whole business a viable proposition for someone to run.

Earlier, there was discussion about whether there was any cross-subsidy between one part of the Post Office and another. An accountant could probably demonstrate either case. However, it is obvious to me that the salary of a postmaster or postmistress in a sub-post office in a declining area--an office that is visited by fewer and fewer people, who nevertheless rely on it--could not be met from the volume of business that is transacted. None the less, at present that sub-post office is kept alive because the entire business is able to sustain it from its overall profitability. That is an important point which ought not to slip off the agenda too quickly.

Although there is a right and proper emphasis and a campaign about the problems of losing rural Post Office services, the needs of the inner cities are no less acute. I could go further and say that, due to the nature of inner-city communities, the density of the sub-post office network is vital to give people the peace of mind and confidence to know that they can walk relatively short distances, without needing to rely on any other form of transport, to obtain their pensions, their child allowances and everything else that is available at the Post Office.

Earlier we heard it said that if, as a result of competition, our sub-post offices were to lose 10 per cent. of their business, many of the sub-post offices would quickly slip into a loss-making position. If their profitability were the sole criterion for whether they should continue, many

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sub-post offices would be closed in the areas that I have described and I am sure that the same would be true in the rural areas. Where could that competition come from ? Frankly, if we leave this successful organisation as it is, but accept the changing technology, changing needs and new developments, and allow the Post Office the freedom to deal with those in a proper way, with sound management and good financial policies, there is no problem with competition--not domestically, at least. A strong domestic position will better equip our Post Office to deal with the increasingly international side of its business. It is true today, as it always was, that a strong home market is vital to enable any industry or service to develop worldwide competitive strengths. One needs that base in one's own domain.

We are in danger of offering, to anyone who cares to come along, a proposition that they can set up a postal service. I know that it will be said that we shall have a minimum postal charge and therefore the opportunities will not arise, but they will. It will not be long before little local services develop, taking letters and delivering them. Very soon, it will become almost the norm to do it from one end of the place to the other, and soon the Government will be asking, "Is there much point in maintaining the artificial level that we have imposed ? We might as well let it go."

Some of us have not forgotten the lesson of Sunday trading. It took the large national companies to break the law, disregard the law, pay no attention to the law, and be rewarded by the Government for having so done. I obviously excuse the Minister for Industry, who was in a different camp on that occasion. There is a possibility that this will develop in the same way because of the idea that it is impossible to control the popular demand that would arise for such a service. We should keep that in mind, especially in the light of our recent debate on Sunday trading and what happens to law breakers in that regard.

I do not necessarily say that it is impossible for private enterprise to run a network of sub-post offices and post offices--clearly, it is possible with full and proper regulation--but the Government's record is to reduce rather than introduce control of these matters. I am sure that they would let it slip as soon as pressure was brought to bear on them. If that is the case, why should we change a winning team ? As I have said, the Post Office needs to take on board developments in this country and worldwide. With regard to inner-city sub-post offices, the Green Paper refers to the new challenges mentioned by a number of hon. Members, but there are also some old needs in inner cities. On a downward slope when demand is decreasing, profit can still be made from providing a good service. Decreased demand does not mean that the service cannot be organised properly and profitably and make a contribution. To do that, one simply gathers up the available business and provides it at a proper price. That would protect the network of inner-city post offices.

There are old-fashioned needs, and old-fashioned common sense ought to dictate that great care needs to be exercised before accepting the Government's view of privatisation by selling 51 per cent. One Conservative Member said that his preference would be to get rid of the lot as quickly as possible, but he failed to explain the sense of the Government's desire to slice it up bit by bit. No doubt he was thinking of the next election and wondering how the Government might best sell off the Post Office, get

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in some money and give it away as another tax handout. That is exactly what they are thinking, and much of what drives the White Paper could be understood by looking at it in that way. In the end, we come down to ideology.

Mr. Clifton-Brown : I am listening carefully to the hon. Gentleman. Is he suggesting that we have privatised about 27 businesses since 1979 merely to win four elections which we won so successfully ? Those businesses now have a change of culture and operate successfully in the private sector.

Mr. Purchase : They have certainly had a change of culture. Of that there is no doubt : indeed, additional evidence arrived this very day on the front page of the Financial Times for all who cared to read it. The hon. Gentleman looks away because he cannot bear to hear the truth. The Financial Times states that the electricity companies, or rather their chief executives and main directors, have had a massive bonanza. It is simply a case of changing the culture so that public money can be used to line private pockets. That is the nature of the change of culture in what were public services.

Let us reflect on this great change in, for instance, British Telecom. I agree that, comparatively speaking, the telephone service is now cheaper, but by golly why should not it be ? There have been worldwide advances in technology. Is the hon. Gentleman or any of his colleagues saying that those changes would not have happened

Mr. Sainsbury : Yes.

Mr. Purchase : That is nonsensical. The fact that BT was owned by the state would not have prevented worldwide technological advance from being taken on by any sensible company or any commercial undertaking. Our model of commercialisation fits well with the ability to take on new technology and for services to develop and improve and reach more people.

The Minister turned the truth on its head when he said that Labour believed that everything private is bad and everything public is good. Almost the whole of the Labour party has spent most of its working life in private industry and enterprise and we do not believe that at all. That whole concept is nonsense and the Government must adopt a more sensible approach. They cannot continue with the idiotic ideology as though it had not failed when it has manifestly done so. People rightly believe that they are paying more for poorer quality water. The water companies may say that the chemical mix is correct, but we know that the water that comes out of the tap is abominable. As for investment, instead of going to their shareholders for money for long-term investment, which is then paid off by revenue, the private companies immediately impose a price rise on the general public who are absolutely held by those monopolies. That is how investment is financed, while at the same time the companies increase dividends well beyond what could normally be expected in any other commercial organisation.

We do not have a uniform view that this is good and that is bad. We have to look at what has happened. There has been some good and some bad in the industries that the Government have privatised. The Post Office is an excellent organisation which delivers a good service uniformly across our nation. It could compete internationally if the Government would give it the go-ahead on a

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commercial basis. Why are the Government obsessed with the ideology that everything in the public sector is bad and everything in the private sector is good ?

We heard talk about how the Treasury determines everything. For goodness sake, the Government are in charge of it : they can decide the rules and what constitutes part of the public sector borrowing requirement and what does not--or perhaps the Minister can do it by himself. If the Government continue to box themselves into a corner of their own making, they cannot plead to the House, "How can the Post Office possibly prosper when it has to run to the Treasury every time it wants to invest two bob ?" That can be turned round if there is a desire to take that utility out of the PSBR and give it commercial freedom, including the ability to raise money on the capital markets.

I hear calls of, "Unfair," but unfair to whom ? The Green Paper tells us that at present what happens with regard to external financing limits and the contribution is similar to what happens to the dividends paid to shareholders. This is our business, our Post Office. Why should we not have the dividend, invest capital and take a long view as a community, collectively ? The Post Office is a prime service industry. It does not have to be privatised in this way. It can serve the needs of our nation domestically and industrially.

Mr. Peter Ainsworth : The hon. Gentleman referred to a point that I made, but I am not sure that he fully understood it. The point about fair competition is, first, that it is good and, secondly, that it cannot exist where one of the competitors has behind it the full weight of the taxpayer. There can be no fair competition on that basis.

Mr. Purchase : That turns everything on its head. Any number of international and multinational conglomerates have such clout in the money markets that it is silly to talk that way about Britain, which probably has a gross domestic product smaller than the borrowing ability of some multinationals. [Interruption.] I do not have it wrong. It is barmy to say that we should not exercise our right collectively and as a state to borrow money to finance long-term investment in our industrial and service sectors. It is not me who has not understood ; your side

Mr. Deputy Speaker (Mr. Michael Morris) : Order. I am sorry to interrupt the hon. Gentleman when he is in full flow, but we do not normally use the words "you" and "your" in the Chamber.

Mr. Purchase : That is the second time I have been told that today, Mr. Deputy Speaker. I understand and I will do my best to refrain, notwithstanding the full flow.

It is right that collectively we should be able to raise money for long- term investment. It is Conservative Members who have not understood the important difference between borrowing for investment and borrowing to pay the dole. The Government are pouring money down a black hole with no chance of recovering it. They are financing unemployment, much of it the result of the so-called rationalisation of some of the former nationalised industries. That is why millions of people are claiming the dole instead of working.

We want the Post Office to be able to borrow for long-term ventures such as modernising, improving and spreading its service as widely as possible, thereby leading us to a springboard from which we can compete successfully on the international stage and win for Britain.

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8.11 pm

Mrs. Angela Browning (Tiverton) : I have resisted the temptation to intervene in the speeches of Labour Members since the hon. Member for Vauxhall (Ms Hoey) so ungraciously refused to allow me to do so in her speech.

Some rather contradictory views have been expressed by Labour Members. They have said that, if Royal Mail is privatised, the price to the customer will be jacked up, but that private enterprise would undercut Royal Mail. The idea that any business would jack up its prices while competing with other companies that were reducing theirs does not sit well in the marketplace with which I am familiar. The hon. Member for Wolverhampton, North-East (Mr. Purchase) disagreed with the Minister's assertion that, if British Telecom had remained in the public sector, it would not have reduced its prices or acknowledged advances in technology. The hon. Member for Birmingham, Yardley (Ms Morris) claimed that privatising Royal Mail would be bad because the only way to protect the 160,000 jobs involved was to keep it in the public sector. I am not sure whether the hon. Lady believes that British Telecom could have maintained its staffing strength while reducing its prices and acknowledging advances in technology--something that has been necessary throughout the world.

I represent a large rural constituency that covers some 650 square miles and has more than 70 post offices. I take a particular interest in, and have a particular concern for, the future of those post offices, the majority of which are sub-post offices. I have had regular meetings with the sub-postmasters in my constituency. Indeed, last September I invited them all to a meeting so that they could tell me how they saw the future and what they wanted for rural post offices in particular. I am pleased to say that 30 of them attended that meeting and I then fed back their views to my hon. Friends at the Department.

I must come to the defence of the Minister. Labour Members have accused him of dithering. We all want the process to be concluded because uncertainty is not a good thing, but my right hon. Friend has not been dithering. He has spent considerable time studying what happens in other countries-- especially the Republic of Ireland, which uses the switch card to good effect in the payment of benefits. I was glad, therefore, to note in the Green Paper the Government's pledge of £130 million for the automation of benefit payments. If the system is similar to that in the Republic of Ireland, it will greatly benefit my rural post offices. When the sub- postmasters met me last September, they were anxious to point out that they wanted ways to generate income other than the opportunity to sell tangible goods. Some of the sub-post offices in my constituency are very small and do not have the room to sell a large range of stationery, let alone stock the grocery items that are so often found in small post offices. Some of them are open only two or three half-days a week and are located in people's front rooms. Their ability to increase their income and the range of services that they offer to people in the villages is obviously extremely limited.

If small post offices were computerised and able to sell a range of additional services, the benefits would be most helpful. Ticketing and similar services that can easily be arranged through a computerised service would help them to broaden the range of services that they could offer. That would help people who live in rural communities.

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I have read the Green Paper carefully and I shall discuss it at a meeting with sub-postmasters in my constituency before 30 September. Before I do so, however, I should like to ask my right hon. Friend some questions. There is some concern about the payment that sub-post offices receive from the Royal Mail. When my right hon. Friend replies to the debate, will he give an assurance that that payment will continue ? It is an important part of their income.

As is made clear in the Green Paper, and as Ministers have said from the Dispatch Box and elsewhere, it is important to maintain the network of sub- post offices and the universal daily delivery of mail from Monday to Saturday, regardless of where people live. In rural areas, people often live at the end of lanes, so it is important to maintain the continuity of the daily post.

Had the hon. Member for Vauxhall allowed me to intervene when she was talking about a second delivery, I would have told her that rural areas have not had one for many years. I visited the modern sorting office in Exeter, which is in the constituency of my hon. Friend the Member for Exeter (Sir J. Hannam), but which also serves my rural constituency that surrounds Exeter. I was there during the late morning and early afternoon and I saw the amount of mail that was cleared. It is quite clear that Royal Mail is now able to deliver, in one delivery, the vast bulk of the mail that it receives in a 24-hour period. Raising problems about a second delivery is just a red herring. Rural areas get their post on time without the benefit of a second delivery. Indeed, in this day and age, a second delivery is a bit of a luxury, especially in view of the small amount of post waiting to be cleared in the sorting office in the late afternoon.

Mr. Hain : Will the hon. Lady give way ?

Mrs. Browning : I would be tempted to do so, but the hon. Gentleman's colleagues did not extend that courtesy to me earlier. The cross-subsidy is important for the network of sub-post offices and sub- postmasters in my constituency want some reassurance about that. As I have said, many of them have very small businesses and the amount of income they can generate, from Royal Mail and other sources, is limited.

I am convinced that the necessary guarantees will be provided, so I shall be happy to support the proposed Bill when it comes before the House. Obviously, I want to take the opportunity to respond in detail to the Green Paper and to sound out my sub-postmasters. The principle behind the Government's proposal--which is to maintain the network of sub-post offices in its present format but to increase the range of services that can be offered--is most welcome. My hon. Friends have demonstrated amply that, if Royal Mail is privatised as is suggested in the Green Paper, it has not only to defend its position in the marketplace, but to be given the opportunity to go out and compete in marketplaces around the world.

We have heard what happens in the commercial environment, particularly with direct bulk mail. I know of businesses in other parts of the world-- America, for example--that send an enormous amount of direct mail into mainland Europe. They rarely use Royal Mail because other countries' services can undercut us yet, as we have heard tonight, the local postman and postmistress ends up

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putting it through a letter box or delivering it to a business. We are being used in a way which produces very little profit. I received a letter from the Post Office--as I am sure did many hon. Members--outlining its concern at the way in which the volume of mail is growing. As a result of the growth in bulk mail, person-to-person mail is declining as a proportion of the gross mail handled by the Post Office. That is extremely worrying and, as we all know, once a business loses its market share and people build in brand loyalty with other service providers, it is difficult to break into those markets.

Royal Mail must be allowed to compete domestically and internationally. Associations that it may want to develop with printing companies and others who can deliver the complete package of services that people who send commercial mail want to purchase are important because that added value element will be extremely important.

In principle, I am happy to support the proposals that Ministers have outlined from the Dispatch Box. I obviously seek reassurance on the critical issues that affect people in rural areas, particularly in my constituency. I look forward to debating them fully and I hope that Ministers will take full account of the representations made to them in response to the Green Paper.

We have heard that, this summer, Labour party representatives plan to come into our rural areas. I hope that they wear good strong boots, as it is not as balmy an environment as they would wish. When they spread their scare stories in rural areas they will find people to be quite sensible. They will also find that the Liberal Democrats got there first as, for many months, the Liberal Democrats have been telling people in rural areas, by means of questionnaires and petitions, that they will lose their daily Royal Mail and the sub-post offices in their villages. I assume that the Labour party will follow them in that. They are past masters of such scare stories and I am sure that they will share their disgraceful tactics. I hope that people will look at the facts and will not be gulled. The people who are gulled by scare stories are pensioners and disabled people who claim their benefits from local post offices and people who look forward to personal letters from relatives once a week or once a month.

The campaign is typical of what one might expect from Opposition parties, but I hope that it will be exposed for what it is--preying on the vulnerable and not a rational response.

Mr. Michael Connarty (Falkirk, East) : Will the hon. Lady give way ?

Mrs. Browning : I am not giving way to any Opposition Members. I sincerely hope that the British public, who will be the prey of the summer campaign, will demonstrate, as they have in the past, that the privatisations that the Government have introduced have not only been right, but have been in the public interest.

8.23 pm

Mr. Peter Hain (Neath) : The most striking thing about the Green Paper is that it is riddled with contradictions. The Government have stumbled into the proposal like a drunken sailor intoxicated by the privatisation dogma.

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Three years ago, we had the citizens charter, with its proposals for deregulation and extra competition. We heard no more about that. Then, two years ago, the President of the Board of Trade announced the privatisation of Parcelforce in an almost instant fashion, without proper consultation, only to be dragged by his officials into considering an overall Post Office review a week later, once it had been pointed out to him that it was not as simple as he had thought. We have had deliberations on the proposals for two years and now the Government have come up with this hotch-potch.

I remind the Government that the well-worn procedure for dealing with drunken sailors is to throw them overboard. The former Under-Secretary of State, the hon. Member for Gainsborough and Horncastle (Mr. Leigh), lost his job as a result of the mania for Post Office privatisation, so which Minister will be next ? I believe that, ultimately, the people will throw the Government overboard as a result of this privatisation. I mean no ill will towards you, Mr. Deputy Speaker, when I say that.

The first serious fault line in the Green Paper is the separation of Post Office Counters from the rest of the Post Office. No postal authority in the world operates a separate retail business, as the Government are proposing. Even the Dutch, who have been quoted every other minute by Government supporters in the debate, have made it clear that they oppose such a proposition.

At a conference in London on 21 and 22 June the managing director of the Dutch post office, Mr. Theo Jangsmon, said :

"I believe the separation of Counters from Royal Mail will hamper some service development".

The chairman of the Post Office, the chief executive and the rest of the Post Office management whom the Government are praying in aid to support the privatisation proposals have argued strongly in evidence to the Select Committee on Trade and Industry and elsewhere for the business to be kept together.

The former chairman of the Post Office, Sir Ron Dearing, who has been significantly silent on the privatisation debate because one might surmise that he is opposed to it, argued the same thing--that the Post Office should be kept together--in a letter to staff in January 1987, as did the Post Office Users' National Council in a submission to the Government's own review.

Are they all wrong ? Do the Government consider themselves the only party to the debate who are right ? I do not think so ; it is essential to keep all sections of the Post Office together, because there is a synergy between the different businesses.

There are 3,092 delivery offices and more than half--1,690--are attached to local post offices. If those post offices are threatened, the delivery offices will be threatened as well. Equally, if the delivery offices are threatened with closure, as will increasingly happen under privatisation, the viability of local or sub-post offices will also be threatened.

Parcelforce is another example. When there is nobody at home, parcels are invariably returned not to the 137 parcel delivery offices--a small number, which is declining--but to one of two other places : either the 3,000 local letters delivery offices or the 20, 000 local post offices. If Counters is separated from Parcelforce and the Royal Mail as an entirely separate institution in the public sector, there is no prospect of that synergy remaining, and that will threaten the Royal Mail and Counters.

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There is also a tremendous danger of Counters being left as a rump service in the public sector, with no obligations and no commitments from its sister businesses dealing with letters or parcels to support it in any way. I am not suggesting that there is an overt accounting cross-subsidy ; there clearly is not, but there is an organisational cross-subsidy that results from being part of the same post office. If, in addition, as the Green Paper proposes, private parcels operators and postal operators are encouraged to use the Post Office network as suggested in the Green Paper, there will be even less incentive for the privatised Royal Mail to continue to support the public post offices in the way it does at the moment.

I speak only for myself in this regard and may be criticised by members of my Front Bench, but if the Government privatise the Post Office--something to which I am 100 per cent. opposed--they should keep the counter business with the Royal Mail. If they are hell-bent on privatisation, they should privatise the whole Post Office, and not break it up in the way proposed. If there is an end to any obligation on the part of Royal Mail and Parcelforce to maintain current inter-business charging arrangements, the Post Office's overall viability, and particularly that of the counters business, would be threatened.

At present, there is a considerable financial flow between different postal organisations. At the end of March 1994, counters recorded an income from the Royal Mail of £221 million, against expenditure of £51 million ; and from Parcelforce, an income of £22 million against expenditure of £1 million--a net income of £191 million from both businesses.

If Royal Mail and Parcelforce choose other means of delivering the services for which they currently depend on Post Office Counters, the effect on its small profit margin will be catastrophic. The Government have completely ignored that. In that event, the counters business would become a cost to the taxpayer, whereas at present it contributes to the Exchequer.

Crown offices are being downgraded or closed and replaced by franchised agents, so the Post Office's identity is being undermined. What obligation is there on Royal Mail or Parcelforce to use a local post office if it is at the back of--dare I say ?--a Sainsbury supermarket, newsagent or some other retail outlet ?

Royal Mail will seek to maximise its market share as a private corporation. It will be under no obligation to the counters operation. Royal Mail and Parcelforce may even regard outlets stuck at the back of a Martins newsagent or Tesco as conflicting with their corporate image. That is another reason why a privatised Post Office may not want to use counters as a separate public sector operation. After privatisation, we saw British Telecom take away services previously provided by counter outlets, such as the booking of international telephone calls. BT is currently presenting a proposal to cease contracting the sale of licence saving stamps. That is what happens when a unified business is broken up. I could quote many other examples. I am emphasising the case for the essential synergy between the different sections of the Post Office as currently structured.

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Mr. Roger Evans (Monmouth) : The hon. Gentleman argues that all Post Office business should be preserved in one unit for the benefit of the Post Office and of all the people who work for it. Is that view held by the Union of Communication Workers, by which the hon. Gentleman is sponsored ?

Mr. Hain : The hon. Gentleman will have to consult the UCW. I dare say that lots of postmen and postwomen will be knocking on the door of the hon. Gentleman's surgery, lobbying him to change his views. There is united opposition among Post Office staff to this privatisation. I make the case not solely on behalf of Post Office workers but primarily on behalf of the public. The counters business will suffer irreparable damage by being hived off and left as a rump service in the public sector.

There is already tremendous public concern about the diminishing number of rural post offices, which are closing at the rate of 200 a year. A privatised Royal Mail and Parcelforce will be under no obligation to maintain local letter delivery offices on the present scale. As they seek to cut costs, they will reduce the number of those offices. That is already happening, but closures will accelerate, which will undermine the viability of local post offices. They are already on death row. In the coming year, they will desperately hope that they can be reprieved through the defeat of privatisation.

Paragraph 5 on page 27 of the Green Paper states that value added tax will be applied to "non-obligatory services". Does that mean that Datapost, which is Parcelforce's express delivery service, will attract VAT ? Perhaps the Minister will respond now or at the end of the debate. Datapost users want to know whether they will be charged an extra 17.5 per cent. The viability of that service, which faces stiff competition from private carriers, will be threatened by the application of VAT.

Paragraph 4 on page 27 suggests that VAT will be applied to contract parcels. The Government say that VAT will not be applied to stamps. Mention has been made of so-called granny parcels. I have never understood why it is thought that grandads never send parcels. I refer to parcels of the kind that you, Mr. Deputy Speaker, and I might send to elderly relatives.

The Government have made it clear that such parcels will not attract VAT, but there are many grey areas and contradictions in the separation. I understand why the Government sought to separate stamps from contract parcels. It would be deeply unpopular if the public suddenly had to bear VAT to the tune of nearly one fifth on current prices.

Will metered post and other pre-paid arrangements attract VAT ? We deserve an answer from the Minister, but he is not responding. It appears that there is some confusion. There will be considerable scope for evasion and loopholes in the clearly defined sectors of contract parcels and stamps.

Small businesses, for example, do not have a contract in the sense referred to in the Green Paper, but are subject to regular collections by Parcelforce. It suits Parcelforce to collect rather than to have parcels taken to local post offices or delivery offices. There is no pre-payment but subsequent billing. Will VAT be applied in those cases ? That is important to small businesses, which are already facing enormous pressures as a consequence of the Government's mistaken policies. They will want to lobby the Government.

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There is a suggestion that VAT will be applied to other sectors, but the Green Paper makes no reference to them. Will that tax be applied to Quadrant, the Post Office's catering operation ; to Subscription Services, another Post Office business ; or to Cashco, which is the Post Office operation that transports money to post offices and between Royal Mail and Parcelforce--a multi-million-pound, if not multi -billion-pound, operation ? Clearly, applying VAT to those cash movements will be an enormous issue, which the Government will have to tackle.

There are equally important technical issues, and they are skated over in the Green Paper. What about the royal parks ? At present, Royal Mail and Parcelforce vehicles have access to the royal parks, not merely to deliver to them and collect from within them but also, by custom and practice, to drive through them, whereas other private operators have not. Indeed, other operators are specifically barred from driving through the royal parks.

If there is to be a level playing field with DHL, TNT and the other private operators, will Royal Mail and Parcelforce vans lose those privileges, or will they maintain them ? We have a right to know the answer to that question, but it is another black hole in the Green Paper.

To pursue the colour analogy, there is also the question of yellow lines. At present, Post Office vehicles can park on double yellow lines without being given an immediate fine and attracting the wrath of local parking wardens, as would happen to you or me, Mr. Deputy Speaker. As private operators--that is what the Government propose--will Royal Mail and Parcelforce vehicles cease to have the privilege of being able to park without hindrance on double yellow lines ?

We should know that, as it will affect the viability of the privatised Post Office and Royal Mail that the Government are so keen on. Will they still be viable without those privileges ? We should also know whether the private operators with which they will compete will have such privileges accorded to them, too.

The most serious problem of all--the Government have not addressed it, and it has not been mentioned in the debate so far, except in the opening speech by my hon. Friend the Member for Livingston (Mr. Cook)--is the wider pattern of competition that it is threatened will be superimposed on the Post Office.

If this were simply a question of privatisation, there would be enough of a threat for us to avoid going down that road, especially for rural services, which are presently subsidised within the Royal Mail sector by nearly £300 million. A lean and hungry privatised Royal Mail could not possibly do anything other than reduce rural services. Under any privatisation regime, there would be enough of a threat to rural services, but when the extra competitive measures buried in the Green Paper are put on top of those, there is a serious threat to the viability of the standards to which we have become accustomed.

There is enough of a threat to second deliveries even now. The hon. Member for Tiverton (Mrs. Browning) did not allow me to intervene in her speech, but her constituents, especially those who are Post Office workers, should be told that she does not appear to favour second deliveries in town areas. Paragraph 9, on page 21 of the Green Paper, says :

"Nearly one area in six receives no second delivery".

That is a revealing statement. In other words, five in every six areas do receive a second delivery ; 85 per cent. of all households receive one. But the Government are not

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terribly keen on second deliveries. Their defensive explanation, saying that one area in six does not receive the second delivery, is almost a nod and wink towards getting rid of it.

Indeed, as I know from personal experience, having worked for the Union of Communication Workers and negotiated with Post Office managers, Post Office managers have consistently tried to get rid of the second delivery for years. Now the Government are effectively giving them the green light to do so. Not only will the public suffer greatly, but 27,000 jobs will be lost as a result.

That will be one consequence of privatisation. On top of that, there will be competition. It is important that the House understands what is at stake. The three separate operations within Royal Mail are processing, distribution and delivery. The Green Paper rules out competition in delivery. Why ? Is that some charitable gesture ? Have the Government had an attack of conscience for a change ? No ; the cost of delivery is the real cost of the Royal Mail. It costs four times as much as the other two functions. In other words, 80 per cent. of all the costs of the Royal Mail fall within the delivery sphere. So no competition is being opened up there.

Surprise, surprise--competition is being opened up in the profitable areas, in distribution and in processing. There will be competition, for example, in downstream access, which will allow private operators to come in and cream off the trunking--the easy work, on which a great deal of money can be made. It is said that competition will also be allowed in consolidation, which is mentioned in the Green Paper. That will allow small companies, which cannot now become involved in mailsort and the other pre-sorting arrangements operated by the Royal Mail, to consolidate their activities together through a new private operator. The profits can then be creamed off, then be trunked down, and the rest will be dumped back into the Royal Mail delivery network. All the costs will be picked up by the privatised Post Office, while the private operators pick up the profitable traffic.

Another vignette from the Green Paper is the encouragement of niche licences, which will allow document exchange operators, such as Britdoc, to cream off more traffic, making a great deal of money in doing so. In addition, the monopoly is to be reduced below £1, allowing extra competition. If we add to privatisation, plus all those competitive measures, the RPI minus X price-cutting formula and the European Commission's proposals to take direct mail--40 per cent. of all Royal Mail's traffic--out of the reserved sector, a cumulative pressure will build up that will mean disaster for the Post Office in its privatised state. I believe that it will threaten the viability of the entire Royal Mail service, and place a serious question mark over its flotation. Potential buyers of Royal Mail should study that idea carefully, because they may be being sold a pup.

I believe that the alternative to privatisation has been clearly set out by my hon. Friends on the Front Bench. It is commercial freedom within the public sector. That is perfectly viable, and it exists all over the rest of the world. Even within Britain, it exists, and has existed, in such institutions as the BBC, BNFL, BP when it was still 70 per cent. publicly owned, and even in British Leyland. There is no reason why commercial freedom within the public sector cannot be delivered, except privatisation

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dogma. It is that dogma in the proposals that we started off fighting, and we shall take that fight to the country. I believe that the Government can be defeated on this measure.

8.47 pm

Mr. Andrew Welsh (Angus, East) : In his attack on the fault lines in the Green Paper, the hon. Member for Neath (Mr. Hain) got to the root of the problem. His warnings were well made. The hon. Member for Tiverton (Mrs. Browning) wanted to see the continuation of rural and suburban post offices. I certainly share her wish for such post offices to continue to grow and thrive, and I hope that the specific reassurances that she sought will be forthcoming from the Government.

Post offices are a crucial part of the local economy of every community throughout the length and breadth of the country. I give due praise and thanks to the men and women who daily provide us with that invaluable service. In my view, we should keep that piece of family silver, polish it up and use it for the benefit of the community, not sell it off at the first opportunity.

I shall be brief, because other hon. Members wish to speak, but I wish to add my support for the Post Office as a public service for the public good. The Victorians introduced that concept which is still supported by the majority of people in Britain. According to recent opinion polls, opposition to privatisation has risen from 64 per cent. to 81 per cent. in the two years since the Government first mooted their ideas. Even 53 per cent. of Conservative supporters are opposed to privatisation.

The reasons for change are Government driven. Treasury rules come from the Government. Access to cash for technological improvements is also controlled by the Government. As with water privatisation, there is a self- fulfiling prophesy. The Government create the rules and then pray them in aid when they want to force through their own dogma.

The Post Office is already efficient, effective and respected. Scotland's 13,000 Royal Mail staff ensure that 94.5 per cent. of first class letters are delivered next day. Given our geographical reality, that is good by any standards.

Under the existing system, the Post Office is a profitable organisation with pre-tax profits of £283 million in 1992-93 and probably even higher profits in 1993-94. The Treasury has not hesitated to dip into that treasure trove to the tune of £230 million in the year to March 1993. But that self-same Treasury also imposes cash limits, thus thwarting potential investment.

There are obvious threats to the commercial future of the Royal Mail--for example, electronic communications. Faxes equivalent to 15 million letters per day were transmitted last year, and electronic trading by computer has doubled in volume during the past year. But those challenges could be met if the Royal Mail had the freedom to do so. Its investment record, despite current Government straitjackets, is good. Greater efficiency, reorganisation, which has dramatically reduced the layers of management, and the adoption of the total quality concept have already

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