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9.6 pm
Mr. Douglas French (Gloucester): The motion invites the House to accept that privatisation would threaten the continued success of the Post Office and place individual post offices in jeopardy. It is not a very full-hearted endorsement of the Opposition's argument for commercial freedom that they make no mention of it in their motion.
To be fair to the right hon. Member for Derby, South (Mrs. Beckett) and the hon. Member for Dagenham(Ms Church), they did argue in favour of some measure of commercial freedom and were joined by the hon. Member for North Devon (Mr. Harvey). One assumes, from what he said among the political invective, that the hon. Member for Falkirk, East (Mr. Connarty) also believes in a measure of commercial freedom. None of those hon. Members gave a coherent presentation of how we could achieve commercial freedom in the public sector, which, after all, is at the heart of this debate.
The problem is that the Labour party is ideologically opposed to any proposals that are labelled as privatisation. The hon. Member for Dagenham accused us of it, but it is her party that is being ideologically dogmatic by not recognising that the Post Office needs commercial freedom and that the only way to deliver it is privatisation.
It is interesting to note that senior management of the Post Office have consistently argued for privatisation. Bill Cockburn was an articulate proponent of it. It is much to the loss of the Post Office that he tired of waiting for something to happen. He wanted privatisation, but, sadly, he has gone to W. H. Smith--to its gain and to the loss of the Post Office. Michael Heron continues to argue in favour of privatisation.
Sadly, the Labour party takes the view that what senior management want cannot also be in the best interests of the Post Office's work force. That was clear from the
sneering comments of the right hon. Member for Derby, South and the way in which she referred to City institutions and from the reference of the hon. Member for Falkirk, East to fat cats. Those are typical left-wing arguments--what is good for management will automatically be bad for those who work for the business. Rather, it could more appropriately be argued that management is best placed to know what is likely to benefit the business.
The first thing that the management of the Post Office has always recognised is that Royal Mail is at the heart of the business and that success must be achieved in that sector. In relative terms, it is more important than any other part of the business. If the fortunes of Royal Mail go down, so, too, will those of Post Office Counters.
Royal Mail has been, historically, a labour-intensive organisation, but is becoming less so because of technology, especially automatic sorting equipment, which becomes more advanced almost every day.It represents a huge investment by the Post Office to keep up to date with technological advances.
Technology means that a given volume of mail can be handled by a smaller work force. We have heard from two hon. Members who are sponsored by unions with an interest in the Post Office, and I appreciate that the unions are concerned that the use of new technology could result in lost jobs. That is the gut reaction when one tries to gauge what might happen. My local sorting office on Eastern avenue, Gloucester provides several hundred jobs, and I must consider what is in the best interests of safeguarding them. To ignore the arguments about the advantages of privatisation is the very way to place those jobs in jeopardy.
That privatisation would ultimately mean job losses is the thrust of the message from the Labour party to the unions or, given the wording in the Opposition motion, perhaps it is the thrust of the message from the unions to the Labour party. The reverse is almost certainly closer to the truth. It is not possible now to stop new technology, and no one would want to stop new investment in plant. It is possible, however, to take steps to ensure that the volume of mail handled by the Post Office and the profit that it generates increases rather than decreases. That can best be achieved, as every hon. Member who has spoken has accepted, by facing up to the fierce and growing competition to which the Post Office is subject.
It is easy to talk about competition without appreciating the impact that it has on the business of the Post Office. As my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) has already said, one of the most profitable sectors of Post Office business is the delivery of bulk business-to-business commercial circulars. The Dutch post office, PTT, to which reference has already been made, has become extremely skilful at bidding for bulk United Kingdom direct mail business. That mail goes from the United Kingdom to destinations outside our country. PTT has been most successful at creaming off business that would otherwise have gone to Royal Mail.
The Dutch post office has now gone further, however, because it has succeeded in bidding for bulk mail destined for United Kingdom addresses. According to the accounting conventions operated by the Universal Postal Union, four fifths of the revenue raised through the
postage rate goes to the country collecting the post and just one fifth goes to the country making that delivery. Where bulk mail business bound for destinations within the United Kingdom is taken on by an outside Post Office, Royal Mail bears the bulk of the costs and gains the minimum of the revenue. It is necessary to address that problem.
Why can the Dutch post office organise itself to win such business? The first reason is that it can make proper commercial quotations and charge proper commercial tariffs. In the statement made by my right hon. Friend the Member for Henley (Mr. Heseltine) in May 1995, some reference was made to Royal Mail being allowed to be more commercial in the deals that it makes. It must, however, still make deals according to fixed formulae. The Dutch post office does not have that constraint, so it can bid for a line of business at a price that it knows will secure it. Special tariffs for special customers is a commercial feature available to the Dutch post office but not available to Royal Mail.
Secondly, the Dutch post office can offer a combination of services, such as the fulfilment of a total postal requirement that covers designing and printing an item, enclosing it in an envelope, generating the address to which it can go and providing transport to take it there. Royal Mail is currently constrained from offering that combination, which customers want.
Thirdly, the Dutch post office is able to enter into realistic alliances and joint ventures. It does not have to ask the Dutch Government whether it is all right to make an alliance or a joint venture with a company; it can get on and do so. That is real commercial freedom.
It was encouraging, in one way, to note from the statement in May 1995 that we are starting to move in that direction, but we have not gone anywhere near far enough. Some Opposition Members have argued that it does not matter because foreign post offices do not have the right to deliver to United Kingdom addresses; the bulk of the business is a Royal Mail monopoly and therefore Royal Mail is protected. That is a misconceived point of view because it is based on the assumption that the post is an irreplaceable service. That is not so.
As a communication medium, writing on a piece of paper and sending it around the world carried by hand is a very outmoded concept, and will quickly be overtaken by all types of communication methods such as the Internet, e-mail, fax and all the others that were mentioned earlier. Royal Mail's problem is that its business is rooted in a function that is going out of date, and if there ever was an argument why it needs to be able to expand its repertoire, that must be it.
The strategy for the British Post Office should allow it to compete vigorously and effectively in its share of the postal market, whatever size that market may be, and to have the freedom to stake its claim to what will be the alternatives to carrying a piece of paper around the globe.
In my opinion, commercial freedom is vital, and commercial freedom in the public sector is a contradiction in terms. If commercial freedom means anything, it means the opportunity to take a risk--an argument that was well made by my hon. Friend the Member for Colchester, North (Mr. Jenkin). If the Post Office is in the public sector and it is allowed to take a proper risk, that risk is underwritten by the taxpayer. That is the central message that the Opposition parties need to be able to understand
and digest because, until they do, they will never adopt a policy on the Post Office that would give it a satisfactory future.
It is wrong that an organisation such as the Post Office has to seek the Government's approval whenever it wants to make a significant investment decision and that an obligation is placed on the Department of Trade and Industry to involve itself in such decisions, not only because it has a right to do so but because, as guardian of the taxpayer's money, it has a duty to do so. The Post Office must be allowed to set its own financial targets, to make its own investment decisions and to raise capital when it needs to do so.
Opposition Members have complained about the level of the external financing limit. I entirely accept the basis of their complaint--that the EFL is far too high and that it inhibits the Post Office--but the answer is to replace the EFL with the corporation tax that the Post Office, as a public company, would pay like any other public company.
As things stand, Royal Mail is undoubtedly destined to lose business on a global scale unless steps are taken. Other post offices, such as the Swedish post office, the Dutch post office and PostDienst in Germany, have recognised that fact. Theo Jongsma, the managing director of PTT, when visiting London in 1994, said:
"I support the privatisation of postal companies worldwide".
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