Previous SectionIndexHome Page

12.45 pm

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): I congratulate the hon. Member for South-West Hertfordshire (Mr. Page) on securing the debate, and am happy to respond. If I did not remember the hon. Gentleman's record as a Minister responsible for the Post Office, I would not disagree with much that he said; but he has a record of failure as long as his arm. I would not have mentioned that if the hon. Gentleman had not been rather churlish in his speech about the steps taken by the Government so far--first to deal with the shambles that the hon. Gentleman left us, and secondly to introduce measures for the future of the Post Office in a sophisticated way, involving all the stakeholders who use it daily as ordinary customers or as business customers for whom it is a major distributor.

The reforms announced by my right hon. Friend the Member for Hartlepool (Mr. Mandelson) on 7 December 1998 broke the deadlock with which the last Government left us. They give us a real opportunity to provide the Post Office with commercial freedoms. The hon. Member for South-West Hertfordshire was, in fact, responsible for the Post Office on two occasions: one would have been bad enough, but he returned for a second bite at the cherry. He claims that he was always in favour of reform, but he never achieved it. His party enjoyed a majority in the House for 18 years, and, owing to an intellectual straitjacket, the only show in town was the privatisation of the Post Office. The Conservatives allowed it to float away in the ether, which damaged management, personal relationships and the Post Office's economic future, and

13 Jan 1999 : Column 270

offered a prospect that was wholeheartedly rejected time and again by the British people, and by management and workers in the Post Office.

The hon. Member for South-West Hertfordshire is known in the Department of Trade and Industry as "Swag-bag Page". As a Minister, he was responsible for the second biggest hike in the external financing limit ever imposed by the Government. He took 91 per cent. of post-tax profits in 1995-96, and came back for a second bite in 1996-97. That money--91p in every pound--was money that the Post Office needed to invest in new opportunities, here and throughout Europe. It was hamstrung by a Minister who handed the money over to the then Chancellor of the Exchequer, who squandered it rather than investing it in postal and telecommunications services.

There was chaos. Industrial relations were in turmoil, with 810,900 days lost through industrial relations in the second year during which the hon. Gentleman was a Minister. It has taken the present Government to resolve the position, securing a 1,800 per cent. reduction in the number of days lost through industrial action.

Not one joint venture was established with the Post Office on either occasion when the hon. Gentleman was a Minister. Since I have been the Minister responsible, I have established a number of joint ventures. The Post Office has acquired a stake in a Swedish mail delivery company, linked up with a Dutch letters and parcels delivery company, established a joint venture for the catering arm and, in conjunction with Microsoft, launched a service enabling customers to receive paper mail sent electronically. Since day one of their inheritance, the Government have sought proactively to establish a new framework for the Post Office, and new opportunities for it to compete here and abroad.

I am grateful to the Trade and Industry Select Committee for the timely publication on Monday of its report following an evidence session on 9 December. The memorandum summarising the main points that the Committee expects to see in the White Paper is helpful in itself. I hope that I can be as successful in meeting the Committee's expectations as we were in fulfilling the recommendations of the report that it published this time last year.

The Post Office is a great national institution, on which we all rely. It delivers post to every address in the United Kingdom each working day, handles more than 70 million letters per day, is beaten only by Coca-Cola as the most strongly recognised brand image, and has more than 19,000 post offices in the UK. Almost 60 per cent. of villages have a post office; only 5 per cent. have a bank. The Post Office is visited 28 million times a week on average--half the UK population. No wonder the Tories wanted to privatise such a special asset, owned by the British people.

We want the Post Office to remain one of the great success stories of the UK, contributing to the commercial success of other businesses, providing the modern communications infrastructure that we need commercially and socially, and contributing to the social cohesion of our nation. I trust that Conservative Members share that desire. Indeed, the hon. Member for South-West Hertfordshire went out of his way to say that that was the case. It is just that his policies in government failed to meet those challenges. It has been up to this Government

13 Jan 1999 : Column 271

to meet them effectively. We are keen to put in place as quickly as possible the reform package that was announced last month.

I want to put in place three main pillars of the reform package by the middle of the year at the latest. First, we shall publish a White Paper putting flesh on the bones of the announcement on 7 December by my right hon. Friend the Member for Hartlepool. The hon. Member for South-West Hertfordshire is right; I will not pre-empt that in the debate.

The White Paper will redefine the relationship between the Government and the Post Office, as well as explain our plans for implementing the comprehensive reform package. I look forward to positive contributions in response to the White Paper by anyone and everyone who is interested in providing genuine commercial freedoms to the Post Office.

Secondly, we will implement the European Union postal services directive. We will introduce regulations under section 2(2) of the European Communities Act 1972, enabling us to ensure early implementation of significant parts of the reform package, especially the establishment of an independent regulator. Thirdly, we will agree with the Post Office the strategic plan, which will form an essential part of the new arm's-length relationship between the Government and the Post Office Board.

The hon. Member for South-West Hertfordshire raised the issue of the Horizon automation project. The Government are committed totally to the project. The deep-seated problems over the project--I do not mean the comment in a personal way--were inherited from the previous Administration, who failed to deal adequately with the introduction of such a complex programme.

We are absolutely committed to providing a modern, secure, convenient and cost-effective means of paying benefits to customers. That is what the benefit payment card has been designed to do, and it remains our objective. However, we have been concerned at the substantial delays that have been suffered by the Horizon project, mainly due to the previous Administration. We continue actively to monitor its progress.

The Benefits Agency and Post Office Counters Ltd. continue to work closely with the supplier, ICL Pathway, to resolve the problems. The Government remain committed to a nationwide network of post offices and to ensuring those benefit customers who wish to do so can continue to draw their benefits in cash at post offices.

The hon. Member for South-West Hertfordshire also talked about German Parcel. I will try to be as helpful as I can in relation to that. We can all be proud about that achievement. Within weeks of the Government giving greater commercial freedoms to the Post Office, it was able to acquire German Parcel. That signals a big step forward in achieving the Post Office's strategic objective to become one of the top global distribution companies.

As the hon. Gentleman said, German Parcel is the third largest private carrier in Germany and a major shareholder in General Parcel, an international company which operates throughout 30 European countries. Therefore, it is important that that exciting new venture is a success for the Post Office. It provides an early demonstration that,

13 Jan 1999 : Column 272

with the new freedoms of the reform package that we have announced, our Post Office can respond much more effectively to the opportunities of a changing and dynamic international marketplace to provide wider and better services to meet the growing demands and needs of its customer base.

Many other European post offices have already invested in substantial acquisitions and strategic alliances, so the Post Office is coming from a long way back. Therefore, we have to respond in a way that ensures that, in that dynamic marketplace, the Post Office can secure with some certainty acquisitions in which it has an interest.

The Post Office has shown that it can do that by that particular acquisition. That will become ever more vital as the postal market becomes increasingly globalised and competitive. That significant international acquisition shows the commitment of both the Government and the new Post Office Board to move quickly to implement the agreed reforms, and gives the lie to those who questioned the Government's commitment to their new policy for a public sector organisation.

I know that the Post Office has faced calls to disclose how much it is paying for German Parcel; the hon. Member for South-West Hertfordshire alluded to that in a reasonable way. Of course, the public, as owners, should be aware of Post Office investments and financial commitments and the Government should be as transparent as possible in their dealings, but not in ways that might unduly damage the Post Office's prospects for commercial success. No owner would want that.

As I said, I hope that I can be helpful. The estimated turnover of German Parcel for the current year is around £265 million. A normal core price for such an acquisition might be the annual turnover plus any special assets, so that should give a good idea of the figure in question, but I stress that other publicly and privately owned European post offices are making acquisitions and, in most instances, we do not know how much they are paying. They do not say; nor do they intend to say.

For commercial reasons, our Post Office would dearly like to know what the costs of those other acquisitions are, so we are not going to hand on a plate to Deutsche Post or other serious competitors the figure paid for German Parcel; nor do I think that the hon. Gentleman would wish us to do so.

The figures in question will properly be reflected in both published Government and Post Office accounts, and any adjustments to the Post Office external financing limits will be announced in the normal way, but such publication will not necessarily reveal the details of any particular commercially confidential deal. The Post Office investment in German Parcel will stand on its own two feet and we fully expect it to pay for itself.

I return to the reforms. The package is radical. It presents the best way forward. Reviews under the previous Government failed to give the Post Office greater freedoms or disciplines. Instead, they left it in limbo and, as a result, starved it of investment. As I have said, the hon. Gentleman played a major part in that starving of investment. Our review gives the Post Office the commercial freedom that it needs.

Pursuing wholesale privatisation, as set out by the hon. Gentleman, was not an option; nor is it an option. It could have put large parts of the network under threat.

13 Jan 1999 : Column 273

Because of the need for primary legislation, it would have created a long period of uncertainty, which would have seen the Post Office's market further undermined at home and abroad.

The reform package has several essential elements. One is the new arm's-length relationship. The Government's role in the Post Office will be restricted to the strategic level, both on matters of commercial direction and on setting social objectives. The Post Office Board will become clearly accountable for its success or failure in running the business. We will require the Post Office to present a rolling five-year strategic plan each year for approval by Government. That is essential to protect taxpayers' interests.

Another is the new regulatory regime, which, as I have said, will be substantially set out in the White Paper. In setting that out, we will clearly show the direction the Government will want taken in terms of greater resources for investment.

My right hon. Friend the Member for Hartlepool has already set out moves on the external financing limits. We decided to change those for the Post Office for next year--1999-2000--to £207 million from the provisional figure of £335 million. That will be about 50 per cent. of post-tax profits, down from the 91 per cent. that was introduced by the hon. Member for South-West Hertfordshire. In subsequent years, it will fall to 40 per cent. of post-tax profits. That will give great incentive to the Post Office to be even more successful than it has been already under the present Administration.

Next Section

IndexHome Page