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Mr. Nigel Evans (Ribble Valley): Oh, "And rural"! That means a Tory gain.

Mr. Galbraith: The two sorts are different, they have different problems and may require different solutions.

Mr. Frank Roy (Motherwell and Wishaw): There are certainly two basic types of sub-post offices. In my constituency, 88 per cent. of post offices rely on the Benefits Agency for almost 50 per cent. of their business--a huge proportion of any business. Does my hon. Friend accept the guarantees that we have heard Ministers give repeatedly, namely, that all claimants will still be able to claim and collect their money from the post office in future? Does he agree that that is the way forward: to change, but to guarantee a future for the post offices and benefits claimants?

Mr. Galbraith: I wholeheartedly agree with my hon. Friend. The way not to guarantee that future would be to stop the advance of ACT; to do that would be detrimental and would lead to the destruction of many more post offices. We cannot have a system that has to be propped up and that will probably change any way because the world is changing. More and more people will want to take advantage of ACT, so if we try to build a system that is protected from ACT, we shall not only do a disservice to those who want ACT and all the benefits it carries, but threaten the very sub-post offices we are trying to protect. If post offices do not change, they will come to be seen as bulwarks against progress--blasts from the past maintaining an out-of-date system in dingy offices, using inkwells and quills to process transactions. We must find ways to bring post offices into the new century.

The same applies to rural post offices. I object to the hon. Member for Ribble Valley (Mr. Evans) implying that Labour Members do not know anything about rural areas. My constituency contains rural areas--not comfortable ones, either. In the Western Isles, there is a problem with service provision because of the vast distances that have to be covered before deliveries can be made. In such areas, we must consider the services that are already provided and look for ways to enhance them. I have travelled extensively in such areas and I know that, sometimes, it is not a post office that is wanted, but a bank. Perhaps we should look for ways in which banking and other services can be provided. In some villages, the post office and the shop are separate. Is it not time we considered how to integrate such services?

I am grateful to you, Mr. Deputy Speaker, for calling me to speak. I welcome the Bill, which represents a major advance for the Post Office and those who work in it. More important, it will improve the service provided, not only to those of us who live in urban areas, but to those who live in rural areas throughout the country.

7.48 pm

Mr. Tony Baldry (Banbury): I am sure that all Conservative Members welcome the maiden speech of the hon. Member for Ceredigion (Mr. Thomas). His was an interesting and enjoyable contribution, and we look forward to hearing him speak on many occasions in future.

Two fundamental concerns arise from the Government's proposals as set out in the Bill. The first is that they represent the second-best solution for the Post

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Office. I am a member of the Select Committee on Trade and Industry, which is chaired by the hon. Member for Ochil (Mr. O'Neill). In the past three years, it has held innumerable sittings during which we have considered the subject of the Post Office. It has produced three extensive reports, covering every aspect of the issue. In each report, its members have been unanimous in stressing that the solution for the Post Office is to make it an independent publicly owned company. How can a company that is 100 per cent. state owned be remotely independent?

I welcome the Post Office being granted plc status and being freer to compete in a highly competitive marketplace. However, I do not welcome 100 per cent. retention of public ownership. The Post Office will still be subject to Treasury control, which is unfair. How can the Post Office compete effectively in the marketplace without being fully privatised? How can it compete on a level playing field with the rest of Europe, especially with Dutch and German post offices, without selling at least 51 per cent. of shares? The Bill simply will not give the Post Office the full freedom to manoeuvre that it needs to tackle such obstacles.

Indeed, it is absurd that the Government do not allow meaningful competition or recognise that there is an alternative to state control. Privatisation works: it has been one of the striking success stories of the past 20 years. It brought about dramatic improvements in the former public sector utilities by removing the dead hand of state control, and subjecting companies to the fresh wind of competition and the discipline of the markets. Privatisation has created a substantial improvement in customer services and a substantial reduction in prices.

It is clear that the Government have not fully privatised the Post Office simply because of pressure from the Post Office unions. The general secretary of the Communication Workers Union has already said that he is unhappy because possible share swaps might mean that some of the Post Office ends up out of Government hands. It is no wonder that no shares were sold.

Even if the Post Office issued shares to acquire other companies under the Government's proposals, it might be able to do so only after Parliament had voted on the issue. The Secretary of State for Trade and Industry told the House last year that the Government would not seek to dispose of Post Office shares without further primary legislation. I appreciate that we are considering a sensitive issue, but the Post Office has been put in a crazy position.

The Select Committee on Trade and Industry has examined the problems of the Bill and the potential hampering of the Post Office's competitiveness. It is again patently obvious that by not being fully privatised, the Post Office will be precluded from effectively competing. That is yet another obstacle to effective competitiveness with our fellow European countries.

The Bill constitutes an example of competitive constraint. It would help if the Government did not blur the lines on when primary legislation was required. The possibility of seeking a resolution of both Houses is confined to cases when the Post Office, the Department of Trade and Industry and the Treasury agree that that is a good idea. However, the Bill places no restriction on limited sale.

The Government did not give the Trade and Industry Committee an adequate explanation when questioned on the issue. Is there any limit to how much can be sold as

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long as it is part of a joint venture? If not, how does that fulfil the Secretary of State's undertaking for only limited sales without primary legislation? Nothing in the Bill would prevent a sale of majority holdings.

We have also already witnessed the adverse effects of union interference on customer service. Despite reducing the postal privilege for letters and packages from £1 to 50p last year, the Government reversed their policy under pressure from the Post Office unions in the run-up to the 1999 Labour party conference.

The Government state that the new regulator will determine the rate at which postal privilege is set. That worried many witnesses who appeared before the Trade and Industry Committee, which recommended that the Bill sorted out postal privileges. However, it remains unclear which privileges, if any, have been dropped. It would be helpful if the Government could inform us of the various privileges enjoyed by the Post Office that have been abolished, and if any have been added. Doubtless we shall learn more about that when we consider the 300 or more amendments that we shall table as the Bill proceeds.

There are also anxieties among the Periodical Publishers Association. It represents the magazine publishing industry, which is worth around £250 million each year to the Post Office. The PPA estimates that the Post Office costs approximately 30 per cent. more than the best-of-class comparisons. Its members are naturally worried about how fairly the Post Office will treat the industry and about the Post Office's commitment. The PPA believes that the new commission should introduce transparent benchmarking against best-of-class comparisons to provide a more competitive service. That benchmarking might be better all round if the Post Office faced the full winds of competition.

The Post Office will be allowed to borrow only a derisory £75 million. As The Daily Telegraph pointed out last year, that figure will not increase. The Trade and Industry Committee found that worrying. Our report on the Government's White Paper stated that

The requirement for ministerial approval is also wholly inadequate for a company with a turnover of £7 billion.

The half measures in the Bill simply do not fully enhance the competitiveness of the Post Office. To compete internationally, it is imperative that the Post Office be able to make deals, alliances and acquisitions across the world, such as those that the German and Dutch post offices make. Again, I stress that the 100 per cent. state control that the measure proposes will make it impossible for the Post Office to act with the necessary vigour and decisiveness. Surely it is better for consumers to let the Post Office take full advantage of the fresh winds of competition. The Government have fundamentally failed to do that through the measure. They are failing the Post Office and consumers.

My second anxiety is the uncertainty about the future of sub-post offices and village post offices after the sudden and somewhat reckless abandonment of the Horizon project. I represent a large rural constituency and there is considerable concern among my constituents that they may lose their local post offices. It is foolish of the Government not to incorporate the network in the Bill. Conservative Members recognised the real need and

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genuine concerns of many people and the potentially harmful consequences that would occur without Horizon. As the Trade and Industry Committee stated in its report on the system:

    "this was recognised to be the only way to ensure the future survival and prosperity of the post office network."

The Government's decision not to provide for the scheme in the Bill will threaten the future of the 19,000 sub-post offices, which rely for 40 per cent. of their income on administering benefits. The omission amounts to yet another Government attack on the fabric of rural Britain and on the livelihoods of people there.

It is no good the Government using soothing words of reassurance to those who rely on the Post Office network that they will not suffer and that postmasters and mistresses will be able to compensate for their loss of income. Many people are simply not prepared for or do not want a new system forced on them.

The Government also mislead by presenting an image of great floods of people opting for ACT. According to Department of Social Security figures, only 34 per cent. choose to have benefits paid by ACT. In our report on the Horizon project last year, the Trade and Industry Committee found that few pensioners opt for ACT; fewer than one in 10 income support recipients choose ACT; and fewer than one in three new benefit recipients opt for ACT. Indeed, the report states that

However, that will not happen simply because the Government have decided not to progress with Horizon and have not included similar provisions for the Post Office network in the Bill. It is a shabby piece of work by the Treasury, which has put pressure on the Department of Trade and Industry, in the belief that a massive saving can be made. That does the Government no credit. It is a double blow to many people in rural areas. A recent survey in the Financial Times revealed that only 5 per cent. of parishes have bank or building society branches.

The Bill is a bad measure. It is a hashed compromise to placate the trade unions and a genuine threat to sub-post offices and village post offices throughout the United Kingdom.

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