Community Postal Services

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Mr. Keith Darvill (Upminster): It is important to get hon. Members' views on the record. I should like to support the step-by-step approach that is inherent in the papers and the motion before us this morning. It is essential that a public service role is kept and that it is maintained to protect the universal postal service and the fixed tariff. Rural areas are obviously of primary importance, but sub-post offices are often not given the priority they need in urban areas. Small parades of shops can be lost once a sub-post office closes. There is an urban as well as a rural aspect to this debate. We all have constituents who rely on that sub-post office system.Anything that erodes it is a danger to the public service ethos.

The commercial and economic grounds for liberalisation are strong and powerful, but we must not forget the importance of infrastructure, because small businesses and others rely on these services. Subsidy should be supported on those grounds. My concern is not with the principle of liberalisation, but with the potential loss of important public services that might follow from full liberalisation.

The impact of communications technology should be constantly monitored. The newspapers have discussed the impact in the United States and Canada where postal services are beginning to diminish. It is not yet clear whether that impact will apply internationally. I suspect that it will, particularly for the younger generation. My youngest son is text messaging all the time these days. In 10 years' time when he starts to work, the letter may well take a different form. Communications technologies may well impact on postal services in the years to come, which could lead to deterioration. That aside, I support the Government motion this morning.

12.1 pm

The Minister for Competitiveness (Mr. Alan Johnson): I am grateful for my hon. Friend's support for the motion.

The hon. Member for South-West Hertfordshire (Mr. Page) got into a philosophical, even ideological, debate about the issue. I must point out the difference between his experience in 1997, just before the 1 May election, and the position today. The hon. Gentleman spoke about Germany in 1997 and now. In 1997 the German postal system was part of the civil service and had not even become a public corporation; something that was reached as early as 1969 in the United Kingdom. The monopoly limit was 500 g and pre-sorting was not allowed. In the UK in the mid-80s, companies that pre-sorted their work received a discount from Royal Mail, but that was not allowed in Germany. The other difference is that German postal services were loss-making. In Europe at that time, only the United Kingdom and the Netherlands were not a drain on the taxpayer.

The hon. Gentleman made an important point, but he would be disappointed if I did not spell out that the Post Office—and Royal Mail in particular—lost ground because of a hiatus of six, seven, probably 10 years. I have a document with me from 1992, which may become historic as the last-ever party manifesto for an election that the Conservatives won. Eminently sensible stuff appears in this manifesto:

    ``We will legislate to set up a new independent regulator . . . We will lower the limit on the Post Office monopoly much closer to the level of the first class stamp . . . We will consider requests to license limited specialist services to compete within the Post Office monopoly.''

The problem is that they did not implement any of those policies. We have just done so in the Postal Services Act 2000. Over the last couple of years we have carried out part of the Conservative manifesto of 1992. Instead of those eminently sensible proposals in the manifesto, the Conservatives tried to pursue something else; the privatisation of the Post Office.

Royal Mail was ahead of the game in the early 1990s, but when the Conservatives found that they could not privatise the Post Office, they tried to plunder it with the £1 billion in three years external financing limit. The hon. Member for South-West Hertfordshire, for whom I have considerable respect, was responsible for saying no every time the Post Office suggested a modest joint venture, which was

legal within the rules at the time. The Post Office had to buy its own train set to run RailNet because the previous Government would not allow it to enter into a joint venture.

I am sorry to say this—no, I am pleased to say it—but those were wasted years, when the argument was not whether the Post Office needed commercial freedom, on which everyone was agreed, but whether the way to get it was by privatisation; the ideological debate mentioned earlier by the hon. Member for South-West Hertfordshire. None of the arguments—about the Ryrie rules and public sector borrowing—were about political laws of gravity; the argument was whether the Government had the will to give commercial freedom to a company in the public sector.

Our greatest competitors were countries where there was commercial freedom within the public sector. In the Netherlands, for example, the service was entirely publicly owned and still linked to the telecommunications company when the greatest advances were made in the early 1990s. It is a shame that it took us so long to come up with a model that worked; I am happy to debate the issue in the general election, whenever it comes, if the Conservative party still insists on proposing privatisation for the Post Office.

Mr. Page: I am delighted that the Government are implementing our 1992 manifesto; that shows how prescient we were at that time. Will the Minister say whether his party supported our 1992 manifesto commitment? In my few humble, disjointed words I did not mention privatisation; I just asked the Minister if he could extrapolate from that and raise his eyes to the future. The hon. Member for Morecambe and Lunesdale prodded him gently on the matter but did not follow it up in her subsequent remarks.

Mr. Johnson: The hon. Gentleman specifically mentioned my comment that, in terms of the future, I believed that liberalisation would have no effect on ownership of the Post Office. That was the hon. Gentleman's precise point, so he did raise the issue of privatisation. The Labour party's view is close to that of the Communication Workers Union—[Laughter.]—for all kinds of good reasons. The union's view is that the monopoly level should be reduced to precisely the level at which it protects a universal service at a uniform tariff and that there should be an independent regulator. Before the 1997 election, the Labour party proposed that. I think the party would have supported the Conservatives' 1992 manifesto proposal; it is a shame that they did not implement it, because so much time has been lost since then.

The hon. Gentleman mentioned the rate of borrowing, which was dealt with under the Postal Services Act 2000. The Post Office has an AA credit rating and will borrow from the national loan fund; we had a long debate on the matter that led to a consensus on how it would work. He hon. Gentleman spoke about other operators being licensed and seemed to argue against competition because that would be a dreadful burden for the Post Office. He asked how I saw the future, now that other operators can be licensed; that, too, was in the Conservatives' 1992 manifesto. The Act gives the regulator the sole responsibility for issuing licences and places a universal service obligation on the Post Office that goes well beyond the licensed area.

There is a universal obligation to deliver anywhere in the country anything up to 20 g—the Opposition have tried to change that—but within that universal service obligation, there is a licensed area which relates to the reserved area for which the monopoly limit currently stands at £1. A lot of fuss and nonsense has been printed in the papers about the licences; the regulator reserves the right to issue a licence to operate within the reserved area when that will not damage the universal service at the uniform tariff. Other licences have not been issued yet; one licence has been issued to the Post Office—we were all relieved about that—which lasts for 15 years. It is nothing other than a positive move on behalf of consumers and postal users.

The hon. Member for South-West Hertfordshire also asked what would happen in future about tariffs. The Government will not decide Post Office tariffs; the regulator will do that. It will decide and not recommend, and an RPI minus formula will probably be introduced in due course. The hon. Gentleman also asked what would happen in a diminishing market if the Post Office lost market share or if traffic declined. The Post Office could, I suppose, go back into making huge losses as it has done in the past, but that is not remotely likely. There are tremendous opportunities, particularly in delivery of packets, parcels and direct mail, which is growing apace.

Direct mail is the scale on which the economies are built, which is why we sensibly argued—similar to other parties—that it should be kept within the reserved area. We should not have a reserved area in which we decide on content; for a start, how would we police it? Sensibly, the Commission's proposals leave direct mail in the reserved area. There are tremendous opportunities, which the Post Office recognises as well, and I do not think that losses will arise.

My hon. Friend the Member for Morecambe and Lunesdale made a good point. With the Labour party and Liberal Democrat leaflets—I do not know why the Conservative party has not lost any literature recently—the Royal Mail was just being perceptive. It had thought that they should be delivered by 3 May, but it now realises that they might not be delivered until 7 June, so the leaflets are stored away somewhere, with a form 739 put through the door to tell the customer to collect when necessary.

My hon. Friend also mentioned the definition of special services. We have not touched on that, but the European Union Committee in the House of Lords said that it was not persuaded by the Post Office's arguments. We do not think that it is the most important issue in the Commission's proposals. My hon. Friend mentioned the only reasons why we had a problem with the definition; there must be a legal certainty that we will not create a problem that will mean couriers and postal administrators continually going to court. The proposals aim to produce clarity, but the wording did the opposite. Significant progress was made in a European working group on that, and we think that the problem will be solved.

The hon. Member for Somerton and Frome (Mr. Heath), who sent me a note to apologise for leaving early, made an important point about balance. He talked about the situation in Sweden, which reminded me that we should look not only at Sweden and Finland, but outside the European Union to New Zealand, where customers in remote locations are charged $80 a year to have mail delivered to their door. We should also examine the situation in Canada, which could be a salutary political lesson for the Opposition; the wipeout that the Conservative party there suffered in the early 1990s was a much to do with the closure of rural post offices. It has not recovered, which is an important political lesson for us all.

My hon. Friend the Member for Falkirk, East (Mr. Connarty), who has a long history of involvement in postal issues, mentioned Scotland. Postal service is important all over the country, but in Scotland there are specific considerations. The highlands and islands are remote but receive the same service as the rest of the country, and there are more post buses there than anywhere else in the United Kingdom, so Scotland's views must be taken into account. The Scottish Parliament made direct representation to the Commission and Ministers on the issue, so its views are being heard.

My hon. Friend also spoke about Scottish Power; we have agreed a contract with it and the Post Office network, so power cards are again available across post office counters. While we consider the possible adverse effects of liberalisation, the Royal National Institute for the Blind has said on record that it is concerned that liberalisation in Sweden has led to a worse service for visually impaired people. That is also important to remember, because articles for the blind have been written into the Postal Services Act 2000, to ensure that blind people are protected by law. The hon. Member for Vale of York called that a modest move. The hon. Member for Somerton and Frome suggested that we had reached a consensus on that at the European level. He knows that we do not have an agreement on 150 g. He rightly said that implementing the measure would be a priority for the Swedish presidency but it is hoped that Ministers will reach agreement, preferably in June. There then has to be co-determination with the European Parliament. It is hoped that the whole issue will be dealt with by the end of 2001, at which time the Belgian presidency will be involved. I did not want anyone to think that by approving the motion we had made further progress yet. There are different views and the Commission is sticking to the 50 g proposal.

12.15 pm

The courier market and the development of the private sector were also mentioned. The courier market has had much input into discussions on the issues but we are adamant that regulation of the postal market should not extend beyond the reserved area. Other countries do that but we shall not do it in the United Kingdom. That is one of the reasons why we successfully opposed the Commission's original proposal for some involvement of private sector couriers. Neither the Government nor private sector couriers welcomed that measure, which has been withdrawn.

My hon. Friend the Member for Morecambe and Lunesdale mentioned closures and the Horizon programme. Without getting dragged into that issue, the Horizon programme was completed last week, smoothly and ahead of schedule; apart from a small group of 40 or 50 offices that are experiencing technical difficulties. It is a huge IT programme—involving 40,000 serving positions and with 72,000 people trained—that will allow the Post Office to attract new work. The move to automatic credit transfer in 2003-05 has to be seen in the context of the fact that it will not mean that 40 per cent. of work will disappear. All the ideas from the performance and innovation unit report—including universal bank, the Government general practitioner and internet access points—mean that people will go into post offices not just to carry out new transactions such as access network banking. If they wish it, they will still be able to draw their pensions and benefits in cash in full across a post office counter.

My hon. Friend the Member for Upminster mentioned the importance of the urban network. We sometimes concentrate on the rural post office network but the urban post office, particularly in deprived areas, is often the last piece of glue holding the community together. We will need constantly to monitor the effects of ICT, which is a problem raised by many members of the Committee. My hon. Friend the Member for Falkirk, East will remember that, in the late 1970s, people said that telecommunications would kill off postal services. When the split occurred, they said that the Post Office would die, that no one would want mail through the post; which is what they said that when telegraphy was introduced in the 19th century. However, mail has boomed, with record levels of 75 million items a day being handled, which is a year's worth of mail in Victorian Britain. They said the same about faxes and it did not happen; now they are saying it about e-mail. We have to be cautious, but all the signs are that postal services, which are so important to people across Europe, will ride the storms of any competition that comes through new technology, provided that they adapt to it.

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