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Dr. Vincent Cable (Twickenham): I should like to speak to the amendment tabled by my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) and others.
The subject of our debate is well chosen, and I agree with most of the language of the Conservative amendment. None the less, the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) demonstrated amnesia about the past, especially when explaining how the Post Office has reached its current financial position. It has lost money for the past three financial years, including this year.
Mr. Gray: On a point of order, Mr. Deputy Speaker. The hon. Member for Twickenham (Dr. Cable) said that he intended to speak to the amendment tabled by his right hon. Friend the leader of the Liberal Democrat party. I believe that you said that you had selected the amendment tabled by the Prime Minister. Am I right that the hon. Gentleman is out of order to speak in favour of the Liberal Democrat amendment?
Mr. Deputy Speaker: Order. The hon. Gentleman has anticipated what I was about to say; my mind is perhaps working a little more slowly. The hon. Member for Twickenham (Dr. Cable) must speak to the Question that has been proposed from the Chair—[Interruption.] Order. We are not debating an amendment that has not been selected.
Dr. Cable: I will happily conform with your order, Mr. Deputy Speaker, and, in the process, use the excellent arguments in that amendment.
The Post Office has lost money for the past two or three financial years, but in the current period of economic expansion it should not be doing so. It is now beset by competition from fax and e-mail, and it has suffered from chronic underinvestment. Over the past 20 years, about £2.5 billion was taken out of it in dividends. It was effectively looted by the Treasury under the old dividend policy; that is part of the record.
The Secretary of State rightly said that the Government have changed the dividend policy to something more helpful, but for a variety of reasons that change has yet to manifest itself. Before this debate, I read Consignia's recent annual accounts, which are revealing and somewhat worrying. In 1999-2000, Consignia made a loss, mainly owing to extraordinary elements, of about £264 million. The Treasury none the less extracted a dividend of £151 million, plus £96 million in tax. Last financial year, when the new dividend regime had been implemented, Consignia made a very minor profit of about £66 million—it was targeted to make a profit of about three times as much—but still the Treasury took £93 million in dividend, plus £15 million in tax.
The Secretary of State for Transport, Local Government and the Regions has made a great issue of principle from the fact that Railtrack paid dividends while it was in a state of financial crisis and should have been investing, yet the Treasury is behaving exactly the same. I am struck by the irony in that.
The key question has already been put to the Secretary of State for Trade and Industry: will she agree to waive the dividend for the current year? I am sure that she will
answer that in due course, but there is a related question. Much of the Post Office's revenue still comes from bond income on the financial securities that it held in the old days. I believe that there is an understanding that that will be transferred from the Post Office. Will the Secretary of State say when that transfer will occur, because it will significantly affect the way in which the Post Office handles its financial difficulties over the next couple of years?The second issue concerning Consignia management is the company's freedom to make decisions. There is an underlying tension between the company's wish to run its own affairs on a commercial basis, which the Government have increasingly respected by standing back from the company, and the fact that the Government are the major shareholder and therefore have a responsibility for what is going on. I want to focus on one specific decision for which the Government have ambiguous responsibility: the appointment of the chairman.
I do not want to go over why the previous chairman went, but will the Secretary of State explain the process by which the new chairman is being appointed? My understanding is—I may be wrong—that the Department of Trade and Industry did absolutely nothing to initiate the process of choosing a new chairman until the very last day of the previous chairman's contract and the day he left the office. Given the four-month period for public appointments, that effectively guaranteed that Consignia would be left without any leadership for the best part of that period. That seems at first sight to be simple incompetence. Perhaps the Secretary of State will explain the matter.
The third issue raised by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) when moving the motion related to competition. I am sure that nobody would object in principle to competition in this context. However, the hon. Member for Gainsborough (Mr. Leigh), who has now left the Chamber, made a very helpful intervention to point out the comments of Sir John Bourn, the head of the National Audit Office, who explained that in the present context introducing more competition would simply make it unlikely that Consignia could honour its universal service obligations.
There is experience of post office networks in other European countries going further down the route of privatisation and competition than the British Post Office, and of what exactly that has meant. In Germany, as I understand it, only 50 per cent. of homes now have mail delivery. In Sweden, the stamp charge had to be doubled to cover the cost of the universal service obligation. The Secretary of State must explain what will happen if, as Sir John Bourn warns, Consignia can no longer continue to observe its universal service obligations. What will be the sequence of events? How will the Government ensure that such obligations are met?
Mr. Drew: Will the hon. Gentleman give way?
Dr. Cable: Perhaps I might anticipate the hon. Gentlemen's intervention by referring to his helpful suggestion that one way of ensuring that such obligations were met would be for the commercial competitors allowed into the business under the deregulation
arrangements to pay a charge, thus making their contribution. I hope that the Minister will take that suggestion seriously.
Mr. Drew: I concur with the hon. Gentleman, but does he agree that such liberalisation in Europe is not a very good example because of the gross unfairness under such systems? All that seems to be happening as a result of the mad rush towards so-called competition and liberalisation is that we are losing the universal service—and at great cost.
Dr. Cable: The hon. Gentleman is right because in Europe, as in the UK, the sorting, distribution and collection system is a network monopoly—it is like the railways. Once cherry-picking of the system is allowed, profits are stripped out and the business is made progressively unviable—as indeed has happened in Europe and would happen here if the Conservative proposal were accepted in its present form.
Mr. Nigel Waterson (Eastbourne): As the hon. Gentleman is on the subject of a so-called level playing field, what view does he take of the issue raised in the NAO report of Consignia alone being exempt from VAT?
Dr. Cable: It is clear that in the long term all players in the industry should operate on the same basis, whether publicly or privately owned. The hon. Gentleman makes a valid point in that respect.
Geraint Davies: For the record, Sir John Bourn, the Comptroller and Auditor General, did not say what the hon. Gentleman has just claimed. Sir John Bourn said that there is a tension between universal delivery provision and more and more competition. That is clearly true. The hon. Gentleman said that universality could not continue within increased competition.
Dr. Cable: I shall quote the relevant sentence and then there will be no need to debate what was said and not said. Sir John Bourn said:
- "If it were to lose significant custom to its competitors, Consignia might find it hard to finance the provision of a universal service at current prices or service levels."
I share the alarm of many Members on both sides of the House over the prospect of the industry being further destroyed by industrial action. It is fair to say that it is proposing to take action under the ballot legislation introduced by the previous Government; none the less, if the proposed strike and others occur, enormous and perhaps permanent damage will be done.
Members of the Government have been floating the idea in the past few days, especially in relation to the railways, that we should be moving to a system of compulsory and binding arbitration for such utilities. Will the Minister give some idea of current Government thinking? Will they allow industrial action only within the framework set by the previous Government, or do they envisage some new initiatives to make such action progressively less likely?
The Post Office Counters network concerns many colleagues, especially those representing rural areas. The point has been clearly made that we are staring in the face
the prospect of the network losing income of £430 million a year or thereabouts, and of a significant haemorrhage of Post Office branches. We are not scaremongering; the original parliamentary answer giving the figure of 40 per cent. was in response to a question tabled by the hon. Member for Great Grimsby (Mr. Mitchell)—a Labour Member. That is the basis of the arithmetic from which many of us have since worked. However, in the PIU report the Government proposed a variety of initiatives, and it is useful to go through them one by one and to ask exactly how far they have got.On the post office card account, there is a rough target of 3 million and no cap. Will the Government confirm specifically that if numbers rise significantly above that, the scheme will be fully funded? The other option for people who wish to use the Post Office under the universal bank is the basic bank account, but there is a problem with that of which I am sure Ministers are becoming aware and alarmed about. Commercial banks are now charging £25 a day for failed direct debits. Many low-income people are faced with penal charges as a result. I hope, therefore, that the Minister will say how far he has got with negotiations with the banks to ensure that, when the basic bank account is introduced, the scale of penalties and charges will be appropriate to the customers whom they will have to serve. It has already been pointed out that those provisions are unlikely to work unless there is a banking network in place. If the branches close, people clearly will not be able to draw on their account in rural areas.
Perhaps I can take the Minister through the key segments of the counters network and ask about progress in each. About 18 months ago, the Government initiated a programme in rural areas that sounded attractive. It was a £2 million interim scheme to help owners of rural post offices to maintain their business. Answers to parliamentary questions from my hon. Friend the Member for Gordon (Malcolm Bruce) and others suggest that, 18 months later, only five claims have so far been processed under the scheme, amounting in total to £27,000, which is a ridiculously small sum.
Apparently, 300 inquiries were made, 18 applications were made, and only five have been processed. I hope that the Minister will explain why there is such a dismal take-up, why so many postmasters and postmistresses have found it so difficult to apply, and what will happen to the remainder of the applications in the pipeline. If such a small £2 million scheme does not work, what hope is there of a much more ambitious scheme working? Perhaps the Government can take us through the process by which that will gradually operate.
I understand that the Government commissioned a report on how to proceed with the modernisation and improvement of post offices in urban deprived areas; perhaps the Minister will give us some idea of the time scale involved.
The third segment, which is rapidly emerging as the most worrying part of the Post Office Counters network because no one in Government seems to support it, consists of the remaining urban areas, such as mine, which are fairly prosperous in national terms, but where the counters network is used by relatively low-income members of the population.
Post Office Counters seemed to envisage a substantial contraction of this sector, and consolidation. It has described the process whereby Post Office Counters will
assess local need, prepare the ground for mergers, and compensate sub-postmasters and sub-postmistresses. There is a good deal of anxiety about how that will happen. Our experience of the management of Post Office Counters, even in areas such as mine, is extremely unhappy. Perhaps the Minister will explain when the process is to be finalised.With reference to Post Office Counters' alternative income, I shall ask the Minister about the so-called GP service. A few weeks ago, in a debate in Westminster Hall introduced by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), we heard about the positive feedback to the pilot scheme in Leicestershire. What were the conclusions of that study? Are the Government committed to rolling out the scheme nationally, and will they fund it?
There are many unanswered questions relating to the counters network problem. We all know that there is a potential crisis. The Government have produced some answers, but let us have much more clarity and precision about the post office card account, the basic bank account and the roll-out of the GP system. We need to know what all those mean and how they will apply in practice.
In general, the Government are facing disaster with Consignia. It is a potential Railtrack. Unless we get clear answers about its future funding and organisation, the Government will face far more embarrassment than they have experienced this evening.
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