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6.23 pm

Mr. Martin O'Neill (Ochil): I am happy to follow the thoughtful speech of the hon. Member for Twickenham (Dr. Cable). I have a good deal of sympathy with his remarks, although I take issue with the Railtrack scenario that he sketched out in his final comments. That was ill-considered, in an otherwise thoughtful and intelligent analysis of many of the problems.

I support the Government amendment. We are dealing with a relatively new organisation in the public sector—an organisation that was promoted by my Conservative, Labour and Scottish Nationalist party colleagues in the last Parliament, and by Conservative and Labour in the Parliament before that. From 1994 or 1995, the Select Committee on Trade and Industry was unanimous in the view that the Post Office ought to be reconstructed on a financial basis as a plc within the public sector, with a degree of independence.

Since April last year, such a body has existed. In anticipation of the European postal directives, the postal monopoly is in the process of being ended. It might have been more helpful if we had known what the thinking was about the ending of the monopoly, rather than the suppositions on which the National Audit Office report was based. We are rather impatient about the length of time that it has taken the regulator to publish his recommendations. It is quite reasonable for Consignia to delay its financial plans until it finds out the detail of the regulatory framework in which it is to operate. We know the difficulties, but we do not know precisely the next phase of the regulator's thinking.

The increasingly difficult state of Consignia's finances must be set in context and given proper weight, as well as sympathy. As my right hon. Friend the Secretary of

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State repeatedly stated in her speech, Consignia and its predecessor, the Post Office, have been starved of the means to carry out the investment that a modern postal service requires. If the investment had been made available, the poor industrial relations that have scarred the postal service for so long would have been dealt with. I am not sure, however, that the £200 million lost in a full year by the parcels operation could be saved. I shall return to that later.

Apart from lack of investment, Consignia attributes its financial difficulties to poor industrial relations, the parcels operation, higher transport costs, the need to invest in technology, the pay increases and redundancies that it has had to finance in the past year, and pay increases and redundancies that have not yet borne fruit in the form of real improvements, apart from a slight increase in the delivery performance, which I shall deal with in a moment. Alongside those problems, there is the prospect of the end of the monopoly. In short, the business needs money to invest to achieve greater efficiency, to pay off some of its staff, to meet performance standards and to fulfil its universal service obligations.

Mr. Waterson: The hon. Gentleman speaks of the need for more investment in and by Consignia. As it is making losses, does the hon. Gentleman have a view about whether the Government should announce a decision not to claim a dividend in the current financial year?

Mr. O'Neill: The Government should give due weight to that, but they should wait until Consignia's own financial plan becomes available. We should have had that earlier. The regulator has been laggardly in producing the final version of the regulatory framework. I would not discount the Government's having to do as the hon. Gentleman suggests. I would favour that for the next 12 months, but an adult business working as a plc should not be getting subsidies from the state in the form of changing the financial premise on which it was, so to speak, set afloat by the Government. I am prepared for that to be done for a year, but not in perpetuity. Before we make a decision, it would be better to await the other two bricks that must go into the wall before we can address the situation properly.

There has been talk today of the ending of the two-delivery system. It is surprising that there was much talk about that by Opposition Members, but little in the way of figures. I am surprised that the hon. Member for Twickenham did not speak about the matter. The second delivery accounts for 30 per cent. of the delivery wage bill but only 6 per cent. of the mail. It cannot make economic sense in any business to have a drag on costs of that character. If we are to have two separate deliveries a day, I would prefer the first to be for business, and to be carried out by 9.30 or 10 o'clock in the morning at the latest. I would favour a second delivery later in the day, perhaps in the afternoon, for most households.

Mr. McLoughlin: Will the hon. Gentleman give way?

Mr. O'Neill: I will finish this point, then I will be happy to give way to the hon. Gentleman.

I do not understand people who spend their day waiting behind their letter box for their letters to arrive. In our household, and probably those of all hon. Members, most

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people have gone out to work by 8 o'clock in the morning and rarely see their post deliverer. Their letters are waiting for them when they return in the evening. [Interruption.] Some people may have a more leisurely lifestyle than the rest of us who have to work for a living; some of us are not necessarily as rich as some people on the other side of the divide.

Mr. Bellingham: Will the hon. Gentleman give way?

Mr. O'Neill: No, I am sorry. I am not going to respond to comments from a sedentary position. I shall take an intervention from the hon. Member for West Derbyshire (Mr. McLoughlin) in a moment.

As a private citizen, I do not consider the idea that a morning delivery is essential to be too important. I would like a guarantee that my mail will be waiting behind the door for me when I come home in the evening, as it usually is at the moment. If I thought that some of the financial difficulties that Royal Mail and Consignia have to confront could be assisted by the formalisation of such a plan, I would be happy for that to happen.

I have heard what has been said by the Federation of Small Businesses. It is up to small businesses to ensure that they are clearly identified, and it is not beyond the wit and intelligence of the small business community or of Royal Mail to make arrangements to achieve that, even if it involves adding another letter to certain postcodes at an appropriate time.

Mr. McLoughlin: The hon. Gentleman dismisses too lightly the serious concerns of small businesses, particularly those in rural areas. There has been an explosion of such businesses and, under the hon. Gentleman's proposal, it would be very disadvantageous to them if there were not some way of ensuring that they got their post earlier in the morning.

Mr. O'Neill: I take the hon. Gentleman's point. The rural hinterland presents difficulties, but—let us face it—it does not necessarily get its deliveries very early in the morning at present. It might in the hon. Gentleman's constituency, I suppose, but I have constituents who are for ever telling me that they have difficulties in that regard. I must also make the point that the increase in the number of small businesses in rural and semi-rural areas is a direct consequence of the growth of the lifestyle business, in which people may sometimes not be working under quite the same pressures.

The hon. Gentleman 's point must be considered, but I do not think that it is as big a problem as some people would have us believe, especially when we consider that an increasing proportion of the business being conducted by the kind of enterprises that we are discussing is carried out by e-mail and on the internet.

Mr. Andrew Stunell (Hazel Grove): Does the hon. Gentleman also recognise that there is an increasing amount of home working being done by people in clerical, administrative and managerial jobs? In some cases, a steady supply of mail is important for those people, too.

Mr. O'Neill: I think we are getting bogged down here. It is not beyond the wit and intelligence even of Royal Mail—whose managers may not necessarily be the

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sharpest in the box—to establish a system to accommodate that type of mail business. Much of the work done from home is facilitated by the internet, however, and it is more important in that context to get broadband—which covers a different part of the communications network—in place. I take the hon. Gentleman's point, but we should not exclude the consideration of a change in the postal delivery system. We, as residents and workers, have changed our lifestyles and patterns in ways to which the Post Office has not fully adapted.

My proposal would make better use of the labour that the Post Office employs. The question of labour at the Post Office can be described as an asset and a liability at the same time: the labour is an asset but its cost is a liability. We must use the labour force to optimum effect. Whatever the figure would be for savings through staff reduction, a sizeable proportion of it would be achieved by natural wastage. Any organisation that has a staff turnover of about 200 per cent. in certain parts of the country will certainly be able to offload a number of people at relatively low cost, because, surprisingly, there is not only a high turnover but a relatively short period of service. We are not, in the main, talking about sizeable sums in terms of redundancy costs.

It is fair to say that that high turnover is a consequence of the inadequate system of industrial relations that exists in the Post Office. It was no secret, in the period before the 1997 election, that the Select Committee on Trade and Industry would have the workers in in the morning and the managers in the afternoon. We asked them the same questions, and we were equally rude to all of them, on the grounds that we felt that there was virtually a complete inability to talk sensibly about industrial relations. One of the actors in those scenes is now a member of the Government—indeed, he is a Minister at the Department of Trade and Industry. In his day, he would say to me that he was somewhat embarrassed by the questions that we were asking. Nevertheless, some of those questions remain unanswered.

It is no accident that industrial relations began to improve following last summer's publication of Tom Sawyer's report, in which he identified a number of issues and problems from which nobody could hide. The unions and the management—to a large extent—were embarrassed into addressing those challenges. The difficulty was that the fragility of the peace, the truce, the improvement—call it what you will—was evidenced by the reaction to the bombshell that was dropped when the figure of 30,000 staff slipped from the chief executive's mouth.

I am never sure whether to believe the cock-up theory of history or the conspiracy theory. I happen to like the chief executive, and I would attribute that occurrence more to cock-up than to conspiracy. Either way, it had a devastating effect on union opinion in Royal Mail, and set matters back considerably. Assurances that have been given since then are not of the kind that enthuse the postal workers' union in terms of the level of wages that its members are getting.

Hon. Members have been talking today about the number of people working in the postal services, and about industrial relations, but they have not talked about the issue behind the industrial dispute. I understand that, over two years, there will be an increase in the basic level of wages for postal workers outside London that will take

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them up to the princely sum of £300 for a 36 or 37-hour week. In the year 2004, £15,000 will not be much of a carrot to dangle in front of workers in an industry with a high staff turnover, when jobs elsewhere seem equally attractive.

The bombshell was dropped at the busiest time of the year—just before Christmas, when we want industrial relations to be at their best—so it is no wonder the union is to ballot under the law. That ballot will give the union's general secretary and executive the right to call a strike at a date of their choosing, although it does not necessarily follow that there will be a strike. Indeed, Labour Members highlighted the fact that the industrial relations legislation was deficient because it put an additional weapon at the elbow of the general secretary and the executive as they went into negotiations. They were able to say, "If you don't give us what we want, our men and women will walk out under the law." We are, I hope, still a long way from a serious industrial dispute, but if one took place it would set us back some way.

The conditions that have created the bad industrial relations are due as much as anything to management timidity, which is apparent across other Royal Mail activities. Let us face it: the main activity is delivering mail, so surely we could have a pricing system with more flexibility than first-class mail at 27p and second-class at 19p. People who want a speedy special delivery must pay £3.50, but developing a pricing system to deliver letters by guarantee in an emergency for less than £3.50 is not rocket science.

Those of us who drive and walk about London know to their cost that couriers on bicycles and motor bikes deliver parcels and packages of a relatively small weight across the city. We may curse the drivers of Post Office vans from time to time, but we can completely exonerate staff from any responsibility for courier services of that sort. The postal services do not run them, not because the unions have refused to take part—in fact, they have repeatedly requested that the postal services change tactics radically and consider running urban courier services—but because the postal services do not want to get involved. They have no interest. I find that timidity frustrating in what ought to be a vibrant private sector-minded and now liberated operation.

There is a long way to go before the business attitudes of the postal services change. In large measure, the culture is that of the civil service rather than that of a competitive business.

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