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9.19 pm

Mr. Richard Bacon (South Norfolk): I have enjoyed listening to the debate.

First, there is the nature of the market that we are facing. It has been said that the Post Office is facing competitive threats from new technologies, industrial relations and heaven knows what else. Although that is the case, it is important not to forget that there is a growing market. Growth was not as large last year as was predicted, but as the sub-postmaster at Mulbarton in my constituency said this morning, 15 years ago there would be six or seven sacks in the morning, and now there are 30 to 40. So there is a growing market with an exciting future.

The Post Office has 28 million footfalls through the doors of its premises every week. Most retailers would kill for that. In the over 350 g market, more than 4,000 companies are competing. We have seen the improvement in service that has resulted from that. We do not necessarily have anything to fear from greater competition so long as it is handled in the right way.

Secondly, there are some serious questions to ask about the management of Consignia. The hon. Member for Croydon, Central (Geraint Davies), who is no longer in his place, said that the income of the Post Office has risen considerably, from £6 billion to £8 billion. He could have added that Consignia's management has let the costs of the business run out of control. Costs are up by £1.2 billion, and that is the main reason why Consignia is in a hole. The problem arises not because there is no market or because Consignia is not getting increased revenues, but because the management is completely unable to control costs.

Reference has been made to poor industrial relations. I am not surprised that they are poor, given that 30,000 people were told just two weeks before Christmas that they would be sacked. My experience is that companies with good managements tend to have good industrial relations, and that companies with poor managements tend to have poor industrial relations.

My third point is that there is only one shareholder—the Government. The NAO report referred to several times in the debate states:

"The relationship between the Department and Consignia may affect the company's commitment to improving efficiency"

Later on, the report continues:

"It is highly unusual for a shareholder to direct a company's management to pay a guaranteed minimum dividend."

In most businesses, the management decides whether to pay a dividend, and the amount involved. I accept that, during the 1980s, the Treasury sucked a lot of money out of the Post Office, but the Post Office was at least making a profit at the time. I should prefer the people working in the Post Office to have more control over the amount of money to be paid in dividend.

The hon. Member for Croydon, Central referred also to the fact that maintaining a universal service would cause conflict in a profit-maximising organisation. No one in his

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or her right mind would suggest that a universal service delivering light letters at a uniform price was a profit-maximising activity. It has been argued that having a universal service obligation could provide a market attraction to some players, but no one would suggest that such a service was, in itself, a profit-maximising activity.

I was interested in the speech of the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz). It was interesting that he did not refer to his own private Member's Bill on employee share ownership. I speak for no one but myself, and I certainly would not want to commit my Front-Bench colleagues on the matter, but my contention is that the best way to transform the business, which has potentially exciting prospects, is to hand it over to the 200,000 people who work in it. If they became the majority shareholders of the business, they could help it find its feet—and the markets that would ensure prosperity.

9.22 pm

Mr. George Osborne (Tatton): I, too, shall be brief, so that others may speak. I congratulate my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), the shadow Secretary of State, for persuading the powers that be to hold this timely debate on the Post Office.

I recently received a letter from the Post Office, which stated:

"Dear Mr. Osborne,


Re. Ollerton Post Office . . . The above post office closed in April 2000."

I knew that. It went on:

"The purpose of this letter is to ask if you . . . may help us identify a prospective candidate"

to

"restore a service to our customers . . . If you are aware of any such person please contact myself within one month from the date of this letter . . . If we receive no new information, we will regard this as a permanent closure."

It seems a rather odd approach if the Post Office is asking Members of Parliament to find sub-postmasters in their constituencies.

Mr. Lazarowicz: Instead of dismissing such approaches from the Post Office, should not the hon. Gentleman recognise them as well-intended efforts to obtain the sort of information that Members of Parliament often have? Certainly, I was happy to assist the Post Office when I received a similar approach.

Mr. Osborne: If the hon. Gentleman ever passes through Cheshire, he will know that I advertised the post in the Knutsford Guardian, and that I have spoken to Ollerton parish council, among other things.

The Government amendment rests on the fiction that the Government have given the Post Office commercial freedom. Consignia is not free, and it does not operate in a commercial environment. It is not free, as the Government are the only shareholder: they appoint the directors, and the watchdog that supervises the Post Office. Moreover, Consignia does not operate in a commercial environment, as it has a monopoly on all letters below a certain weight or at a certain price.

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It is clear to me, having listened to Labour and Liberal Democrat Members, that they need a lesson in market economics. One had thought that new Labour had taken root, but the debate has revealed that those roots are thankfully pretty shallow. Time and again, Labour Members have said that we need to keep postal services as a nationalised industry and keep the Secretary of State for Trade and Industry in control. Have they learned nothing from the privatisations of British Telecom and British Gas, which have driven down costs for consumers and have increased service provision and the products available to consumers? Those privatisations are generally a very good thing and have been copied around the world. Indeed, the National Audit Office report, which has been bandied around this afternoon, makes it absolutely clear:

"The incentive on Consignia's management to secure efficiencies is relatively weak in the absence of pressure from private sector shareholders and the stock market and is further weakened by the knowledge that efficiency gains would give Postcomm room to introduce more competition and to set tougher price controls."

That is the truth of the arrangement that the Government have set up through the Postal Services Act 2000. We are living with the consequences as services are cut, jobs are lost and unions hold strike ballots.

We live in a world in which ways to communicate, whether by e-mail, telephone, the internet or text messaging, have proliferated. All sorts of methods of communicating are provided by private operators and they operate in a highly competitive market environment. Surely it makes sense to bring the private sector into the provision of snail mail, as people who use e-mail call the Post Office service. Surely it makes sense to bring private sector discipline into Post Office management.

9.26 pm

Brian Cotter (Weston-super-Mare): It is regrettable that after such a long time and so many debates we are still discussing concerns about sub-post offices and the Post Office. It is also regrettable that the Conservative party seems to have amnesia. The core issue, which has been alluded to by a number of right hon. and hon. Members, is that the Conservatives had the opportunity in the early to mid-1990s to tackle this issue and make investment which would have saved us from the problems that we face today. It takes a certain amount of cheek for them to criticise the Government. I am not against criticising the Government, of course, and frequently do so. However, the Conservatives talk about dividends and funding, yet in 1995 they took away £1 billion from the Post Office services.

Mr. Robert Key (Salisbury): It was profitable.

Brian Cotter: For the next two and a half years, they took away another £1 billion.

Mr. Key: It was very profitable.

Brian Cotter: Profitable, indeed, but what was required at the time was investment, and yet the Conservatives criticise the Government.

As my hon. Friend the Member for Twickenham (Dr. Cable) said, the Government are failing to give Consignia the necessary freedom to operate as an

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independent publicly owned corporation. Consignia makes that point frequently. Mr. John Roberts, the chief executive of Consignia, told the Select Committee that he had serious doubts about whether the existing model was working.

Another executive from the company told the Financial Times on 13 December:

"The public sector monopoly model is no longer fit for the environment in which we operate . . . We don't have the degree of flexibility that our rivals have, particularly in bringing down our cost base."

Many points have been made in this debate. It is regrettable that the Government brought in the hare of ACT two years ago without thinking it through clearly. It has caused concern about the sub-post office system not being viable. Because of that, we are still looking for a firm commitment from the Government that the lost revenue will be replaced. From 40 per cent. to 50, 60 and 70 per cent. of revenue comes from that source.

We have had so many assurances from the Government, yet many of us wonder whether there is real meat in them. My hon. Friend the Member for Twickenham referred to a scheme that the Government have put forward as part of their programme to save the sub-post offices. They allocated £2 million to the scheme, yet after a considerable period there have been only five call-offs: £13,200, £1,600, £208, £10,200 and £3,860. Why? It is either because people do not feel that the scheme is really what they want, or because it is difficult for them to access it.

I am conscious of the fact that little time remains for the debate, but we need an answer from the Minister. What real opportunities will people be given to obtain funding support? How will the "Your Guide" scheme work? Will it be funded by the Government? It would offer sub-post offices another framework for progress, based on the Government's proposals.

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