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Dr. Vincent Cable (Twickenham): I add my sympathy to that expressed about the 15,000 postmen and women

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who will lose their jobs. In the Secretary of State's discussions with Mr. Leighton during the past few days, did he specifically tell her that 40,000 redundancies are now in prospect? Was that one of the conditions that he set for his appointment as chairman of Consignia?

I welcome the new dividend policy, which the Liberal Democrat and Conservative parties have sought, but does the Secretary of State agree that £64 million, however welcome, is very small compared with the £2 billion that successive Governments have taken out of the Post Office in the past decade, undermining its ability to compete with the private sector?

Specifically on competition, I welcome the conversion of the Conservative spokesman to slowing the introduction of competition; it was the first statement to that effect that I have heard. Is the Secretary of State now part of that consensus, which seems to affect both sides of the industry and both sides of the House?

Finally, on the transfer of the universal parcel service as part of the universal service obligation, irrespective of whether that service makes a profit or a loss, is Parcelforce transferring a liability or an asset to the Royal Mail? Why is the private sector being introduced into not merely the parcel service, but the mail service, while making no contribution whatever through a levy to the maintenance of the universal service obligation?

Ms Hewitt: First, the conditions of Allan Leighton's appointment have nothing whatever to do with the job losses announced this morning or any that may be announced in future. Any question of future job losses has to do with the necessary modernisation and restructuring of the business. The point that Allan Leighton and I have discussed, which may be of interest to the House, is our agreement that we need to get away from detailed interference by Government and officials in the running of a company to which we have given commercial freedom. When the new strategic plan has been approved, it will be up to the company to deliver on that plan. It will report to us, and I, in turn, will report to the House at appropriate intervals.

The hon. Gentleman is right to draw attention to the enormous dividends that were taken out of the company during the Conservative years, when the dividend was set at 90 per cent. Of course, one of the first steps that we took was to cut that dividend to 40 per cent. As I announced a few moments ago, we will waive that dividend for the current financial year. A decision on dividends for other years, during which we have been in power, will be taken in the context of the strategic plan.

We made our position on competition clear when the Postal Services Act 2000 was introduced. The first and primary policy goal is to sustain the universal service obligation. Competition is valuable, and I would expect the hon. Gentleman to support the introduction of greater choice and competition to benefit consumers.

As for Parcelforce's detailed accounts, as I have said, it has made losses every year since it was established. I do not know how those losses break down between different parts of the Parcelforce business, and I am not at all sure that the company knows.

Mr. Tony Clarke (Northampton, South): I listened carefully to what my right hon. Friend had to say, but

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does she not consider it to be a matter of gross incompetence that Post Office managers announced the 15,000 redundancies at the same time as they announced that they had got it so badly wrong in wasting £2 million on changing the name to Consignia? Does she not feel that workers in the industry may ask why they should trust their judgment now if they got it so badly wrong then? Furthermore, considering the inevitable instability that there will be in the industry, why cannot the Government tell Postcomm that the unilateral liberalisation of mail at this time, outside that accepted by our European partners, could sound the death knell for the Post Office as we know it today?

Ms Hewitt: As I said, we have taken steps in government to strengthen the management of the Post Office. Even before the appointment of the new chairman, we had secured the appointment of a new finance director to the company, and my hon. Friend the Minister for E-Commerce and Competitiveness recently announced the appointment of a new chief executive for the post office network. The unions and hon. Members, at least on the Labour Benches, have welcomed that.

On Postcomm, I remind my hon. Friend that when we consulted on the new proposals and the creation of proper commercial freedom within the public sector, the Communication Workers Union said that it wanted a new regulator independent of the Government, on the same basis as Oftel, Ofwat and Ofgas, for instance. That is precisely what we have delivered within the framework of an Act that makes it clear that the No. 1 duty of the regulator—independent though he or she may be—is to secure the universal service. I know that the regulator takes that duty seriously.

Mr. Edward Leigh (Gainsborough): As the Secretary of State knows, the National Audit Office has produced a full report on the subject. Will she say more about Postcomm's proposals for the immediate liberalisation of mail and for achieving full competition by 2006, because those proposals go to the heart of the matter? Consignia accepts the need for competition but is against the timetable laid down by Postcomm, which it says will endanger the company. What timetable does the Secretary of State consider would ensure the survival, growth and profitability of that company and the maintenance of the universal service? Does she accept Postcomm's rationale that it is only by increasing competition to the extent that we have a fully competitive market by 2006 that the company can be saved?

Ms Hewitt: The excellent report by the NAO, to which the hon. Gentleman refers, clearly identifies two risks inherent in the situation. The first is that of introducing too much competition too fast, which might damage and jeopardise the universal service obligation. The second is that of not introducing enough competition, thereby removing from the company an incentive to modernise and to improve its service to its customers.

It is important at this stage for the company and the regulator to sit down and talk to each other, which they have only just begun to do, and to arrive at an agreed view of the company's finances and the nature of the market. On the basis of that analysis, the regulator will arrive at a sensible view of the situation and make a decision about market opening that does not jeopardise

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the universal service, but which delivers the benefits to the consumer that I would expect the hon. Gentleman to wish to see.

Mrs. Louise Ellman (Liverpool, Riverside): Can the Secretary of State say whether Allan Leighton has been given complete commercial freedom in relation to urban post offices? Do the Government value urban post offices? How will they protect services to deprived communities in Liverpool and elsewhere, and value post offices and sub-post offices for the services that they provide, as well as for the jobs that they offer?

Ms Hewitt: As someone who represents a number of deprived urban communities, I entirely agree about the importance of the services that local post offices provide in low-income areas, both urban and rural. The fact is that about two thirds of people in urban areas live within half a mile of two or more sub-post offices, many of which are struggling to survive commercially, as we all know from our constituencies. It makes sense for the Post Office to sit down and talk to sub-postmasters, to consider the detailed market within local communities and to produce proposals to rationalise and improve the network of urban post offices. That is what it will do, and it will not make any decisions on closures of any urban sub-post offices until and unless those consultations have taken place.

Mr. Keith Simpson (Mid-Norfolk): The Minister will be aware from the course of the questions that she has been asked this afternoon that the House appears to be unhappy with Consignia's track record. Will she now answer the question put to her by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) and tell us whether Consignia's business plan, which seems to have failed, was signed off by her predecessor?

Ms Hewitt: I was referring to the business model for Parcelforce, which is the main subject of today's announcement. That model was put in place in 1986, and although it formed part of the previous year's strategic plan, this Government, and my predecessor specifically, noted concern about its viability. I have no doubt that the company is right to grasp this nettle and to recognise that we cannot carry on with a company that is publicly owned and has been given commercial freedom, but which has been losing money for the last 10 years. By integrating the universal parcel service in Royal Mail, which the unions, among others, have been arguing for, we will strengthen the universal service and stem the losses that Parcelforce has been making ever since its business model was established under the Conservative Government.

David Hamilton (Midlothian): Does the Minister understand several points? One is that the work force already accept that restructuring should take place. Parcelforce is an example, and a bad one, of what happens when cherry-picking is allowed to take place throughout an industry.

The Minister spoke about vehicle losses that would take place under restructuring. Is she aware that in urban and semi-rural areas, workers require those vehicles because they are the only vehicles that they have nowadays to get them from one place to another? That is due to the subsidies that were paid, and indeed every local authority

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has to pay out millions of pounds because of that lot on the Conservative Benches. They sit there and cry crocodile tears over thousands of workers, but that is absolute rubbish. I can understand angry workers in the industry, but can the Minister understand why there will be great anger about what is happening under a Labour Government?

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