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Until the intervention of the hon. Member for Morecambe and Lunesdale (Geraldine Smith), I sensed a consensus in the House. We tabled this motion, which we believe is pretty uncontroversial, to try to create a consensus. We omitted some of our policies that, I think, she does not like. We want the whole House to send a clear message to the Government. There is a huge campaign in this country against what the Government are doing—a groundswell of opposition to their policies. I am looking forward to the lobby, this Wednesday, with the National Federation of SubPostmasters, which will present to Ministers a petition from nearly 4 million citizens, arguing that the Government need to change tack. Hon. Members will have been in their constituencies over the summer, they will have heard the anger from
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sub-postmasters and sub-postmistresses, and they will want to back us tonight so that we can send a real message to the Government.

Laura Moffatt (Crawley) (Lab): Is the hon. Gentleman aware of the latest change in the network of post offices in my constituency, in the neighbourhood of Broadfield, where the post office has just been reopened by a successful businessman, Mr. Limbachia, who sees an opportunity to serve his community and is delighted to offer that service?

Mr. Davey: I am always delighted to welcome the reopening of a hospital, post office or school that has closed under this Government. However, the hon. Lady ought to talk to her right hon. Friend the Secretary of State for Trade and Industry, who was interviewed by the Financial Times today and is predicting thousands of closures.

Mr. Weir: The hon. Gentleman has talked about the anger among sub-postmasters. Is not he also aware of the anger among the public? When he talks about reports, has he seen the report from Postwatch Scotland on the importance of rural post offices in Scotland, which shows that 67 per cent. of respondents rate the post office as either “very important” or “important”. Significantly, the percentage rose substantially among the unemployed and those on low incomes. Post offices are vital to that group, and if the Government do not make decisions on funding for the future, it will be a disaster for the unemployed and those on low incomes in rural areas.

Mr. Davey: The hon. Gentleman is absolutely right. It is our most vulnerable constituents who are most at threat when post offices close. The Government say that they care about social inclusion and that they want to deal with financial exclusion, but, on post offices, they do exactly the reverse.

Sarah Teather (Brent, East) (LD): Does my hon. Friend agree that the problems only just begin when a post office closes. It is not just those using such post offices who find themselves excluded but the many others using neighbouring post offices who find that the queues become so excessive that they also have problems accessing a local service.

Mr. Davey: My hon. Friend is absolutely right. In my constituency, Post Office Ltd railroaded the closure of six post offices in the borough of Kingston. Queues at Surbiton post office have now lengthened, reducing the quality of service.

Susan Kramer (Richmond Park) (LD): Is my hon. Friend aware that this is not just a rural issue? It applies very much to suburban communities. My most deprived ward, Ham, contains a large estate where many elderly people live. It now has not one sub-post office, and the nearest post office—which necessitates a mile-long walk for some 90-year-old people, because it is the only one they can get to—is very likely to close as other services, notably the provision of television licences and Post Office card accounts, are removed. That is genuine deprivation.

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Mr. Davey: My hon. Friend is absolutely right. I think the comments that we have just heard demonstrate the anger of our constituents. Interestingly, a recent poll of sub-postmasters and sub-postmistresses by the national federation showed that 72 per cent. were no longer confident about the long-term future of their businesses. There is real anger out there in our communities.

Although we have tabled a fairly consensual motion, I cannot promise that my comments tonight will produce a consensual alternative. There are some tough decisions to be made, along with some difficult choices. There is no easy solution, whether for Royal Mail or for the post office network.

Our party has looked at the policy in detail and debated it democratically, and we have reached a tough decision. We believe that Royal Mail must be reformed if it is to compete in the liberalised market. We know that if we face up to that harsh decision, we shall be able to secure the cash to invest in the public sector post office network. That proposal will not meet with approval on all sides—it is a tough decision—but we believe that it is a serious and credible proposition, and that if Members want to save the post office network in their constituencies, it is the only option.

Miss Anne Begg (Aberdeen, South) (Lab): Nearly three years ago, when the urban regeneration programme hit Aberdeen and a number of post offices consequently closed, the then Liberal Democrat-controlled council promised to put council services into post offices so that they remained viable. To date, not a single council service has gone into a post office in Aberdeen. I wonder whether this is in fact a tough choice, or just the Liberal Democrats promising what they cannot deliver.

Mr. Davey: That was a good try, but I am afraid it failed. In many constituencies where local authorities have tried to work with post offices, Post Office Ltd—thanks to restrictions imposed by Royal Mail Group—has got in the way of such partnership deals. I am afraid the hon. Lady has scored an own goal against her own Government.

The post office network faces huge problems. Members throughout the House will know the history. Over the past 20 years 7,500 sub-post offices have closed; last year nearly 150 closed. Even that does not tell the whole story. Many full-time post offices have become part-time as their hours of service have been cut. That is due to years of lack of investment and lack of imagination on the part of successive Governments.

I referred to some of the bad decisions earlier. That is why we are here today, facing—if we listen to the chief executive of Post Office Ltd, Alan Cook—a potential reduction in the post office network to just 4,000 following cuts of 10,000, or—if we listen to Postcomm—a potential cut in the rural network from 8,000 to 1,500. Then there are the leaks from the Secretary of State.

No doubt the Government will say that it is nothing to do with them. They will say that it is all to do with the customers who are not using post offices any more: they are using new technology, and it is all too expensive. The Government have tried terribly hard and invested lots of money, but it is just not working, so they have to
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cut post offices. That will be the Government’s line, and of course it is absolute tosh.

The Government have been following completely contradictory policies. They are trying to say that they want to save the post office network, while taking business away. Last year they were subsidising, through the social network payment, to the tune of £150 million. In the same year, they took business worth £168 million out of the post office network. According to Adam Crozier, five years ago 60 per cent. of the revenue of the average post office came from Government business; in two years’ time, it will be down to just 10 per cent. That is the size of the cut in post office revenue. It is not the fault of the customers or of technology; it is the fault of those people over there who are making the decisions.

Chris Bryant (Rhondda) (Lab): Building on the consensual basis that the hon. Gentleman mentioned, I was accompanied by an Assembly Member when I carried out a tour of all the post offices in my constituency last week. When we called, 25 were open. Surely we would all agree that one of the worst decisions taken in recent months was on television licences. It was a bad decision for two reasons. First, as the hon. Gentleman said, it withdraws business from post offices, but, secondly and even more importantly, it means that an awful lot of people will not get their TV licences and will have to go to court over the next few months. What does the hon. Gentleman suggest the BBC should do about that?

Mr. Davey: When the hon. Gentleman carries out his next tour, I hope that there are no fewer than 25 post offices open, but if he continues to support his Government I suspect that there are likely to be a lot fewer.

If the hon. Gentleman spoke to BBC managers, he would hear from them that the Government were unable to guarantee the future size of the network, so they were not able to ensure that a network would be in place for TV licence payers to use. That was one of the main reasons the BBC refused to go ahead with a contract with Post Office Ltd. Once again, it was the Government’s failure that led to the problem.

Michael Connarty (Linlithgow and East Falkirk) (Lab) rose—

Mr. Davey: I am not giving way, as I want to make some progress.

A number of reasons can be cited for the failings of the post office network and the lack of confidence among sub-postmasters. The first is the Post Office card account, which represents more than 10 per cent. of annual income for the average post office. For many months, uncertainty about the future has been evident, but we observed at parliamentary questions today—probably thanks to the Liberal Democrat Opposition day—that Department for Work and Pensions Ministers went further than usual to say that there might be a future for the Post Office card account. If that proves to be the case, it will be very welcome, but we want to see more details before we can believe the weasel words of Ministers. We also want to be sure that individuals are able to choose the Government account rather than be pressurised to move their business to a bank.

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Jo Swinson (East Dunbartonshire) (LD): Does my hon. Friend agree that it is not just the revenue lost to post offices by the withdrawal of the Post Office card account, as the footfall is relevant, too? In common with the hon. Member for Rhondda (Chris Bryant), I toured sub-post offices in my constituency this year and some estimated that 40 per cent. of their footfall came from benefits and POCA. There is the further point that other services within the post office will also be lost if POCA is withdrawn.

Mr. Davey: My hon. Friend is absolutely right: that is precisely why it is so damaging for the Government to keep withdrawing all these services. It creates uncertainty. Sub-postmasters or sub-postmistresses want to invest in their businesses, but in order to do so they must know that there is a future. They want to know that the contracts will stay with them and that they will be able to secure some return on the investment, but the Government have created a climate of huge uncertainty.

Social network payments are the next issue. We know that they are due to run out in 2008, yet the Government have given no indication whether they will continue or at what level. Sub-postmasters and sub-postmistresses simply will not invest beyond 2008 because they do not know what income they will receive. It might all be to do with the spending review, or perhaps the Secretary of State has been told to find a lot of savings for the Chancellor. If so, our fears are magnified. Failing to support post offices in rural or deprived urban areas creates real problems.

Miss Begg: Will the hon. Gentleman give way?

Mr. Davey: No, I will not.

Another problem with the Government’s handling of post offices is the lack of imagination. Only last year did they establish a set of pilots, looking at new services such as home delivery, mobile post offices, partnerships with pubs, local authorities, police stations, pharmacies and others, and host services with satellite post offices. All those pilots are welcome, but they have come very late. We have been arguing for more innovative approaches for a long time, but the Government have left it late without putting the investment behind the pilots to ensure that they work.

There have been other problems with the Government’s thinking on post offices. A particular concern for the Liberal Democrats are the restrictions that Royal Mail Group forces on Post Office Ltd, which force restrictions on postmasters.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): On the restrictions forced on postmasters in respect of the business they can take from other postal providers, is my hon. Friend not concerned that Royal Mail, facing competition, is beginning to get its own employees to look for new business for Royal Mail? In one of its videos, it appears that it is encouraging people to look at who goes into the post office and to steer them away from the post office so that they go direct to Royal Mail. If these people are to have their hands tied behind their back by Royal Mail, it seems a complete betrayal by Royal Mail to take away the business that they can get only from Royal Mail.

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Mr. Davey: My hon. Friend is right. The position is particularly disturbing. Since 1 January, post offices could have been working with 17 other licensed operators to bring in more letters or parcels business, but Post Office Ltd has prevented that from happening. As he suggested, it is working the other way; it is a negative because Royal Mail is trying to take that business away. Therefore, those restrictions need to be removed and we need to have freedom for our sub-post offices.

Mr. Alan Duncan (Rutland and Melton) (Con): May I seek clarification about which measures the hon. Gentleman thinks are a solution to which problems? I am following his logic and, by and large, I agree with him. His party’s policy of the part-sale of Royal Mail will address the problems of the lack of investment in Royal Mail and stand to replenish a large part of the pension fund, but does not he accept that we need to segregate that from the problems of the network? That policy is not a solution to its problems and, if his argument is to hold together today, as I think so far it is doing, we need to explore other solutions to those problems.

Mr. Davey: I cannot agree with the hon. Gentleman. Part of our policy is to have significant new investment in the network and to create an investment fund from the sale of 49 per cent. of the shares in Royal Mail. We believe that that will produce £2 billion that could be invested in the network. Royal Mail would then be free to borrow on the capital markets to invest in the automation that it needs. Our solution will provide money for the Post Office network and freedom to borrow on a commercial basis for the Royal Mail.

Mr. Duncan: This is a grown-up, sensible debate, but the ability of the Royal Mail to borrow or to act like that does not necessarily help all those tiny rural or urban post offices that are privately owned and perhaps linked to a shop. Therefore, the investment that the hon. Gentleman is talking about will not necessarily benefit them one penny.

Mr. Davey: Of course it will because the investment can come through in terms of extra training, and extra support for business development, marketing, ICT and all the things that are needed for those private entrepreneurs. Moreover, the proposals that I have mentioned to remove restrictions will enable them to develop their business far more with mail operators. I am sure that the hon. Gentleman is aware that the mail business is the most profitable and the biggest business of the average sub-post office. Therefore, allowing that to expand is the best way to ensure the viability of the network.

The Government should have been pressing the banks to enable the Post Office network to join the Link network. If that could be accessed through every sub-post office around the country, so that every sub-post office could be used as an ATM, that would be a great way not only to end financial exclusion but to ensure the footfall that my hon. Friend the Member for East Dunbartonshire (Jo Swinson) mentioned, so that business went into every post office. Therefore, we have made some very attractive proposals for reform and investment that we believe will deal with the problem.

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Miss Begg: The hon. Gentleman criticised the Government for taking Government work from the Post Office, which he said undermined the network. How much do the Liberal Democrats think needs to be spent, and how much are they pledging to spend, to prop up the network?

Mr. Davey: I mentioned the figure of £2 billion just a minute ago. I am sorry if I was not clear enough. To be precise, the £2 billion will come from the proceeds of the sale of 49 per cent. of the shares in Royal Mail.

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

Mr. Davey: I will not give way because I wish to make some progress.

The post office network has all the problems that I mentioned—the replacement of the Post Office card account, uncertainty over the social network payment, and the Government’s lack of imagination—but what is the solution? The solution that the Government have come up with is to set up a Cabinet Committee chaired by the Deputy Prime Minister. That does not fill me with a great deal of confidence. When we have asked how many times the Committee has met, we have not had any answer, so I wonder whether we will hear—either in the Minister’s summing-up or in his speech—whether the Committee has met, what it is considering, and what proposals it has for dealing with the problem.

Geraldine Smith: Will the hon. Gentleman give way?

Mr. Davey: No, I will not.

One of my problems with the Deputy Prime Minister is that he has often put forward 10-year plans, including the 10-year plan on transport and the 10-year plan on housing, and none has produced any of the things that were promised, so it does not fill me with confidence to know that the Deputy Prime Minister is now in charge of the future of the post office network.

I am delighted that, in the past year or two, Royal Mail’s performance has improved, but it faces three major challenges, of which the Minister will be aware. First, there is the challenge from competition; secondly, there is the challenge posed by 20 years of under-investment; and, thirdly, there are problems caused by the pension deficit, which mean that it is competing with one arm tied behind its back.

As 17 licensed operators compete with Royal Mail, the competition is fierce and very real. Companies such as Deutsche Post, TNT Post, DHL and Business Post are taking market share from Royal Mail. At the moment, they are taking only 3 to 4 per cent., but most commentators believe that that figure may be set to explode. The 500 big business mailers alone represent 50 per cent. of Royal Mail’s turnover of £6 billion, so those private sector competitors could take a big slice of the cake relatively quickly. That would seriously hit Royal Mail’s finances. There are already some early signs of that, in terms of Royal Mail cutting back services. We are experiencing earlier collections and later deliveries. In some parts of the country, if people do not post their mail before 9 o’clock, it is not collected until the next day. However, their delivery does not come until 3, 4 or 5 o’clock in the afternoon, and that makes a complete mockery of next-day delivery promises. That is a cut in service.

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