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There will be another cut in service, too, because the junk mail that Royal Mail now promises to deliver is set to increase in volume many times over. That is a real concern, and Royal Mail has gone to the ridiculous extent of punishing a postman for explaining to ordinary citizens how they can get the mailing preference service. That is a complete disgrace, but it shows the desperate measures that Royal Mail is taking because of competition. However, if we consider the lack of investment, we can see what is at the root of Royal Mail’s problems.

I have to make a confession: before I came to the House, I was a management consultant, and the industry in which I consulted most of all was the postal services industry. I had the privilege of going to 40 countries and looking at their postal administrations, so I am afraid that I know an optical character reading machine and a remote video encoding unit from my elbow. The automation in Royal Mail is pretty poor compared to that of our competitors. The Germans and the Dutch, for example, can sort 95 per cent. or more of their mail by machine, but in the UK the figure is about 50 per cent. That is how far behind we are. Just imagine the impact that that has on a firm’s cost structure. The estimates of how much investment is needed vary; some people say that £2 billion or more is needed, but the Government have offered less than £1 billion, so the investment crisis in the Royal Mail is very real.

On top of that, there is the pensions deficit. I agree with the Minister that there has been progress on that issue. He has allowed Royal Mail to make good its deficit over 17 years. That is a long time, and it is not the time-line given to private companies, but at least it will enable Royal Mail to make good its deficit. The Government have underwritten that by £850 million, but that still leaves Royal Mail with annual contributions of around £750 million per annum to make. That is a dead-weight cost that Royal Mail has to meet before it can make profits and invest in its business—and when it is fighting competitors, it is a real dead-weight cost.

Mr. Weir: I do not disagree with much of what the hon. Gentleman has said, but I am confused. If it is his policy to privatise the mail delivery service, given the problems of competition and cost, how would a privatised Royal Mail compete while continuing to fulfil its universal service obligation, which is important to rural areas? Would that obligation not come under pressure from privatisation?

Mr. Davey: Let me spell it out for the hon. Gentleman. In the public sector—the Government want Royal Mail to remain in the public sector, as does the Conservative party, unless it has changed its policy recently—the Royal Mail cannot go to the private market to obtain the money required to invest for the automation that I have discussed. It relies on Treasury handouts, and the record over many decades shows that the Treasury has not given it the money it requires to invest, so it cannot compete or become efficient. Our proposal enables it to borrow on capital markets, so it
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can obtain the funds and thus achieve the automation that it requires. It can compete, so we will bring new life to the Royal Mail.

I am concerned that the Government, faced with those three challenges, have not done more. We are waiting with bated breath to hear when they will make an announcement about the future of Royal Mail. Royal Mail management have submitted a modest proposal to the Government, in which they suggest keeping Royal Mail in the public sector, while allowing 20 per cent. of shares to be held by employees. Management agree with us that that will give employees an incentive to perform well and improve productivity, as their future will be tied to that of Royal Mail. The Government balked at that modest proposal, and we must ask why. I think that that is to do with the Communication Workers Union, and the 213 Labour Back Benchers who signed the early-day motion saying that they should not accept the proposal —[ Interruption. ] Ministers are not prepared to make tough decisions, because they are still in hock to the unions and to their Back Benchers. The Secretary of State is not prepared to make decisions that would put Royal Mail back on its feet, and secure the investment that our post office network needs.

Our party has taken tough decisions. We have submitted proposals that work for Royal Mail and for post offices. That is the way to ensure that we revitalise the Post Office and Royal Mail. I would like to end by asking the Minister some specific questions. First, when will the Government end the uncertainty for Royal Mail and the post office network?

Mr. Duncan: When the hon. Gentleman said that the Government’s policy is determined by Members who signed the early-day motion, did he not hear, as the rest of the House did, the hon. Member for Stroud (Mr. Drew) shout, “Yes”?

Mr. Davey: Absolutely. I am pleased that I allowed the hon. Member for Rutland and Melton (Mr. Duncan) to intervene, because he has made my point for me. I hope that the Minister will tell us when the uncertainty will end, because the National Federation of Sub-Postmasters needs to know the answer when it comes to the House on Wednesday. Will he pledge to stop his colleagues in the Department for Work and Pensions undermining the Post Office card account, even before the contract is renewed? Will he pledge to stop taking Government business from the network? Will the Government stand up to the CWU, and give Royal Mail employees shares in their future? Will he give post offices freedom from the restrictive practices imposed by the Royal Mail Group? If can give us positive answers to those questions tonight, it will be a real step forward in the debate. I fear, however, that he will not do so, because although we have tabled a reasonable motion, it is clear that he will oppose it. We hope that colleagues on both sides of the House will join Liberal Democrat Members to send a message, because we believe that it is time to save our post office network and Royal Mail. The House should speak for the country, and for 4 million petitioners, and back our motion.

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4.59 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Jim Fitzpatrick): I beg to move, To leave out from “House” to the end of the Question, and to add instead thereof:

As the Minister with responsibility for postal services, I am delighted to join the hon. Member for Kingston and Surbiton (Mr. Davey) and other colleagues and participate in today’s debate on the future of the post office network and of Royal Mail.

Clearly, this is post office week. We have today’s debate, and on Wednesday we have the National Federation of Sub-Postmasters’ rally and lobby of Parliament, together with the presentation of a petition of nearly 4 million signatures to No. 10. Of course, the week began with the publication of Postcomm’s sixth annual report on the post office network, which comprehensively set the scene for many of the issues that I am sure we will cover in the course of today’s debate. On Thursday, of course, we will also have Trade and Industry questions.

The future of the post office network and of Royal Mail is an issue of great relevance to every Member of this House. The hon. Member for Kingston and Surbiton has initiated the debate with some highly emotive remarks and claims, mirroring his recent press release, which referred to


I hope to challenge those assertions. As my hon. Friend the Member for Rhondda (Chris Bryant) pointed out, there is certainly a contradiction between them and the hon. Gentleman’s claim that he intended to introduce the debate in a consensual tone.

We need to centre the debate on such important matters in reality rather than in political point scoring, and in the proper context of the problems and challenges that we face. The hon. Gentleman claimed that the Secretary of State said in the Financial Times article that there would be thousands of closures. In fact, my right hon. Friend said that we were determined to provide certainty for the Post Office and put it on a long-term stable footing. He also said that we needed to ensure that we maintained a national network, which was not what the hon. Gentleman reported that he said.

We need to distinguish between myth and reality. This was recently given very clear focus by Sandi Brocklehurst, the sub-postmistress at Crewkerne in Somerset, writing in the Western Daily Press in August when she said:

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I expect that that view is shared by many of her colleagues.

Mr. Redwood: Only this Government could decide to thin down, instead of fatten up, their asset by taking away much of the money that sustained it. Will the Minister now promise that postal workers will have an opportunity to own shares in their own business, because surely that would be the way to raise morale and provide real incentives?

Jim Fitzpatrick: If the right hon. Gentleman will forgive me, I will come to those issues later in my speech, when I hope to be able to satisfy him as to our general intention.

Dr. Tony Wright (Cannock Chase) (Lab): When my hon. Friend was giving his list of transactions that people do not want to do at the post office, I recalled that I have just received a reminder for my television licence, which said that I could no longer go to the post office to renew it, but I could go to a shop called “Supercigs”, a discount tobacco outlet. I was puzzled by that, because as I understand it, we want to encourage people to go to post offices and dissuade people from going to tobacco shops. However, we have a policy that sends them to tobacco shops, not post offices.

Jim Fitzpatrick: My hon. Friend makes a fair point. The Government are making every effort to try to persuade people not to smoke. I will come to the issue of licences and the Post Office, but the decision was made on commercial grounds by the BBC and was not controlled by the Government. It was in line with the other choices that I will discuss shortly. The world is changing, and people are choosing to operate differently.

Chris Bryant: The Government are, however, directly involved in the Driver and Vehicle Licensing Agency. It is right that people should be able to get their tax disc on line—there are more insured cars on the road as a result of that successful system—but the form no longer states that they can obtain their disc at a post office. Would it not be a good idea for the Department for Transport to suggest to the DVLA that it should make it clear that tax discs are still available at post offices?

Jim Fitzpatrick: My hon. Friend makes a fair point. I can advise him that it was raised with me when I met the National Federation of Sub-Postmasters executive and I undertook to examine it. I am looking into the matter on the basis that people should have a choice—and do—but it is fair that all the choices should be made available to them.

Sir Robert Smith: Will the Minister give way?

Jim Fitzpatrick: If the hon. Gentleman will allow me, I should like to make some headway. Several hon. and right hon. Members want to speak so I do not
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want to hog the Dispatch Box for too long, although I shall not avoid interventions, because the debate is important.

I want to spend a short time, however, reminding the House about the Government’s record on the network to date. In total since 1999, the Government have committed a funding package of well over £2 billion for the network. The hon. Member for Kingston and Surbiton might not agree with our policies, but I suggest that it stretches credulity to claim that they are “acts of vandalism” against the network or evidence of a “do-nothing” policy.

Our funding package for the network includes the provision of some £750 million over the five years to 2008 to maintain rural post offices—£150 million a year. That funding, backed up by the requirement for Post Office Ltd to prevent all avoidable rural post office closures, has helped to keep open thousands of offices that might otherwise have closed. The policy of no avoidable closures was extended earlier this year and will remain in place while the future strategy for the network is being finalised.

We recognise, however, that not all the initiatives undertaken—whether by the Government or by Post Office Ltd—have been as successful as we would wish. However, whether we like it or not, the truth is that post offices are not being used as once they were, and the trend is accelerating. The business is going through a sustained period of change, and needs to adapt to customers’ changes in lifestyle and habits; for example, 75 per cent. of people have their pensions and benefits paid directly into a bank account, compared with the 23 per cent. who choose a Post Office card account.

Mr. Davey: Can the Minister answer this simple question? Does he think that the reduced footfall in post offices has anything to do with the Government?

Jim Fitzpatrick: The reduced footfall in post offices has a variety of causes. For example, I was trying to make a point about the Post Office card account: 8.5 million of the 10.5 million pensioners have their pension paid into a bank account, while only 2 million have opted for payment through POCA. As a result of the dramatic advances in technology in recent years, we have seen unprecedented changes in the communications and banking industries. As we all know, for many people text messaging, the internet and e-mail have become part of their everyday lives, virtually replacing traditional written communications. People, young and old alike, increasingly use phone or internet banking, cash-point machines or direct debits to pay their bills.

Geraldine Smith: I agree that people’s habits are changing and that they are having their pensions paid into their bank accounts, and that trend will continue, but the Post Office card account is causing much concern. I received a petition with 1,600 signatures from the sub-postmistress at Bolton-le-Sands in my constituency, so will my hon. Friend look carefully at what can be done to protect the Post Office card account?

Jim Fitzpatrick: With me on the Treasury Bench is the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Warwick and
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Leamington (Mr. Plaskitt), and although I shall talk about POCA later, I can assure my hon. Friend the Member for Morecambe and Lunesdale (Geraldine Smith) that he is working extremely hard to make sure that there will be a successor to POCA and it will allow people to draw benefits from a post office if that is their choice.

Sir Gerald Kaufman (Manchester, Gorton) (Lab): With regard to delivery of written communications, what advice should the Post Office give my constituents in the Gorton, South ward, where a by-election is to take place on Thursday? The Liberal Democrat candidate is on the register at an address outside the ward, but his nomination form has the address of the home of the councillor who has died. How is the Post Office to deliver messages to that candidate—assuming, of course, that anybody wanted to get in touch with him?

Jim Fitzpatrick: Apart from the obvious and predictable message to the constituents to vote Labour, let me say that I cannot believe that the Liberal Democrats are giving two different messages to constituents. Surely that is not usually the case!

Several hon. Members rose—

Madam Deputy Speaker (Sylvia Heal): Order. Can we now get back to discussing the motion on the Order Paper?

Jim Fitzpatrick: I am very grateful for your protection, Madam Deputy Speaker, and I shall try to make some progress. I shall give way to my hon. Friends and other colleagues later, if I may.

Cumulatively, the trends that I have mentioned are having a pronounced effect on the levels of demand for social and personal mail services, for bill payments and for licensing transactions at post offices. Motor vehicle licensing is going through a period of rapid change. Last year there were 860,000 renewals online, and this year online renewals are running at an annual rate of about 3 million. There can be no turning back the clock—although that is not to underplay the fact that Royal Mail has moved from losing £1 million a day a few years ago to profitability under the leadership of Mr. Allan Leighton and his board. That has been achieved through the hard work and dedication of its work force throughout the country.

We all have to accept, and work with, the fact that changing lifestyles and modern technology have clearly changed the market in which sub-post offices operate. It is too often forgotten that the post office network operates in a commercial marketplace. The services that the network provides, including lottery tickets, foreign currency, telephony, bill payments and financial services, are in direct competition with other retailers and providers. There have, of course, also been some very notable successes in certain areas, such as foreign currency: the Post Office is now the UK’s number one provider of foreign exchange services, with 12 million transactions last year. It is also the largest independent provider of travel insurance, with 1 million policies sold annually.

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