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16 Oct 2006 : Column 623

In closing on the subject of Post Office Ltd, my key message to the House is that the Government recognise the scale of the challenges facing the network. They recognise the important social and economic role that post offices play, particularly in rural and deprived urban communities, and they recognise that where post offices playing that role can never become commercially viable, there will be a continued need for public funding to ensure the provision of Post Office services. We are listening to, and understand, the concerns of sub-postmasters and others.

For the Royal Mail the Government’s ambition, as set out in our manifesto, is to see a publicly owned Royal Mail fully restored to good health, providing customers with excellent services and its employees with rewarding employment. Only a few years ago, as I mentioned earlier, the Royal Mail had annual operating losses of £318 million and the quality of service was poor. The Government put in new management and made available more than £1 billion of finance facilities to help turn the company around. In 2005-06 Royal Mail, as a group, had operating profits of £355 million. The quality of service had been improved, with 94.1 per cent. of first class post being delivered the next day and 10 of its 15 licensed targets being met. Quality of services remains the company’s top priority.

That could not have been achieved without a willing, able and dedicated work force. It is right that employees should be rewarded for their part in that turnaround. They received more than £1,000 each following the successful completion of the renewal plan in 2005 and more than £400 this year. Working conditions for employees have also been improved during this period, with the introduction of a five-day working week and many sorting offices being provided with IT equipment to provide remote learning opportunities for staff. The company’s range of policies and programmes have been redesigned to help and empower female employees, and it has been recognised as among the top 50 places where women want to work.

Royal Mail still has several challenges to face. The postal services market has been fully liberalised since 1 January 2006. Royal Mail has had to become more efficient to enable it to compete in such a market. One of its main rivals is already piloting end-to-end services. Added to that, Royal Mail has had to tackle its pension fund deficit, which stood at £5.6 billion at the end of March 2006.

Mr. David Drew (Stroud) (Lab/Co-op): As someone who was a member of the Committee that considered the Postal Services Act 2000, may I ask whether the Minister accepts that one of our arguments during those proceedings was about the relative unfairness of the Royal Mail alone having to meet the cost of the universal service obligation? Other companies that come into the marketplace should also be required to meet the obligation, especially if they intend to offer a national service. Are the Government examining that matter?

Jim Fitzpatrick: My hon. Friend makes a good point and speaks with his experience of that Committee. As he is probably aware, a live debate about that matter is going on in the industry.


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Royal Mail has developed a business strategy that will transform the business over the next five years. It involves the introduction and deployment of new sorting equipment and more efficient ways of working, and the rationalisation of the mail pipeline. That will need investment, and the Government are prepared to put in place the finance required to achieve that transformation. The Secretary of State set out the proposed finance framework that was agreed in principle with Royal Mail in his written statement to the House on 18 May. The measures in the framework allow the company to stabilise the pension deficit and give it the funds that it needs to transform the business.

The detail of the finance framework has not yet been finalised. The documentation is being drawn up, but, most importantly, the company and the Government need to agree on how the work force should be incentivised to deliver the transformation. The Royal Mail board has made it clear that it strongly believes that an employee share scheme is the best way to do that, and has submitted a proposal. The Government are prepared to consider options for incentivising employees in Royal Mail, including an employee share scheme in the context of a publicly owned business, under which shares would be held in a trust for the benefit of employees, and could not be transferred to non-employees.

The motion states that the delay in finalising the finance framework is damaging Royal Mail. In reply, I would say to Liberal Democrat Members that although the finance framework is not yet in place, the company has been preparing for the implementation of its strategy and has made other operational changes to improve its efficiency. It has not been in a state of paralysis. The Government are actively considering Royal Mail’s proposals, but will not be pushed into making decisions without a thorough examination of the proposals that have been put to us. I understand that that is called due diligence in the business world. It would not be right for the Government, who are entrusted with looking after the taxpayers’ shareholding in Royal Mail, not to carry out proper due diligence before making an informed decision.

The Government strongly believe that Royal Mail can compete in a fully liberalised market and meet its obligations to provide a universal postal service. A successful Royal Mail is good for the shareholder, the management, the employees, the taxpayer and the UK as a whole.

In both the post office network and Royal Mail, the endeavours of both the Government and the businesses will ultimately depend for their success, as ever, on the skills, dedication and sheer hard work of sub-postmasters and employees, which we often tend to take for granted, but which should never be underestimated or overlooked. As my right hon. Friend the Secretary of State has made clear, we are determined to give the Post Office the certainty that it needs by putting the network on a long-term stable footing. We are equally determined to continue to help Royal Mail on its way forward. I commend the amendment to the House.

5.39 pm

Mr. Alan Duncan (Rutland and Melton) (Con): This is an important debate and it would be good if we could find some cross-party agreement. Every single
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Member of Parliament has a post office in their constituency—at least at the moment. The Post Office is a great national resource, but it is approaching a serious crunch point. Its long-term future will probably be decided in the next three years. As a country, we have to decide whether the network is something that we want to let wither and die or something that we will value and support. Our post offices already offer a great range of services, ranging from stamps to foreign currency and from insurance to passport services.

Sir Robert Smith: The hon. Gentleman made an important point about the choice between allowing the network to wither and die or making an investment to sustain it for social reasons. Must we not get across to the Government the message that the sooner that decision is made, the less expensive it will be? To help the network recover from damage through neglect will be far more difficult than to intervene timeously.

Mr. Duncan: I thoroughly agree with the hon. Gentleman. In a way, that is what I shall argue, and it is why we will join his party in the Lobby tonight in support of the motion.

Chris Bryant: What a surprise.

Mr. Duncan: Everything is a surprise to the hon. Gentleman.

As Adam Crozier has said, Royal Mail could fulfil its legal obligations with just 4,000 branches. When the Labour party came to office, there were almost 20,000 branches, but despite repeated manifesto pledges to keep post offices open, there are now only about 14,000. Under the Labour Government, a quarter of the network has disappeared, and the cuts fall hardest on the most vulnerable in our society.

Of course, the reason that post offices are closing is that many are losing money. Despite the subsidy that the Government hand to Royal Mail each year, the network still loses over £100 million a year. The majority of rural post offices have a very small customer base—1,000 of them have fewer than 50 customers per week. Much of the change from profit to loss in recent years is due, as we have been discussing today, to declining income from transactions that relate directly to Government.

Post offices used to be the only place that a range of services could be accessed, but times have changed and they are changing fast. People now pay their bills online, they have their benefits paid directly into a bank account, TV licences are no longer available from a post office, and people can even print stamps to put directly on the items that they want to post. These developments cannot be reversed. What is missing from the debate is any clear Government strategy for the role that our post offices should fulfil, because the Government do not appear to have one. That is why two post offices have closed every working day under this Government.

One of the things that is keeping post offices open is the Post Office card account. POCA is a very simple form of account, into which only benefit payments can be made. Over 4 million people use such accounts and the average post office branch has 355 customers a week collecting their benefits through the scheme. The Government’s decision to abolish it is one of the
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greatest threats to the network that remains. Post Office card account transactions are responsible for 10 per cent. of a sub-postmaster’s net pay. The National Federation of Sub-Postmasters has said it believes that this decision

On Wednesday, as we all know, they will deliver a petition signed by more than 3 million people calling for the Post Office card account to be saved.

Even before the card is officially withdrawn, the Government have been trying to encourage benefit recipients to move from claiming their benefits in person at their local post office, for which the branch receives a payment, to having the benefit paid directly into their bank account. It is clear that the Government’s decision to abolish the account poses a major threat not just to rural post offices, but to urban ones, which in many cases matter just as much. To make matters worse, the Government have not clarified what they intend to do to ensure that benefit recipients continue to receive a decent service at their local post office. If that is confusing for elderly benefit recipients, they should look at the economics of the POCA.

Mr. Weir: Does the hon. Gentleman accept that the situation is worse than that? In many rural areas the banks moved out many years ago and there is no alternative to a post office, so when people no longer have access to POCA or a post office, they will end up paying more of their money to get their own money out of ATMs, if they exist, or to go into the local town by public transport, if that exists, to get their money.

Mr. Duncan: Yes, there is a problem of rural isolation all over the country—in Scotland, and even to some extent in my own constituency. Essentially, people who do not have a car are stranded. Some might say that people have to go to shop for food, and if they can go to Sainsbury’s they can find their way to a post office. However, that is not always true for the elderly at the time that they need to go to get their money. There are growing problems of rural deprivation. The modern world is leaving in a state of isolation a lot of people who cannot go as fast and as actively as many of us.

The Government claim that it costs £1 to pay into a POCA and only a penny to pay into a bank account, but Ministers have repeatedly refused to answer questions about the financial arrangements behind the scheme, so the real costs of the POCA remain unclear. The card account is hugely important to people who do not have bank accounts and at least 1 million of our most vulnerable people cannot get a bank account. They may have been in prison or do not have the necessary credit rating—there are many reasons. Such people are heavily, if not entirely, dependent on the POCA. Furthermore, the account is a vital source of revenue for post offices. If the Government choose to replace it only with a limited, targeted scheme, that may help those without a bank account. However, the financial cost to post offices will still be great. As the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) said, this is an urgent matter and decisions need to be taken now. If such a process is already in train by the time that we hope to be in government, the danger is that there will be nothing left for us to reverse. The solution is not to abolish the
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account—that is why we have been calling on the Government urgently to review their decision.

The Government have created this famous Cabinet committee chaired by the Deputy Prime Minister to look into the post office network, but despite the importance of the issue to local communities, it has not published any recommendations, and it was only this afternoon that we learned that it has met—once. Perhaps doing so on the croquet lawn does not really count, but we shall see. I can only hope, therefore, that the Government are taking the issue seriously and will accept that they have not done enough to protect the future of the post office network.

The Liberal Democrats have a policy document, but it does not mention the Post Office card account. In fact, all they have is a plan to part-privatise the Royal Mail, which is understandable, albeit that one of their own spokesmen described it as

To be fair, it is more than that, but their proposal is a short-term answer to a long-term problem. It is a one-off injection of money for perfectly logical causes such as the pension scheme and investment in the sorting system, but it does not—despite the protestations of the hon. Member for Kingston and Surbiton (Mr. Davey)—protect the long-term needs of the post office network.

We need a new direction—a new strategy to protect much-needed post offices. Here, at least, we have a lot of overlap and agreement between the Opposition parties. The solution has to be to reinvigorate the Post Office. We must give it new life by giving it new business. We must secure its future and that of individual post office branches by letting them open up to new markets, and new customers, with new products.

Mr. Bellingham: My hon. Friend is making an excellent speech. Does he agree that it is staggering that an organisation that handles £90 billion in cash through its tills every year is in all this trouble? Surely the Government have to accept responsibility for not doing more to support it.

Mr. Duncan: That is the case that I am trying to outline. Indeed, it is why we have been calling on the Government to rewrite sub-postmasters’ contracts to allow them to act as agents for other businesses, including private mail services. Just as many pubs that were tied to one brewery are now free houses, so post offices should be released from their ties and made able to offer a broader range of services. The post office network plays an essential role in combating financial exclusion. If that role is to be preserved, the Government need to take urgent steps to give sub-post offices freedom to gain the new business that they so desperately need.

Conservative Members are prepared to give the business people who run our sub-post offices a chance and a future. We want to give them a framework in which they can develop their businesses and make profits where they are currently constrained and forced into loss. Unlike Labour, we will not limit sub-postmasters. We will give them the tools that they need
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to ensure that the post office network can thrive and continue to fulfil the important role that it plays in our local communities.

5.50 pm

Kate Hoey (Vauxhall) (Lab): I welcome the Liberal Democrats’ choice of debate for today. Some of us have been urging a debate in Government time for some time. We now have a debate in the main Chamber and that is good. The timing is especially appropriate given the huge lobby on Wednesday by the National Federation of Sub-Postmasters. It will not only take place in the name of the National Federation of Sub-Postmasters, but is supported by Citizens Advice, the National Pensioners Convention, the National Federation of Women’s Institutes, Postwatch, Age Concern, Help the Aged and many people who will find their way to Westminster on Wednesday to tell us, as Members of Parliament, what they feel, especially about the Post Office card account.

The Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick) took some criticism. However, I believe that he genuinely has the interests of all those who use the Post Office card account at heart. He is doing his best within a machinery, which, as any of us who has been in government knows, cannot always do exactly what one would like. He has done his best and he has spoken to the all-party group on sub-post offices. However, I hope that we will get some definitive answers. I blame the Department for Work and Pensions for much of the mess because it devised the method of changing the way in which benefits were paid. The Minister who introduced the change left the Department when it was being implemented and is now in a different guise.

For me, the main issues are choice and the valuable service that the Post Office provides throughout the country. I shall not repeat the figures for the numbers of rural and urban post offices that are closing. Every closure creates a huge hole in the community that the post office serves and the provision of social benefits there. We want to find ways in which to prevent that.

I genuinely cannot understand why the Government allowed the BBC to get away with what it did. I pay my licence fee but I share some of the problems of the right hon. Member for Gordon (Malcolm Bruce)—I am sorry that he has left—with it. The BBC’s behaviour, some of the programmes that it broadcasts and the way in which it has downgraded certain matters often makes me wonder why we have to pay a licence fee. The Government should have been much tougher with the BBC and made it clear that the criteria for the licence fee include its public service ethos. It should have been forced to give the people the choice of using the Post Office service.

Mr. Paterson: Will the hon. Lady give way?

Kate Hoey: I shall give way to the vice-chairman of the all-party group.


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