Examination of Witnesses (Questions 1-19)|
22 OCTOBER 2007
Q1 Chairman: Secretary of State, thank
you very much indeed for agreeing to come before this Committee.
I know there is a rival attraction going on in the Chamber but
we still seem to have quite a lot of interest.
Mr Hutton: I will do my best to
Q2 Chairman: Can I put on record my gratitude
for the very flexible way you have approached this Committee over
the recent couple of weeks. I was very anxious that we did not
disrupt the industrial relations process as a Committee and I
am very grateful to you for, I think, cancelling events this afternoon
to be able to come and join us, which is much appreciated. We
think it is important that we have an account from you because
you do have oversight of the general policy area of the regulator
itself. You are the shareholder in the Royal Mail Group, and postal
policies, obviously, are a mainstream issue of your department,
as are the competitiveness issues that flow from the way in which
that market works for the broader economy and the society in which
we live. Perhaps you could begin by confirming where you think
we are now at 3.31 on Monday afternoon.
Mr Hutton: This morning the Postal
Executive did meet to consider the latest draft of the agreement
and approved the package and I think will recommend it to be accepted
by the wider membership of the union in a ballot that I think
will take place over the next couple of weeks. That is enormously
encouraging. I think this agreement can be a mandate for modernisation
in the Royal Mail. I think it is affordable; I think it will help
the Royal Mail cut costs and improve the efficiency and value
for money service that it provides, and for us here, the custodians
of the public purse, all of us, it is within the financial envelope.
We were not prepared to put any more money in to finance a more
favourable deal because we think that would be wrong. The Royal
Mail needs to reduce costs, not increase them, so all in all hopefully
the ballot will produce a "yes" vote because I think
this is in the interests of the workers for the Royal Mail too.
Q3 Chairman: Why did it take so long?
Mr Hutton: The agreement is a
complicated one. It is fundamentally about how the organisation
has to modernise and change and it does address some pretty fundamental
issues about working practices in the organisation. In fairness
to all sides, I think those issues were always going to be difficult
to resolve but I think they now have been resolved. These negotiations,
I think it is worth reminding ourselves, started back in March,
so they have gone on for quite a considerable time and, as I said,
Chairman, they have proved to be very controversial and difficult.
I am very grateful to the work that the TUC have done here. Brendan
Barber in particular, I think, has done a very good job in trying
to bring the parties together and now that has happened, and,
as I said, we have now all got to hope that the membership of
the union recognise that this is a good deal for the business,
a good deal for them and a good deal for the public.
Q4 Chairman: Is it correct to say
that pay and pensions were largely resolved; at the end it was
working practices or certain specific practices that were the
last issue to be resolved?
Mr Hutton: Yes, I think that is
Q5 Mr Hoyle: Secretary of State,
the first question I would like to open up with is what role has
the Government played as the shareholder and owner of Royal Mail,
because the Government was quite clear it wanted an end to this
dispute like everybody in the country, in ending this dispute?
Mr Hutton: We have the obvious
role of encouraging parties to come together and talk. I think
it is talking that resolves disputes, not striking. I do not believe
the industrial action was ever justified. It has hurt the public
and it has hurt businesses, particularly small businesses, who
overwhelmingly rely on the Royal Mail to deliver their mail and
therefore the cheques and so on that they depend on. That was
our primary role, to facilitate a coming together of the parties,
and we did finally discharge that role. We have another role,
of course, which is to safeguard the public investment that has
gone into Royal Mail, and it has been very considerable over the
years, but what our role was not, I think, was about taking over
the conduct of the negotiations. The relationship that Parliament
has decided should be the right relationship going forward was
set out in the Postal Services Act 2000, and our role now is as
that of a shareholder in a commercially run organisation. You
would not expect shareholders to be involved in the detailed operational
day-to-day matters of the company and we are going to keep out
of that, but our role, as I said, was to try and make sure that
the dispute came to an end as quickly possible and on terms that
were sensible and fair to all concerned. That is the role we tried
to discharge, and we did it through meetings and contacts and
phone calls and the usual things that you can imagine.
Q6 Mr Hoyle: So is it unfair criticism
when they suggested that while Royal Mail was burning the Secretary
of State was fiddling?
Mr Hutton: I do not know who said
that but give me their name and address and I will pursue it myself.
I think that is unfair. It is important for all of us, I hope,
to come to an understanding about one very important thing. Since
the legislation in 2000 ministers have not had day-to-day operational
responsibility. We have very limited powers of direction in relation
to the Royal Mail, and I think rightly so. We have some broader
strategic responsibilities to discharge about the appointment
of the chairman and board and the approval of the company's strategic
plan. We have some limited role in relation to borrowing when
it goes above certain limits but ministers do not take day-to-day
responsibility for the Royal Mail, not because we are trying to
duck out of it but because I think in the modern age that is a
completely inappropriate role. This sector of our economy is changing
very rapidly indeed and I think we have a fundamentally baked-in
interest in ensuring that we have got a management team in there
which is capable and competent, understands the scale and breadth
and scope of the changes that are going to affect this sector
and is doing its best to make sure the Royal Mail can respond
and rise to the challenges of the needs of our economy. That I
think has to be a job for professional managers, not politicians.
Q7 Mr Hoyle: Obviously, you are right,
but in a modern setting most people say it is about shareholder
power, so you have to be aware that you have got the power. You
were very kind and very generous in your comments about Brendan
Barber and the TUC, but what role did ACAS play?
Mr Hutton: ACAS were involved,
I think, during the summer. When I became the Secretary of State
I think there were meetings taking place between the union and
the company and ACAS. Sadly, they were not able to come to a satisfactory
outcome, but ACAS were involved, I think, in the spring and the
Q8 Mr Weir: Just listening to what
you were saying there, Secretary of State, you said in the House
two weeks ago, "We are not going to take sides in this dispute",
but is that compatible with the statement made by the Prime Minister
and echoed by yourself that "the dispute should be brought
to an end on the terms that have been offered as soon as possible",
considering that at that time the union did not accept the terms,
and indeed the dispute seems to have been settled on different
terms that you yourself have described as sensible and fair terms
Mr Hutton: I think what we were
trying to do was speak up for the public in all of this. We were
not trying to take sides in relation to the parties to the dispute
but the public have an obvious interest in bringing this industrial
action to an end as quickly as possible and that is why the Prime
Minister made the comments that he made and I obviously support
them 100%. I think the package that was on offer was a fair and
reasonable one and it has been broadly accepted by the Postal
Executive. There have, I think, been a number of small changes
to that agreement but I think broadly, in terms of its affordability
and the change to working practices, that was the offer that the
Prime Minister was referring to in the House a couple of weeks
ago. We have tried very hard not to fall into the trap, and it
would have been a trap, of taking sides in relation to the parties
to the dispute because I do not think that is the role we should
play. We have to safeguard, as I said, the investment that has
gone into the Royal Mail. We have to try and speak up for businesses
and the public who were massively inconvenienced by this dispute.
It is obviously better for there to be an agreed settlement. I
am not in favour of heavy-handed management imposing changes on
working practices without proper discussion and, hopefully, agreement.
Those were the things that mattered to us in all of this. We saw
a process that was very long and protracted. It started in March
and was still going until a couple of hours ago. I do not think
anyone could accuse the company in particular of trying to fast-track
these negotiations and push them through. I do not think the evidence
supports that, so I think on every sort of level we have reached
the end of a process and I think the public were anxious to get
this industrial action called off. They have a lot of respect
for the staff of the Royal Mail. I do. We all do in our constituencies;
we see what a good job they do, and I believe that the vast majority
of the staff of the Royal Mail were anxious to get back to work
too, and I am very glad to say today that I hope that is a step
Q9 Mr Weir: But, even given all that,
do you not accept that saying that they should go back on the
terms that had been offered at that time was equivalent to taking
one side, the management side, at that point?
Mr Hutton: No, I do not accept
that. I think the interest that we were trying to articulate was
the public interest, but we would not have articulated it in the
way that we had if we did not think the offer was a genuinely
fair and reasonable one and affordable for the business and therefore
for taxpayers. That is why we made the comments we did.
Q10 Mr Weir: Moving on from that,
you have said that you have an interest in safeguarding the investment
the taxpayer has made in the business, which I think we would
all accept, but are you confident that Royal Mail management at
national, local and regional level is up to that task, given what
has happened in this dispute?
Mr Hutton: Yes, I am.
Q11 Chairman: You have absolutely
full confidence in them?
Mr Hutton: Yes.
Q12 Mr Binley: Secretary of State,
I want to refer to the matter of your involvement as the major
shareholder, in fact the only shareholder, in what is our prime
postal service. I take the point totally that small business has
suffered dramatically, particularly in terms of cash flow, because
of the dispute. They would rather not have had a dispute at all,
quite frankly. You say, and the Prime Minister has said, that
you did not intend to take sides and that you did not see that
it was your job to get involved, and yet on 15 October the responsible
Minister stated that the Secretary of State and he had had a number
of meetings with Adam Crozier, Allan Leighton, Bill Hayes and
David Ward to discuss the postal dispute. What were you talking
Mr Hutton: What do you think we
were talking about?
Q13 Mr Binley: I do not know. I want
to know. It is for you to answer the questions and for me to ask
them, quite frankly.
Mr Hutton: I think it is pretty
obvious what we were talking about.
Mr Binley: Well, tell me then, so I can
be assured that
Q14 Chairman: Brian, give him a chance.
Mr Hutton: I do not have to answer
it if you do not want me to, Mr Binley, but we were talking about
the dispute and the terms of the dispute.
Q15 Mr Binley: So you were just there
Mr Hutton: We were there to encourage
both parties to reach an agreement.
Q16 Mr Binley: So, after having said,
"I want you to reach an agreement", you had no further
involvement other than listening to what they had to say?
Mr Hutton: Would you like me to
have been running the negotiations?
Q17 Mr Binley: No, but I would like
you to have taken a definite role as the shareholder. I think
that is one of the shareholder's jobs, quite frankly, when a business
is in trouble.
Mr Hutton: Shareholders do not
negotiate the pay and conditions of staff.
Q18 Mr Binley: No, but when a business
is in trouble they start to use their weight and that is when
I would have expected you to use yours. I still do not understand
why you had a number of meetings to listen to the same thing.
Mr Hutton: Because it is an iterative
process. You may not be familiar with these sorts of disputes;
I do not know.
Q19 Mr Binley: In business, oh yes,
I am familiar with them.
Mr Hutton: But probably not in
a business on this scale.