Select Committee on Trade and Industry Minutes of Evidence

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 compete.

  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 fair.

  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 summer.

  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 this afternoon?

  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 closer.

  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 about?

  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 to listen?

  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.

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