Examination of Witnesses (Questions 20-39)|
22 OCTOBER 2007
Q20 Mr Binley: With a big company,
Mr Hutton: Well not of a £9
Q21 Mr Binley: Courage I was involved
Mr Hutton: Well, fine, good for
you. We were trying to get this dispute over as quickly as possible
in a responsible fashion and I think that is what we have done.
Q22 Mr Binley: During the first six
weeks of the postal dispute Royal Mail refused to negotiate with
the CWU and that resulted in four bouts of industrial action.
Why were you not at that time urging Royal Mail to get involved
as responsible management should do?
Mr Hutton: I did get involved
very early on when I took on my responsibilities as Secretary
of State. There was a background to this dispute that preceded
my appointment as the Secretary of State, as I am sure you will
be aware, but I did make it my business to meet the unions early
on. I think I met the union in July a couple of weeks into my
tenure as Secretary of State, which I think was the reasonable
thing to do. I met management, I think, slightly earlier than
that because I wanted to understand from their point of view what
the dispute was about and how important the issues were for them.
I have tried to keep involved, and my junior Minister, Pat McFadden,
has as well, with the conduct of these negotiations, so I reject
absolutely your allegation that ministers were not involved or
interested in this dispute. We were very interested in it. I just
repeat what I said earlier, and I think this is very important.
I do not believe it is the role of the principal shareholder to
conduct the negotiations between the two sides. ACAS tried to
resolve those disputes. That is an entirely appropriate and decent
and honourable thing for them to do. They failed, and when they
failed the TUC stepped in and Brendan Barber did a very good job
in trying to bring the parties together. Over the summer there
was a period of several weeks when industrial action was called
off. I welcomed that; I am sure you did, and the parties tried
to get the dispute resolved during that time as well but they
failed. I think when it was clear that industrial action was starting
again we made the comments that have been referred to in the House,
and I made comments as well making quite clear what our position
was. I genuinely believe that the interventions that ministers
have made have been correct. I believe they are consistent with
our role and the new relationship between the Royal Mail and ministers
which is enshrined in the legislation, and the dispute now, I
hope, has come to an end.
Q23 Mr Binley: Are you then saying
to me that the management did not listen to the concerns expressed
by the shareholder?
Mr Hutton: Yes, they certainly
Q24 Mr Binley: They did not or they
Mr Hutton: Of course they did,
Chairman: Did? There is a double negative
Q25 Mr Binley: Yes, there is a double
Mr Hutton: Of course they listened
to the points I made. My job was, as I said, to make sure that
the deal that was on offer was affordable, was right for the business
going forward, given the scale of change affecting the Royal Mail.
Q26 Mr Bone: It seems to me, Secretary
of State, that the Government was very involved with the negotiations,
with the private meetings, the fact that the management consulted
you on what would be acceptable and what would not be. I do not
think a criticism of Government could be that it was not involved,
it clearly was involved, but its statement that it was not taking
sides and leaving it to the management and the union are just
Mr Hutton: No, I do not think
that is fair and proper either. You cannot have it both ways.
On the one hand we were accused of being the invisible party,
and now you have just accused me of being hands-on and forcing
the terms of the negotiations and taking the side of the management.
I do not think you can have it both ways. We were trying to facilitate
the earliest possible end to the industrial dispute and I think
that was a proper role for us to try and play, but fundamentally
our role as a responsible shareholder was trying to make sure
that the value of the business was preserved and protected. Ministers
have acted very clearly on the advice of officials and the advice
we received from the shareholder executive throughout this, and
I think we have acted properly in relation to our role as the
Q27 Mr Bone: I do not think I was
ever suggesting that you were not involved. I think it is clear
from all the things you have said that you were involved, and
quite properly involved. The fact that it might have been done
behind the scenes and people were not aware of it is fair comment
as well, but clearly you cannot then stand up in public and say,
"We are hands-off. We are leaving it totally to the management
and the union to sort out". You, Secretary of State, cannot
have it both ways.
Mr Hutton: We were not trying
to pretend that we did not have meetings with the union and the
managers. Why on earth would we want to do that? We were not,
and if we were asked by
Q28 Mr Bone: My question was, why
did you pretend that you were not involved when you clearly were?
Mr Hutton: We did not pretend
that we were not meeting both sides. That is quite ludicrous.
I would like you to point out any point where ministers said they
were not meeting the union or management.
Q29 Mr Bone: Is it not true, Secretary
of State, that you were absolutely behind the management and you
wanted the management's position to succeed, and you were in effect
against the union and for political reasons you could not say
Mr Hutton: We wanted a fair and
affordable outcome to these negotiations and we were clear about
what was a fair and affordable outcome and we made that position
very clear, but we wanted these negotiations to be concluded as
negotiations. It is in no-one's interest for there to be imposition.
I think there are two fundamental conditions that are essential
for the Royal Mail going forward. One is that the investment goes
in and the business changes, and the second is that both management
and the workforce share a common understanding about the challenge
the business faces and are committed to trying to address it.
It took much longer than I would have liked, than anyone would
have liked, but what has come out of this negotiation I think
is an agreement between management and the union about the need
for change in the Royal Mail and that I believe is very important
for the long term viability of the Royal Mail.
Q30 Mr Bone: Just picking up on those
comments, if this had been a totally private company and there
had been no government involvement, would you not say the management,
who are pretty well-paid management, have failed pretty dismally
when you get to a series of national strikes? If I am on a board
and we get to a state where my workers think that they have to
go on strike because there is no other avenue left open to them,
in all cases is that not a failure of the management, to get to
that stage in the first place?
Mr Hutton: I think it is fairly
dangerous to generalise and say that in all circumstances in all
situations it is going to be the failure of management when there
is industrial action. I think that is probably stretching the
point too far.
Q31 Mr Bone: Let us be specific then.
With some highly skilled, and you said, I think, excellent management,
in response to Mr Weir you said you fully supported them. Have
they not failed, because how can it be under your watch that this
management has landed you with such a painful series of strikes,
hurting so many people across the country? It must be a failure
to get to that stage and I just do not believe that this is the
sole responsibility of the union. It seems to me the average postman
or postwoman is an extremely decent person whom the country has
a high regard for. They are not the sort of people that go on
strike willy-nilly. Do you not just accept that one point, that
it must have been a failure to get to that stage?
Mr Hutton: No, I am not going
to accept that. If it would be helpful for the Committee, Chairman,
I will write and set out to the Committee the full chronology
of events from the early part of March when these negotiations
started. It would not be a terribly constructive thing to do for
me to point the finger of blame. There have been failures in the
system, of course. This industrial action I believe, as I said
earlier, should never have started, but I think it is not fair
to say that the sole responsibility for that is with the management
of the Royal Mail. I think there are always, to quote a very familiar
phrase we will all be aware of, two sides to every argument.
Q32 Mr Bone: But you would also accept
from that then that there was failure by the management?
Mr Hutton: Your question to me
was that they were solely responsible for what happened.
Q33 Mr Bone: And I think you said
they were partially responsible, or you implied in your response.
Mr Hutton: No. I think with hindsight
we can all say what was this dispute about, why was it necessary,
but hindsight, sadly, is one of those things that is rarely available
when you need it, and it serves precious little point, I would
respectfully suggest, to try it now, hopefully, now that the dispute
is beginning to end, and to accuse management of being entirely
responsible or the union for being entirely responsible, and I
am not going to do that.
Q34 Mr Bone: So in fact they were
both to blame?
Mr Hutton: As I said, this industrial
action should never have started.
Q35 Roger Berry: However, Secretary
of State, constituents of mine who work for the Royal Mail have
identified criticisms of management with which you will be very
familiar. For example, in relation to the conditions of employment
and so forth, Mr Leighton, in a letter in 2003, in a style that
perhaps only Mr Leighton is skilled at, addressing the demands
from the workforce, for example, made it perfectly clear that
the practice of delivery workers leaving their shifts early if
the work was completed, the so-called "job and finish"
procedure, was entirely acceptable to him, it was a good thing
and he was very happy about it. Therefore, did you appreciate
that a few short years later, when management seeks to change
working practices, from the union's point of view arbitrarily,
they were saying, "Hang on. He is moving the goalposts".
Does that resonate at all? Is that a reasonable observation for
Royal Mail workers to make?
Mr Hutton: It is an observation,
for sure, for them to make and it was put to me by my own constituents
who work for the Royal Mail too. I will just say two things about
that. First, remember, negotiations (and there were negotiations)
and proposals started in March, and I think the Royal Mail management
were keen to get an agreement on changes to flexible working practices.
I do not think it was ever their intention that they would simply
sort of descend from on high and impose changes. They were trying
to negotiate the changes that were necessary. Secondly, I am aware
of the correspondence that you refer to, but the only thing I
would say about that is this, and it partly comes back to what
I said in relation to Lindsay's questions. The sector is changing
very quickly indeed and the Royal Mail, if it wants to be competitive,
provide a good service and retain as much market share as possible,
is going to have to change, and that means the working conditions.
It also means the way and the speed at which it gets in the new
technology and the new machinery that will help it to compete
with the best providers out there, and they are more efficient
and more competitive than the Royal Mail, so I do not think you
can ever fairly say that one thing is going to be set in stone
for ever irrespective of the business circumstances in which you
are trading. I am afraid the simple economic reality is that things
are changing very quickly indeed and the Royal Mail will have
to respond to that, including looking again at working practices,
if it is going to succeed.
Q36 Roger Berry: I absolutely understand,
Secretary of State, but some things did change pretty quickly.
Not least was Allan Leighton's attitude towards pensions. It was
not just in his letter of 2003 where he was proclaiming that he
had been asked to secure pensions, which he had, and he wrote,
"We will secure everyone's pension by putting £100 million
into the fund each year until the current pension gap is filled";
no suggestion of reviewing the pension arrangements. Indeed, in
March of this year, literally just before the beginning of the
dispute, the Royal Mail Pension Plan people write out to their
members saying, "No changes are being made to members' benefits
or the rate of members' contributions as a result of these funding
arrangements". Then, just before the proposals came forward,
they effectively started talking about shifting the basis of the
pension scheme when assurances had been given to workers that
there were going to be no changes to the pension scheme consistent
with the assurances given a few years earlier by Mr Leighton.
Do you not accept, Secretary of State, that Royal Mail employees
might find opening the debate on pension entitlement literally
within days of receiving a letter saying that was not going to
happen might just have created concern, alarm, disquiet, anger
Mr Hutton: Of course I am sure
it created all of those things.
Q37 Roger Berry: And was that not
Mr Hutton: It is just as important
to remind ourselves that the pension Trustee will be involved
in necessary scheme changes and regulations, and there is a proper
60-day consultation period that has to be pursued now in relation
to these scheme changes, but, again, I think you will find that
the Royal Mail is in the same position as virtually all of Britain's
leading companies at the moment in having to look again at aspects
of their pension offer. There is a significant deficit in the
Royal Mail pension scheme, several billions of pounds, I think
probably the largest of all of Britain's biggest companies, and
it has to be addressed in a sensible way. I do not dispute that
it is very difficult when workers are given these sorts of options
and choices. None of them is palatable. Of course it will create
the sort of emotion and reaction that you have described, but
that does not mean that therefore the only response for management
is not to engage in making those kinds of changes.
Q38 Roger Berry: No, but, Secretary
of State, Mr Leighton has years of experience. If he was saying
four years ago that there was no problem in relation to pensions
then either he had done his homework and there was no problem
in relation to pensions or he clearly had not done his homework
and he was misleading people. The fact is that you and I know
perfectly well that a large number of Royal Mail employees believe
they were deliberately misled, and when a letter goes out in March
assuring people that there are no proposals to change pension
arrangements to then open negotiations in relation to this matter
within a few days creates a groundswell of anger. As Members of
Parliament we have just received our pension statements. Can you
imagine how we would respond if in the next 24 hours somebody
were to say to us, "Oh, by the way, forget that letter you
have just had through the post with the assurances from top management.
We are going to start negotiating on pension plans"? We would
regard that as unreasonable.
Mr Hutton: I do not dispute for
a second that having to engage with these issues about making
the pension scheme affordable and sustainable in the long term
going forward does involve some very difficult choices for pension
scheme members. I accept that and I am quite sure from my own
experience of how we would all feel ourselves that dealing with
these changes is always going to be very difficult; it is difficult.
Of course, I am not going to dispute either that this might well
have cast some shadow or cloud over the negotiations as well.
I am obviously prepared to accept that; that is a simple statement
of the obvious, but I will just come back to one other point that
I am trying to make, obviously not very well, that despite all
of those difficulties this has to be done; this has to be addressed.
I am not going to argue with you about the timing and the sequencing
and everything else, you might be perfectly right about that,
but I think there is no hiding from the fact that these issues
will have to be addressed going forward. There is a consultation
period. I think the union still has one or two issues in relation
to the scheme changes that are being proposed and that discussion
should continue, and obviously this is an issue that has to be
resolved, again in that context, but I just think it is again
a statement of the obviousI have made one; I will make
anotherthat these changes have to be engaged with and there
is no place you can go where you can somehow brush this away.
Roger Berry: I think perhaps we are talking
past each other. I entirely agree that one always has to look
at flexibility in working practices continuously; no question
about that, and if Mr Leighton did not know this four years ago
everybody else did. Pension funds are facing difficulties and
these issues have to be addressed. I am not arguing for maintaining
the status quo in any respect. My point is not that. My point
is, is it not understandable that Royal Mail employees felt an
enormous lack of confidence in management that was telling them
one thing one day and then coming along with a package of changes
the next day that were going to fundamentally
Chairman: Almost literally the next day.
Q39 Roger Berry: almost literally
the next day that were going to fundamentally affect their working
practices, their pension rights and so forth? My issue is not
that we should not all have to address greater flexibility in
our work. My issue is not that there are not issues about pensions
that need to be negotiated properly. My issue is, is it not entirely
understandable that a lot of Royal Mail workers found it beyond
belief that the management of Royal Mail kept shifting its position?
One minute it was, "I'm the nice guy. I write really chatty
letters. We have listened to your views about pensions. It is
sorted. We agree with going home when you have finished the job.
We agree with all that. Trust me: it's fine", and then turning
round and changing it. That is my point, that management, it seems
to me and certainly to my constituents with whom I have discussed
this and, as you say, Secretary of State, you have discussed it
with yours as well, it is this issue about, "Can we trust
them? They are trying to pull a fast one again". That to
me has been a major cause of the concern and in my view that seems
legitimate. You are, if I might say, in a slightly difficult position
perhaps in this as the sole shareholder, but you do confirm you
understand why there has been real anger on the part of many people
who work for Royal Mail because of management shifting their ground?
Mr Hutton: I do accept there is
a lot of anger in the organisation and it is aimed, yes, at management,
some of it is aimed at the union, and some of it is aimed at me.
That is obviously so. There is a lot of anger in the room. I hope
you feel a bit better now. Let me make two points about what you
have just said. I need to reflect a little bit more carefully
and maybe come back to the Committee, Chairman, about the chronology
that you are describing here because I am not sure it is absolutely
100% accurate. My understanding is that on 8 February the Royal
Mail made it clear that they were looking at pension reform and
would be taking forward proposals shortly. I would like to come
back to the Committee about this particular point.