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14 May 2008 : Column 445WH—continued

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To add to those worries, the post office in the village of St. Catherines closed suddenly in the middle of February. Again, the Post Office told me that the closure was only temporary and that it was planning to find somebody to take over the post office. However, three months later, the Post Office has again not managed to find anybody. I know that throughout the highlands and islands, there are post offices that are supposed to be temporarily closed, but they have been in that position for several years. It certainly worries me that, when a postmaster gives up a small village post office, it seems to be extremely difficult to find anybody to take over the business. That suggests that people looking at those businesses do not regard them as profitable, so I am worried that even after the closure programme we might continue to see a gradual decline of the post office network.

The key to keeping post offices open and profitable is clear—to ensure that the contract to pay pensions and benefits stays with the Post Office after 2010. We must not see a repeat of the TV licence fiasco, when the contract to renew TV licences was given to PayPoint, an organisation that lacks a rural network.

Mr. Russell Brown: As the hon. Gentleman recognises, footfall is important. However, does he also recognise that the Post Office is having extreme difficulty in competing with the likes of PayPoint to win contracts? Let us take, for example, the fictitious “A Bank Ltd”, or a fictitious utility company, which might allow people to pay their accounts at a post office. However, the price has to be cut to such a level that the postmaster or postmistress receives a greatly reduced payment for providing that service, which in effect means that the business is no longer viable for them. I suspect that is why we end up with temporary closures that become almost permanent; no one is interested.

Mr. Reid: That is an important observation. However, the key thing is that, where there are Government contracts, they must be given to the Post Office. The reason is that the Post Office is the only organisation that has a rural network. PayPoint has an extensive network, but only in towns. Let us compare PayPoint with the Post Office in my constituency. PayPoint has no outlet in the whole of rural north Argyll, nor does it have an outlet on several of the inhabited islands in the constituency. By contrast, rural north Argyll has several post offices and the inhabited islands to which I referred also have post offices, so when the BBC gave the TV licence renewal contract to PayPoint, it meant that people on several of the islands in my constituency and in rural north Argyll were not able to renew their TV licence over the counter. I do not want that situation repeated with the Post Office card account.

The way for the Post Office to compete with PayPoint is through the rural post office network; the Government must recognise that in specifying the contract.

Lembit Öpik: On the point about costs and internal costings, has my hon. Friend heard, as I have, from people in the Post Office that one or two of the privatised processors outside the Post Office now cost more, not less? In addition, there is the huge social cost in places such as Llanbrynmair, Carno and Trefeglwys, which are remote villages in my constituency. On top of everything
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else, people in those villages have to pay a lot of money in fuel bills to drive elsewhere for their postal service. Those additional hidden costs must be taken into account as well, because in many cases we are adding many pounds to the cost of simple transactions. That money could be saved if the Government made the political decision to protect things such as the Post Office card account. However, apparently for dogmatic reasons, they refuse to do so.

Mr. Reid: Yes, my hon. Friend is perfectly correct. There are social costs and extra costs that rural dwellers have to pay to travel to a post office in a town if their post office is closed.

Willie Rennie (Dunfermline and West Fife) (LD): I thank my hon. Friend for his excellent speech. I am meeting representatives of Royal Mail in about 10 minutes’ time so that they can tell me which post offices in my constituency they wish to close. On my hon. Friend’s point about more trade for post offices, Fife council recently decided to put more business the Post Office’s way by allowing customers to use post offices to pay council bills, but Royal Mail does not seem to have taken that into account. Does my hon. Friend not think that it would be wise for Royal Mail to wait until the full effects of that extra trade, which is significant, are felt so that it can make a full assessment before deciding which post offices it does or does not wish to close?

Mr. Reid: My hon. Friend makes an important point. I was certainly pleased with the initiative proposed by Essex county council for the council and post offices to share services. Unfortunately, in my area, the proposal was made far too late to allow the council or community groups to put together a proper business plan. In the case of my hon. Friend’s constituency, I hope that the Post Office will give Fife council time to put together a proper business plan. One way to secure the future of rural post offices is by sharing services with councils, community groups and other public bodies.

The key to securing the future of post offices is the card account. The Government must specify that whoever wins the tender must have a rural network, but we also need to develop the Post Office card account. Clearly, it has limited functionality at present, but it ought to be developed into a bank account with a full range of banking products. That is the road that France, Germany, Italy and other European countries have followed. It would allow small rural post offices to become profitable and to survive, and it would be of great benefit to people on low incomes who are often financially excluded. I urge the Government to develop the Post Office card account into a proper bank account with full banking facilities, and to ensure that the contract for paying benefits and pensions specifies a rural network.

I shall speak briefly about parcels. One of the complaints that I receive regularly from people in my constituency is that when they give their postcode when placing an order for something that has to be delivered as a parcel, they are directed to small print saying that an extra amount is charged for deliveries to the highlands and islands. That causes great consternation.

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Clearly, the private parcel delivery companies are not keen on delivering to remote areas. Part of the problem is that they do not have depots in remote areas where parcels can be left if the people to whom they are being delivered are out. The Government and the review panel should consider allowing small sub-post offices to retain parcels that parcel delivery companies cannot deliver because someone is out.

At present, under the contract that small sub-post offices have with the Post Office, a parcel delivered by a private delivery company cannot be held anywhere in the shop. Even if the post office is in a corner of a shop, it is still against the contract to leave the parcel anywhere in the shop. Often, the post office-cum-shop is the only shop in the village, which means that if a parcel is being delivered to somebody in the village, there is often nowhere for it to be left if the person is out. I would like the Government, the regulator and the review panel to consider whether we could allow post offices to store parcels on behalf of private companies as well as Royal Mail.

Royal Mail and the Post Office are clearly in a critical condition, as the report demonstrates, but I still believe that with the right action they could be rescued. I conclude with three questions for the Minister. First, will he assure us that the universal service obligation will continue and will not be watered down in any way? Secondly, will he assure us that the present round of post office closures is the last, and that the remaining network has a secure future? Thirdly, the interim report says that the present set-up is unsustainable, so what action do the Government intend to take to ensure that Royal Mail services are sustainable in the long term?

2.55 pm

Mr. David Drew (Stroud) (Lab/Co-op): I am delighted to take part in this important debate, particularly as it comes on the back of the issuing last week of the report, “The challenges and opportunities facing UK postal services”, by Richard Hooper, Dame Deirdre Hutton and Ian Smith. I shall refer to it, because it is an important report that shows the seriousness of the problems that we face.

Clearly, we know the background. It is good to see the Minister in his regular seat. He must have spent more time in this Chamber over the past few months than any other Minister, and I am sure that we will eventually give him the seat if he sits in it much longer.

We have been through the political pain and community anger caused by the closures, some of which are still to come in parts of the country. Now—dare I say it?— there is an increasing likelihood of legal challenges, as individual post offices and communities look at how the consultations were held and see them as having been unfair. However, we are looking at the big picture today, and that is what I mainly want to do.

I have some responsibility and interest: as I have said previously in this Chamber and in the House, I served on the Committee that considered the Bill that became the Postal Services Act 2000. It was largely a consensual operation all those years ago and was about trying to save the Post Office and Royal Mail. It is fair to say, as I will say again later, that the legislation has not been an unalloyed success. We are in a mess at the moment, even if the report that has just been published is taken as the benchmark.

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The purpose of the legislation that we introduced five or so years ago was twofold. First, there was an idea that liberalisation would make the British Post Office more efficient and competitive. It would be able to see off its main competitors in the British market but also become strong enough to work in France, Germany, Italy and everywhere else in Europe. Its reputation and prowess would be such that it would succeed. Clearly, on those measures, we have a complete disaster. We have no imprint on Europe, and our competitors—the Dutch, Germans and French—in one guise or another, are rampant in our homeland.

Mr. Russell Brown: Before my hon. Friend moves off that point, all that opening-up of the market has not come without a significant amount of pain and a significant number of job losses, as I am sure he well recognises. The problems cannot be rectified quickly, especially in rural areas such as Argyll and Bute and my own area. Some 30,000 jobs have been lost—and, I hate to add, there may be more losses to come.

Mr. Drew: I thank my hon. Friend for that intervention, with which I agree. To use a horrible analogy, it has been all pain and no gain. It is about time we considered whether something could be turned on its head, so that we could see some gain and a bit less pain.

The second purpose of the legislation was to try to restore—dare I say to refine?—the definition of the universal service obligation. We spent a lot of time trying to make it clear in the legislation that there was such a thing as a USO and that the Post Office was largely responsible for delivering it but would be protected in so doing. I contend that the USO is more under attack now than ever before—zonal pricing is an obvious example of that—and, more particularly, that we have not been able to protect the Post Office and Royal Mail. Foreign competitors and other major carriers came in below the radar and took away business that, fairly, should be with the Post Office. It is the lack of fairness and the lack of a level playing field that I wish mainly to mention.

On the USO, the Minister’s predecessor stated clearly that the Government were looking again to try to identify whether other major national carriers—international, because they come from abroad, but national in the sense that they have a significant share of the market in this country—should now contribute to the USO. That clear statement, which said that we as a Government were considering whether those other carriers could contribute to the USO, has been restated in answers to parliamentary questions. It would be good to hear the Minister say that progress is being made on that issue and that some announcement is, to use Government language, imminent. It is about time that we expected those who are, by every definition, a national carrier to have an obligation under the USO and that we stopped exploiting the British Post Office by making it deliver the last mile in return for negligible commitment and contribution. Ergo, why should they not pay towards the USO? I hope that we will hear something interesting from the Minister.

Just to show the depth of the problem that we face, I shall read from the introductory remarks in the report by Hooper, Hutton and Smith. Hon. Members should
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remember that this interim report is posing the challenge and is not coming up with any answers at the moment: it is long on analysis but contains few answers. On the next steps, page 7 says:

Three wise people are looking into this matter. I welcome Parliament’s being part of that process, because at the moment nothing matters more to our constituents than postal services, whether in respect of shutting post offices, the lateness of the mail, the deterioration in mail delivery or this most loved institution’s now being regarded more under attack than ever before.

It would be good to get some idea from the Minister about the time scale that the three wise people are working to and what authority they have to come up with solutions, which we welcome. All hon. Members could come up with the headings used in the review—profitability, pricing, efficiency, access to capital, pensions, labour relations, regulation, competition and financial outlook—but it is good that we have that analysis. I like the report, because it is short and readable, and we can dwell on what it is trying to say, even though it is just a framework.

More than anything, the three wise people are demanding a new vision. If someone were to ask me what is the vision for the Post Office and Royal Mail, I would not know, apart from its being one of closure and despair. That cannot be right. We have taken the most loved, most trusted and, until recently, the most used institution and turned it into a big question mark. I could blame my own Government for that, but the problem is deeper and has gone on through the generations. The British public have to accept their responsibility: every e-mail they send to a Member of Parliament is a letter not sent through the postal service. We are all responsible for all the changes.

Mrs. Sharon Hodgson (Gateshead, East and Washington, West) (Lab): Does my hon. Friend agree that the solution is not to follow the Liberal Democrat policy, which I understand is to privatise and break up Royal Mail? Surely, that would be the worst-case scenario and would ultimately lead to job losses, which we want to avoid.

Mr. Drew: From my political perspective, I want to do everything that I possibly can to reduce competition, because it is unfair competition, and I certainly have no truck with further privatisation. Liberalisation was a nice term, and we used to bandy it around as though it were the answer to everything. In essence, in this respect, it has been an unmitigated disaster.

I shall make five simple points, forming the kernel of the debate, to which the Minister may wish to respond, although he may not wish to respond to all of them now. First, we must revisit the Postal Services Act 2000. That Act, which we were all proud of, is not working. I cannot put my finger on exactly what part of the Act is wrong, but we have created an unfair situation, whereby competition is one-sided. Those who compete with the
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Post Office and Royal Mail are doing okay, but the Post Office and Royal Mail are doing badly. Those of us who believe that there is a need for a state communications service think that that must be looked into. I do not see why something that is so beloved should be completely undermined. The current situation should not be used as an excuse for further privatisation. The service should be owned by the state, given that much of the communications service is already in private hands.

Secondly, the universal service obligation, which I have already mentioned, is not working because it is entirely vested in the Post Office and Royal Mail, which cannot be fair, given that other national carriers should also be contributing.

Thirdly, as the hon. Member for Argyll and Bute (Mr. Reid), whom I congratulate on securing this important debate—I am sorry that I did not say that at the beginning—and other hon. Members have said, competition has arisen in the form of losing PayPoint, possibly losing the Post Office card account and losing the passport business, which is not often mentioned. Whatever one’s views on the identity card, it was a potential money-spinner, yet the Post Office effectively gave up the ghost, because the criteria were rigged to make it so difficult for it to win the business. That is a tragedy, because it could have worked.

Mr. Andrew Smith: While ancillary services are being explored, would it not make sense also to consider the future relationship of post offices presently scheduled for closure, but where the postmaster or the local community would like to have an ongoing relationship with the Post Office for as many postal services as possible through the outreach programme—I welcome the Post Office’s announcing its expansion—or some other means? Both Iffley village and Grandpont post offices in my constituency face closure and an ongoing relationship of that nature, which could retain postal services, would be welcome.

Mr. Drew: I agree entirely. My last point is about investment and innovation, so I shall come to my right hon. Friend’s question after making my penultimate point.

Although it is controversial to say so, there is a serious problem with the leadership of Royal Mail and the Post Office. The double act of Leighton and Crozier, which was regarded as a marriage made in heaven, has been an unmitigated disaster. They have taken Manchester United and turned it into Derby, to use a football analogy. I am afraid that, if the Government have not yet given them a vote of no confidence, it is about time that they did, because we have had both a dispute that was lamentably handled and the closures, in respect of which no one seems to know the strategy, other than that there must be 2,500 of them. They will blame the Government, but perhaps the Government ought to say, “It would help if you knew what you were doing in terms of the closures.” We have rehearsed that argument, and I will not go through it again.

I am apportioning the blame. At the end of the day, people are being paid millions of pounds to sort out this matter, and when that is not being done, we must look at the people at the top, and it is about time that we did so. Having said that, I will be for ever held up in
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the Communication Workers Union’s hall of fame. Nevertheless, having attended various demonstrations, it is difficult to be told, as a Government Member of Parliament, what the top people are earning to shut down all the facilities that we want to keep open.

Sarah Teather (Brent, East) (LD): I feel a certain amount of frustration because the closure programme will only save £45 million and some £4.5 million in bonuses was paid last year to the gentlemen that the hon. Gentleman mentioned and the board of Royal Mail.

Mr. Drew: I assume that the players at Derby are getting a bonus, but I am not sure whether it is totally deserved. I will pass on quickly.

My last point, to return to the issue raised by my right hon. Friend the Member for Oxford, East (Mr. Smith), relates to investment and innovation. We cannot pretend—this is why we cannot turn back the clock—that everything will come from the top down and that the £1.7 billion will be turned into £3.4 billion as a result of ever-increasing investment. It is good that the Government have invested in the Post Office—previous Governments did not and instead took money out of it—but we must understand that there are other sources of funding that we can make available.

Pleasingly, the Government announced today that they will introduce a community empowerment Bill, although some of us thought that we already had one in the Sustainable Communities Act 2007, but never mind—we will reinvent it. However, if there is great support for post offices out there in communities and if those communities want to keep their post offices open, why do we not challenge them? Why do we not tell them, “Find some financial means, find the volunteers and take on the responsibility.”? Let us see this as a partnership. It can work. Community shops in my area work in that way, so why can we not see such an approach as an absolute winner? At the moment, all we seem to do is shut down facilities and tell communities, “Sorry. We don’t want a presence in your part of the world.” We need to rethink the ideology and to turn what is happening into a community opportunity, not something that is about closures.

There are plenty of challenges. The Minister probably has the most difficult job in the Government; it used to be the Immigration Minister who had the most difficult job, but now it is probably whoever deals with the Post Office. The Minister therefore has plenty to do, but we are all here to support him. I hope that he will make some nice comments about what my little programme would do.

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