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14 May 2008 : Column 458WH—continued

Furthermore, successive Governments have been unwilling to give Royal Mail permission to go to the markets and borrow for investment. Part privatisation would give Royal Mail that permission because it would allow for a change in the nature of the business. Our policy is that there should be a separation of Royal Mail from the post office network, as other hon. Members have mentioned. I will say why that is necessary in a moment. Part privatisation of Royal Mail would enable the sale of 49 per cent. of the shares and the proceeds of
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that sale could be invested into the post office network to give it the kick-start that is needed. That will not solve all the problems of the post office network, but it will at least allow a kick-start in investment and enable the network to be modernised as required. The remaining 51 per cent. of shares could be divided between Government and a John Lewis-style trust for the benefit of employees. The shares could be held in a trust for the current employees of the business to ensure that they have a stake in the future of the organisation and can share in its success and profits. Employees would have a share in improving the performance of the business.

I appreciate that some hon. Members disagree with that policy, but the truth is that the Government do not have another solution. I suspect that the postal services review was probably paving the way for recommending something similar, but so far the Government have refused to come forward with a policy that will lead to the sustainability of Royal Mail or the post office network. Separating the Royal Mail from the post office network is key to the survival of the network. My hon. Friend mentioned post offices acting as a depot for parcels, which would be particularly important in rural areas. Actually, that is important everywhere. How often have we had the frustration of having something delivered by a private company and finding that we have to go a long way to pick it up or have the persistent hassle of renegotiating times when it can be delivered? It would be so much easier and more convenient if a parcel could be delivered to a local post office and wait there for us to pick it up. That would provide a source of revenue for the post office and would be better for those of us who are trying to pick up things sent to us.

The lump sum created by the sale would also allow investment in modernising the network, as I said. There is currently a particular problem with Crown post offices. They are not hospitable places to be and considerable investment needs to be made in training, in the appearance of the branch and in the infrastructure. That would allow the post office to function more efficiently and would be welcome.

A number of hon. Members spoke about the need for new sources of income. The hon. Member for Dumfries and Galloway (Mr. Brown) spoke about the Post Office card account. The Post Office should be central to a new universal service obligation: that of providing basic bank accounts. I am relatively open minded about whether the Post Office itself should be the provider of that bank account or whether it should work in partnership with others. I would be interested to hear the Minister’s views on that. There is a serious problem with financial inclusion and access to basic bank accounts. The policies the Government have so far pursued in trying to encourage other banks to provide such accounts does not seem to have been particularly successful. My proposal would marry together two different issues, provide a source of income for the Post Office, and recognise the value of the post office network as a public service.

My hon. Friend the Member for Argyll and Bute made a number of good points about Government services being given to PayPoint and the need to think about criteria for awarding contracts. That is key. When
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we think about the use of the post office, we need to understand it as a public service and ensure that things such as the rural economy are written in.

Several hon. Members spoke about the idea of a levy to pay for the universal service obligation for postal services. We deliberately left that open in our policy because of what we foresaw might happen if there was a failure to invest in Royal Mail. Judging by the interim report from the Postal Services Commission, it seems that such a measure will be necessary. I hope that the Government will think seriously about it because the universal service obligation must be protected. A levy may be a sensible way forward.

3.40 pm

Charles Hendry (Wealden) (Con): It is a pleasure to serve under your chairmanship, Mr. Weir, although you must have found this a deeply frustrating afternoon, as at times you would probably have preferred to be participating in our discussions rather than being in charge of them.

Mr. Mike Weir (in the Chair): I am entirely neutral today.

Charles Hendry: I congratulate the hon. Member for Argyll and Bute (Mr. Reid) on securing this timely and important debate, and on the thorough and thoughtful way in which he introduced it. He took us through some of the areas where we have seen a general decline in the post office service. He talked about the ending of the second delivery and the increasing cost of postage, although the hon. Member for Dumfries and Galloway (Mr. Brown) was right to point out that in most other European countries, the postal rate is two to three times what it is in the UK. The hon. Member for Argyll and Bute talked about the confusing approach that is used to show that the post has been delivered on the next day. We need to take more account of that. He could have added the end of the daily collections, the often confusing pricing system, which means that people do not understand the correct postage for their letters, and the decimation of the postbus service, which has been withdrawn in many parts of the country. The hon. Gentleman was treading on dangerous ground when he criticised the BBC for seeking to save £100 million of licence payers’ money. If people had to go through post offices, another £3 or £4 would be added to everyone’s licence fee to pay the extra £100 million that would be required. It is right that there should be open competition.

The Post Office is in a serious situation, but it is a mess of the Government’s making. After all, the Government set the framework for the closure of post offices. The financial rules and level of subsidy were set by the Government. The access criteria, which were about geographical location rather than economic viability, were set by the Government. The fact that the consultation period is only half the time recommended by the Cabinet Office was determined by the Government. It is intriguing that post office closures had to be suspended in the run-up to the local elections because of Cabinet Office rules, yet the same rules do not prevent the Government from announcing £2.7 billion of public funding for tax cuts this week, just before a by-election.

Furthermore, the rules on the closure of post offices must have been cleared by the Government. Post offices that are closing have been told that they may not offer a
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lottery service and they may not offer a PayPoint service, because the Post Office wants to encourage migration. It is one thing for the Post Office to determine where people may buy their stamps, but it should not be determining where people can buy bread and milk as well. As was said by other hon. Members, particularly the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), when we lose a post office, we often lose a shop and services beyond that as well, which does tremendous damage to local communities.

The sadness is that the Government ignored a formula that could have saved post offices. In addition to the subsidy, which is so important and which we support, they should have been finding ways to bring new business into the post office network before they tried to find out how many post offices they could get away with closing. There has been discussion this afternoon about how we could bring in business by allowing the Post Office to work with other carriers. It is environmentally crazy to have vans driving forwards and backwards past the local post office every day unable to deliver packages to local houses because people happen to be out. It would make much more sense to use the post office as a hub where people can access a range of local carrier services.

Other financial services could be considered. Sub-postmasters themselves are calling for that. We never meet a sub-postmaster who says, “I want more subsidy; I want to depend on subsidy.” They always tell us that they want to depend on business. We should be opening up opportunities for them to depend on business, and ensuring that post offices become a hub where people can access local and central Government services. Much more business could be done through the post office network, which would enable more post offices to survive on business, rather than having to rely on subsidy and seeing their numbers cut as they have been.

Investment should have been made to enable post offices to compete on a level playing field. The hon. Member for Dumfries and Galloway talked about the number of people who renew their car tax online, but if we go online, we just type in our registration and it is immediately known whether our car is insured and has an MOT certificate if it requires one. If we renew through the post office, it does not have access to that information through its computer, so we have to take with us the insurance certificate, the MOT certificate and all the bits and pieces that make the process less convenient. Even when we want to do things to support the local post office, we find that the system is skewed against us.

More generally, it is clear that the challenge facing Royal Mail is formidable. Some of the most lucrative parts of the business have been gradually chipped away. The issue is not whether it was right to liberalise, but that liberalisation works only if everyone liberalises at once. The problem we face is that we have done it ahead of most other countries in Europe. If it had happened in other countries at the same time, Royal Mail would have been able to explore opportunities elsewhere.

The Hooper report has been cited. It states:

From what Mr. Leighton and Mr. Crozier say, it is clear, too, that more money will be needed. It is wrong to blame them for what has gone wrong. They are trying to run a business with their arms tied behind their backs by the Government. Adam Crozier said:

Allan Leighton said:

We need to know from the Minister what discussions he is having with them, how much money he proposes to put into the Post Office and Royal Mail and how he plans to do that. What will they offer in return? Just a year ago, a £3.7 billion rescue package was put together for the Post Office, but now we know that it was not adequate to secure the survival of Royal Mail and the all-important universal service obligation.

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): The hon. Gentleman just said that the money that the Government had put in was inadequate. Can he please tell us how much he proposes to put in, in addition to what we have pledged?

Charles Hendry: I am saying that the money has not been able to produce the restructuring that the Government said it would achieve, so we need to consider different formulas. We certainly need to consider whether we should divide the role of the Post Office from that of Royal Mail to put much greater clarity into their financial arrangements than is currently the case. We know that the Post Office and Royal Mail are coming back for more funding so we need to know how the Minister plans to respond.

Will the Minister also clarify the confusion that is emerging about the future of the Saturday delivery? That issue has been covered in the press in the past few days. Last week, The Daily Telegraph reported that the Saturday delivery was under threat. Postcomm immediately responded that the story had “no substance whatsoever”. However, Postcomm’s chief executive, Sarah Chambers, said:

What precisely was she referring to? What is being considered? It appears to us that there is a real attempt to chip away at the universal service obligation. The Government must have an understanding of what Postcomm is considering and what Royal Mail wants in that regard.

In the course of a television interview, the Minister said, “We are absolutely committed to the universal service obligation.” However, he would not talk further about the threat to the Saturday service. We need to know what is happening. We all know that Royal Mail faces what may be the biggest threat in its history. The delivery service—the service our constituents rightly expect—is under threat, but at the heart of the situation is the Government. They cannot just say, “These are other organisations and we do not know what’s going on.” We expect some answers and we expect them from the Minister this afternoon.

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3.49 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): It is a pleasure, Mr. Weir, to serve under your chairmanship. It is also a pleasure to be here in Westminster Hall, in my usual place, discussing the Post Office. Members who are really keen can see me in action again in half an hour, in a debate on post office services in Stafford. However, it is always a pleasure to debate the wider issues, which is just as well, as we do so with some frequency.

Today’s debate is not quite like the usual post office debates, which are normally about the closures taking place in various parts of the country. Although some hon. Members took the opportunity this afternoon to mention the various local communities in their constituencies to be affected by closures, our debate has ranged more widely. It focused particularly on the Hooper review, which was set in train by the Government just before Christmas.

The Hooper review arose from a manifesto commitment to undertake a review of the liberalised market during this Parliament. The timing is right, because something significant is happening in the mail market, but I do not think that it was referred to during the debate. Many Members spoke about the inequities of competition—about creaming off the more profitable parts of the mails market and about the evil nature of various companies that have come into the market. I have to tell them that those companies will be employing people in their constituencies, so I urge caution. However, that was the tone of the debate.

No one mentioned the wider changes in the mails market. It would be complacent to say that the problems and challenges facing Royal Mail are due only to competition from other mail providers. There is competition, but it is hugely and significantly additional competition. It comes not from TNT or UK Mail, or the other operators at the access pricing end of the market, but from Google. That is not only my verdict; it is the verdict also of the chief executive of Royal Mail. The competition is the internet. As my hon. Friend the Member for Dumfries and Galloway (Mr. Brown) said, it is about the capacity to put services online. It is popular and is used by 1 million people a month.

Mr. Carmichael rose—

Mr. McFadden: I shall give way in a moment. The debate is not only about transactional services online but about how we communicate with one another. When I said that something significant is happening in the mails market, I meant that the volume of mail once tracked economic growth—they were like two peas in a pod; they would go up together and come down together. Over the last couple of years, however, the total volume of mail has declined by about 3 million items a day. It would be complacent of us to place that at the door of the liberalised mails market.

Mr. Carmichael: The Minister is right about the changes in the mails market as a whole. The changes were taking place six or seven years ago, when the Government first spoke of liberalising the postal market. From our experience of parcel post, we know what unregulated competition in such a market can achieve. With hindsight, does the Minister not think that pushing
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liberalisation of the market as far and as fast as the Government chose to do, and allowing Postcomm to set the access price as low as it did, was a mistake?

Mr. McFadden: There are two points. First, Postcomm did not set the access price; it was negotiated by Royal Mail. Secondly, whether we were correct to liberalise at a particular time—a point mentioned also by the hon. Member for Wealden (Charles Hendry)—is becoming a moot point. The European directive has been agreed. The rest of Europe is committed to liberalisation over the next few years, with the largest countries doing so by the end of 2010. Liberalisation is coming in other countries.

Many hon. Members quoted the Hooper review, saying that it stated that

No one quoted Hooper’s statement:

It is important to remember both statements when considering the challenges facing the mails market.

What has been the effect of competition? The report is clear about the benefits to large users of mail services. It is also critical of benefits to small business and domestic users. Of course we care about domestic users, because they are our constituents. Even though only 13 per cent. of mail is what we would describe as social mail—the stamped mail with which we are all familiar—it is important that our communities receive a top-quality service from Royal Mail. The large bulk mailers—they account for 87 per cent. of mail—have done well from competition.

In the few minutes that remain to me—it is always a feature of these debates that I am asked to respond to more points than is possible in the time—I turn to some of the specific points raised in the debate.

Although postal prices for the UK were increased recently, they are comparatively low internationally. Our service to the user is not expensive compared to services in Europe.

Many hon. Members asked about the future of the card account and stressed its importance to the future of the post office network. I spoke to the National Federation of SubPostmasters earlier this week, and it is keen for the Post Office to win the contract for the new card account. Hon. Members will know from their attendance at previous debates that the process is out to tender. The hon. Member for Argyll and Bute said that the Post Office must get the work. That may be a statement of intent on his part, but it is not one that the Government can legally make. Tendering rules have to be pursued, and the decision will be taken in the proper way by my colleagues at the Department for Work and Pensions.

Mr. Alan Reid: If the Government were to specify the contract so that the provider had to have a rural network, including branches on the small islands in my constituency, the only company that could win the contract would be the Post Office.

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