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Phil Hope: There is, of course, huge sympathy across the House for individuals and families affected by thalidomide. My hon. Friend will know that a private compensation settlement was arranged many years ago—this is the 50th year, I think, since the tragedy occurred. In addition to the annual payments to victims, those affected by thalidomide will continue to benefit from ongoing improvements to health and social care in
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the circumstances that he describes, particularly the developments that we are introducing to help people with disabilities to get better social care. There have been substantial increases in the level of funding provided for health and social care services in recent years, and thalidomide survivors and their families will benefit from those services over the years ahead.

T9. [243664] Mr. David Evennett (Bexleyheath and Crayford) (Con): Figures given to me by the Minister in a written answer show that alcohol-related finished admissions to hospital in Bexley have increased by more than 70 per cent. since 2002. Does that not show that Government policies on tackling the public health problems caused by alcohol are not working, and why we need our vital accident and emergency hospital department at Queen Mary’s in Sidcup?

Alan Johnson: On the hon. Gentleman’s final point, I understand that the independent reconfiguration panel is considering the matter. On alcohol issues, the hon. Gentleman makes a serious point. The number of admissions as a result of alcohol is increasing. If one looks at the reduction in premature deaths from heart disease, cancer and cardiovascular disease against the increasing trend in diseases caused by too much alcohol, one realises there is a very real public message to get across. That is one of the reasons why, the week before last, the Home Secretary announced that she was taking measures to ban the promotions that lead to a large consumption of alcohol in a very short time such as “women drink free” and happy hours on which there will be restrictions. We need to look much more closely at how we introduce other public health messages so that people are aware that consuming too much alcohol is a real and dangerous health risk.

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Speaker’s Statement

3.33 pm

Mr. Speaker: Now that the House has concluded the debate on the Queen’s Speech, I wish at the start of the Session to make a brief statement about the duties and responsibilities of Members.

Our ancient privileges allow us to conduct our debate without fear of outside interference. In particular, we enjoy freedom of speech, both in Committee proceedings and in debates on the Floor of the House. Parliamentary privilege is essential for proper democratic debate and scrutiny, but it should be exercised responsibly.

It is up to each one of us to ensure that, as individuals and collectively, we do not misuse the rights that we have. They should be exercised in the public interest. We must ensure that we follow the letter and spirit of the code of conduct and related rules that we have approved to regulate our business.

Each Member is here to represent the views of his or her constituents and to participate in the process of democracy. We should ensure that every Member is heard courteously, regardless of the view that he or she is expressing. Every member of the public has the right to expect that his or her Member of Parliament will behave with civility, in the best traditions of fairness and with the highest level of probity and integrity.

I turn now to security, not only for Members of Parliament but for the staff of this House, who work so hard on our behalf, and for those who are pass holders. I expect every Member of the House to co-operate fully with those officials who are responsible for the security that ensures that our democratic process is not disturbed and that visitors to Parliament can continue to be made welcome. While the work of the Boundary Commission continues, hon. Members have a duty to look after the constituents who elected them. The boundaries do not change until the next election, so we must obey the convention of not involving ourselves with another Member’s constituency until after that time.

Mr. Peter Kilfoyle (Liverpool, Walton) (Lab): On a point of order, Mr. Speaker.

Mr. Speaker: The point of order must come after statements, and we have a few statements to hear.

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Royal Mail

3.35 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I wish to repeat a statement made a little earlier by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform about the Royal Mail. The Government are firmly committed to a universal postal service—that is, the ability of the 28 million homes and businesses across the country to receive mail six days a week with the promise that one price goes everywhere. The universal service helps to bind us together as a country. As well as having social importance, it is the means by which many companies build and operate their businesses. However, it does not come free.

Last December, my right hon. Friend the Member for Barrow and Furness (Mr. Hutton), the then Secretary of State for Business, Enterprise and Regulatory Reform, invited Richard Hooper to lead a full independent review of the postal services market. Its purpose was to look ahead to the future and recommend the steps needed to sustain the universal service in a world where technology, consumer behaviour and the communications market are all rapidly changing. The review did not cover the post office network. We have now received Richard Hooper’s final report. It is a serious, wide-ranging study and makes sober reading. We are publishing it this afternoon, and I am grateful to Richard Hooper, Dame Deidre Hutton and Ian Smith for their work on it.

Let me set out Hooper’s analysis of the challenges facing the Royal Mail. First, there has been a revolution in communications technology in the past decade as consumers have turned to e-mail, the internet and text messages. In this country, 60 billion text messages were sent last year, and we now send 5 million fewer letters per day than two years ago. Hooper is absolutely clear that the main challenge to the Royal Mail comes from the impact of changes in technology and consumer choices. His estimate is that last year the shift from mail to those new technologies cost the company £500 million in lost profits—that is five times the impact of business lost to other postal companies in our liberalised market. The message is therefore clear: making those other companies go away is not the answer to make the Royal Mail succeed. Royal Mail’s success matters because it is the only company capable of delivering mail to every address in the UK, six days a week. As Hooper makes clear, that will be the case for the foreseeable future, so a healthy Royal Mail is vital to sustaining the universal service.

The second challenge that Hooper describes is that of efficiency. Hooper reports that Royal Mail is less automated and less efficient than its western European counterparts. In modern European postal companies, 85 per cent. of mail is put in walk order by machine for delivery to the individual home or business. By contrast, in British local delivery offices, that is still done entirely by hand. The Royal Mail urgently needs to catch up and modernise.

The third challenge is the pension fund. Hooper warns that Royal Mail has a large, growing and volatile pension fund deficit. That is near impossible for the business to manage, and it is a huge demand on its revenues. Each year, on top of its regular £500 million
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contribution to the pension fund, the company is having to find an extra top-up of £280 million to plug the deficit. These payments look set to rise substantially when the fund is re-valued next year.

Fourthly, Hooper says that labour relations in the company need to improve. We know that levels of trust and co-operation are low and that industrial action takes place too often, and a fresh start in industrial relations is badly needed. Fifthly, there is regulation. Hooper reports a lack of trust in the relationship between the company and the regulator. There are disagreements about even basic information and those tensions divert energy from the chief challenge of modernising the business.

Overall, Hooper’s conclusions are crystal clear: the status quo is untenable, the universal service is under threat, and we face the choice of either downgrading the universal service as we manage decline, or acting now to turn things around and secure Royal Mail’s future.

At the heart of the Hooper report are three linked recommendations. First, Hooper recognises that the pension fund deficit represents a significant challenge for the company. The report recommends that as part of a package of changes, the Government should take over responsibility for substantially reducing the pension deficit. I stress that Hooper says that that would be justified only as part of a coherent package to secure Royal Mail’s long-term viability. Secondly—and closely related to that—to improve its performance, Royal Mail should forge a strategic minority partnership with a postal operator with a proven record in transforming its business, working closely with the work force. Hooper believes that that would give Royal Mail the confidence, the experience and the capital to make the changes needed to improve performance and to face the future—in other words, save the Royal Mail by investing in its future.

Finally, on regulation, Hooper proposes that Ofcom should take over responsibility from Postcomm for regulating the postal market. Its primary responsibility would be to maintain the universal service in the wider context of other changes taking place in the communication markets. My Department will study the report in detail and we intend to respond with a full statement of policy in the early part of next year. With backing from the Government, Royal Mail has been improving performance in recent years, but progress has been too slow, and Hooper makes it clear that, in the face of the challenges confronting the company, transformation must be faster and more far reaching.

The Government agree with Hooper’s analysis and recommendations. As he does, we reject cutting back the universal service; indeed, we share his ambition for a strong universal service and a strong Royal Mail. We intend to take forward the recommendations as a coherent package of measures. We will fulfil our manifesto commitment to

Bringing in a partner through a minority stake in Royal Mail’s postal business will help us to deliver that goal. It will bring Royal Mail fresh investment and new
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opportunities to grow in Europe, and enable it to offer new services. It will provide a fresh new impetus to modernising the Royal Mail and to securing the universal service.

We and the Royal Mail have already received one expression of interest from the Dutch postal company, TNT, to build such a partnership. I very much welcome that approach from an experienced postal company, just as I will welcome other expressions of interest from credible partners should they come forward. My Department will pursue that in the coming weeks.

Finally, I should comment on the Post Office, which was not part of the review’s terms of reference. The network of local post offices combines a unique set of commercial, public and social roles. In recognition of that, a partnership would not include the post office network. However, a healthier Royal Mail letters business will be good for the Post Office, and today’s announcement will help underpin our existing commitment to the post office network. We are providing £1.7 billion until 2011 to support a network of around 11,500 branches. We will continue to support the non-commercial network beyond that time. The House will recall the recent announcement that the Post Office card account will stay with the Post Office. We will now build on that decision, to ensure a stable and sustainable network for the future. We are determined to have a post office network offering a broad range of services throughout the country, supporting both social and financial inclusion. I am delighted that the Select Committee on Business and Enterprise has agreed to undertake an inquiry into what further services the Post Office could offer.

I believe that Royal Mail and the postal market can thrive in the future, provided that decisive action is taken now. Without far-reaching change, the opportunities brought about by technology will become overwhelming threats. That need not be the case. I believe that there are benefits for everybody in the package of measures that we intend to take forward. It will protect the universal service for consumers and give Royal Mail new opportunities to modernise and develop; it offers Royal Mail’s staff a future in a modern, efficient postal operator, with more secure pension arrangements; and it offers the whole country a Royal Mail that we can be proud of. I commend this statement to the House.

Alan Duncan (Rutland and Melton) (Con): May I thank the Minister for sight of his statement?

We welcome Richard Hooper’s report, which confirms what everyone has known for a long time. Royal Mail’s working practices are inefficient, competition is intensifying, industrial relations are poor and sorting machinery is outdated. The fixed price of a stamp and Royal Mail’s huge pension deficit seriously limit its room for manoeuvre. All that has been clear for a decade, but the Government have done little to curtail a precipitous decline in Royal Mail’s fortunes. Today we learn that the Government are trying to strike a deal to see them through the next election. They are trying to look like the saviour of Royal Mail, but are doing so in flagrant breach of their election manifesto and by raiding the pension fund to bail out Government borrowing.

Even though the Minister’s own party does not seem prepared to do so, we on the Conservative Benches broadly welcome his intention to introduce a new commercial partner. It is a step in the right direction,
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but the details remain unclear. Will the Minister confirm the status and details of the plans? What will private partners be offered in exchange for their investment? Will he demand a commitment from them to invest in new sorting technology? Can he confirm whether the opportunity to buy a stake in Royal Mail will be put out for competitive tender? By what commercial method might he sell a stake, believed to be about 30 per cent., and can he guarantee that all the revenues from any sale will go directly to Royal Mail and not to the Government?

The Government have had more than 10 years to deal with the problems that Hooper identifies, but they have completely failed to do so. In his first attempt as Business Secretary, Lord Mandelson said that the Government’s policies would


Since then, almost 40 per cent. of all post offices have closed. Rather than creating innovative solutions to the problems facing the business, the Government have concentrated on managing its decline.

During those 10 years, the Government could have cut costs, done deals, forged partnerships or even, as they are now doing, part-privatised the business. However, until now, they have done none of these things. They have not driven through efficiencies in Royal Mail management; they have not invested in new technology; and they have not dealt conclusively with the pensions deficit. So just as the Government have wasted 10 years mismanaging the country, they have also wasted 10 years mismanaging Royal Mail.

Now, disguised in today’s statement, is the truth. The Government intend to raid the pension fund in order to plug the black hole in the public finances, dumping the cost of a multi-billion pound liability on future generations. The seizure of £22 billion from Royal Mail’s pension fund would make the Government’s woeful borrowing figures look a little better, but it would saddle future generations with an almost open-ended bill. The whole process has been engineered to make a quick buck for the Prime Minister, kill the issue until after the next election and pass the biggest financial problem not only to the next Government, but probably to those who follow them. In order to asset-strip, the Government have decided that if there is not quite enough in the pot, they might as well swipe the whole pot.

Can the Minister tell us what he estimates the long-term annual pensions liability to the taxpayer to be? Will Royal Mail’s pensions liability be included in the Government’s borrowing figures? What exactly will happen to the £22 billion that is currently in the pension fund? Will the Minister keep the fund intact and top it up, or not? Has he been assured that such action would comply with European Union state aid rules?

The other issue is the unions. Royal Mail workers are already planning strikes. What does the Minister expect will be their reaction to today’s proposals? We believe that any restructured ownership package must include the full involvement and incentivisation of the staff. What will the pension terms and conditions be for future joiners and for agency workers? Thousands of
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post offices have already closed; large-scale sorting office closures would be a further blow. What is the Minister’s estimate of future job losses, and what is his assessment of the effect of a reconstituted Royal Mail on the income of post office branches?

Proposals for the serious reform of Royal Mail are welcome. Private capital to fund improvements in its services is welcome. We welcome, too, Mr. Hooper’s focus on preserving the universal service obligation, and the proposed amalgamation of Postcomm and Ofcom into a sensible, tidied-up single structure. But after a decade of missed opportunities, the Government’s last-ditch attempt to dangle the prospect of part-privatisation must not distract us from the real story: a bit of Enron accounting that will impose a huge bill on every family in the country for generations to come.

The Government are taking the funds that would have paid most of the pensions, and placing a new obligation on future generations to pay the bills that those funds would have covered. Yet again, the Government are stealing everyone’s tomorrow for their today. For future generations, the bill is in the post—and it has the Prime Minister’s stamp all over it.

Mr. McFadden: As ever, the hyperbole of the hon. Member for Rutland and Melton (Alan Duncan) disguises the lack of any credible policy in his party.

The hon. Gentleman implied that nothing had been done about Royal Mail for the last 10 years. I remind the House that, in 2007, the Government made available £850 million in reserves on the balance sheet to support the pension fund, that they made available loan finance to help Royal Mail to modernise, and that, back in 2001, they made available £500 million in loans to purchase the companies comprising GLS, which is Royal Mail’s European logistics and parcels arm. Action has been taken and change has happened, but, as Hooper reports, that change has been too slow to meet the challenges confronted by the company in the face of changes in consumer habits and the burden presented by the pension fund deficit. I did not follow the hon. Gentleman’s logic in that regard. The pension fund does have assets, but it also has liabilities. The problem is that the liabilities are greater than the assets, and that represents a significant burden for the company when it comes to meeting the costs.

The hon. Gentleman asked about figures. As I said in my statement, last year the company had to find an extra £280 million—on top of the normal £500 million contribution to the pension fund—because of the pension fund deficit. To help the company to deal with the deficit, we released funds that could be spent on modernisation and meeting the challenges.

We have received one approach from a potential partner, and we invite other approaches from interested potential partners. We will try to reach an agreement that is in the best interests of Royal Mail and the British public.

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