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11 Feb 2009 : Column 1471
6.26 pm

Mr. Rob Wilson (Reading, East) (Con): I am pleased to have the opportunity to contribute to this important debate, and I shall try to be quick because I know that others want to speak.

In common with many areas of the country, my constituency of Reading, East has not been immune to the failings of Royal Mail. For the last couple of years, I have been involved in a campaign to prevent the local sorting office from closing. That has had an impact on workers; we are losing hundreds of jobs because of the closure. Many people have already been laid off and hundreds more have been, as they put it, left hanging in limbo. Royal Mail is moving the office to a £20 million mail centre in Swindon, and despite my best efforts to save those jobs—indeed, I arranged an all-party group to see the previous Minister responsible for postal services, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick)—I have unfortunately been unable to put a halt to the process. I have had regular meetings with employees, and I held a surgery recently at my local sorting centre. It is clear to see the human impact of the failings of this commercial organisation, and if change does not take place, even more jobs will be lost in the years to come.

The closure is due, in part, to the failure of Royal Mail’s national management. It has failed to get a grip on many of the problems that it has faced over the past decade. In Reading, as in the rest of the country, one of those problems is the fact, mentioned by many hon. Members, that the technology used is seriously behind the times. Royal Mail chose to close its sorting centre in Reading to move to Swindon and, consequently, hundreds of people have been left out of work.

The Hooper report, which was published at the end of last year, makes it clear that one of the principal threats to Royal Mail comes from technology and the massive explosion in digital media, the internet and mobile technology. As many have said, that has prompted a substantial decline in the number of letters being sent by consumers. Another factor is Royal Mail’s outdated sorting procedures, as compared with those of other European countries. When I met the Minister responsible for postal services last year, I pressed him hard on that point. I repeat what I said to him then: modernisation is crucial to Royal Mail so that it can compete properly in the wider market that is now open to all European competitors.

As I said, my local sorting office on Caversham road is unfortunately going to close, but I believe that the Minister probably now accepts that there is an urgent need for considerable investment in new sorting equipment. Otherwise, many other sorting offices around the country will close and more jobs will be lost.

Poor industrial relations have dogged Royal Mail for years, and the disputes that have come about as a result are well documented. In my constituency there have been local tensions between the management and the Communication Workers Union. Such disputes are holding back Royal Mail, and I appeal to the CWU and the management of Royal Mail to stop their endless conflicts and get on with saving and modernising the business. That is clearly what most employees want.

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The most high-profile recommendation in the report is that Royal Mail should be part-privatised. The Minister seemed to get in a bit of a state about whether to admit that it will be privatised. That is recommended so that the expertise and capital investment necessary to modernise the business can be brought in. The opportunity to use that private capital and expertise will improve postal services and could give Royal Mail a new lease of life by enabling it to compete with other companies on equal terms.

Nearly two months after the publication of Hooper’s proposals, the Government are still yet to provide serious details—the meat on the bone—of what they actually intend to do. It is about time that we began to hear their detailed plans. If we do not, there will be more damaging speculation about what the future holds and more uncertainty for the employees of Royal Mail.

We all know that Royal Mail faces very serious challenges and is grappling with the process of modernisation. The Hooper review argued strongly that now is the time to act, and it is clear that the status quo is no longer tenable. It is time for Royal Mail to modernise, or it will face continued decline. I hope, for its own sake and that of its remaining workers in my constituency, that it is given the opportunity to thrive again.

6.32 pm

Joan Walley (Stoke-on-Trent, North) (Lab): In the very few minutes that I have, I wish to make the point that an Opposition day, when the Opposition want to make political capital—despite the situation in the Thatcher years, with which we are familiar—is not the time to have a debate on such an important subject as Royal Mail and the delivery of postal services.

I have looked carefully at the Government’s amendment, and there is nothing in it that I disagree with, so I have no problem with it. However, I do have a problem with what my hon. Friend the Minister said about the direction in which we are going on the Hooper report’s recommendation 13 on bringing in a private partner. That leads to the suggestion that we have partial privatisation on our hands. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) mentioned the possibility of pre-legislative scrutiny, which might be a way of trying to deal with the current problems.

One problem is the way in which Royal Mail has been starved of investment. As my hon. Friend the Member for Morecambe and Lunesdale (Geraldine Smith) pointed out, about £2.4 billion of profits went to the Treasury under the external financing limits. That money should have been invested in Royal Mail. The liberalisation has been carried out in haste, so Royal Mail has not properly been able to compete with European competitors, and we have been at a disadvantage.

The problem is how to make good the legacy of the wrong decisions that have been taken in the past. Somehow we must deal with that problem and secure the long-term commitment to the universal service obligation, and we must also find the money for investment in pensions so that delivery people all over the country, including in my local office in Burslem, know that the Government are protecting and safeguarding their pensions.

I genuinely recognise that balancing all that with the need to act quickly on the modernisation agenda will not be easy. The Government could use the Hooper
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report as a starting point. Negotiations could also take place with the Communication Workers Union, which in its detailed response of more than 60 paragraphs stated that it wants to work with the Government to find a way forward. However, if that way forward is bound by recommendation 13, which states that the only method of proceeding is through the private sector, I tell the Under-Secretary of State for Business, Enterprise and Regulatory Reform, my hon. Friend the Member for Dudley, South (Ian Pearson), that it is wrong way. Although we have assurances that further legislation will be introduced, and that Parliament will have an opportunity to debate it, we need to put investment in place now. My hon. Friend the Member for Ynys Môn (Albert Owen) suggested that there are other ways in which to proceed. The private sector has no monopoly on the right way to bring in expertise to transform the Royal Mail radically.

Whatever has been said about Adam Crozier and whatever he may have done for the premier league, he has not got back to me directly about individual issues that I have raised with Royal Mail about management. We must recognise that the Government own the Post Office, and it is not good enough for Ministers to say that they cannot interfere in operational matters.

The Hooper report, which was published in December, is already out of date. It took evidence during the credit crunch, and the easy, not very detailed recommendations that it makes about the way forward with a private sector partner are not right. I urge my hon. Friend the Under-Secretary to reconsider and involve hon. Members of all parties in finding a way forward, so that I can tell people in the Burslem delivery office that the Government are examining their needs.

6.36 pm

Mr. Jonathan Djanogly (Huntingdon) (Con): Let me repeat the shadow Secretary of State’s earlier remark that we welcome Richard Hooper’s review of the UK postal services sector. Published on 16 December, with the title “Modernise or decline”, it provides a worrying statement about the desperate condition of Royal Mail today. Simply, it states that the status quo is untenable. Sadly, that conclusion comes as no surprise to the Conservative party. As my hon. Friends the Members for Wealden (Charles Hendry) and for Reading, East (Mr. Wilson) noted, it confirms what we have feared for a decade: the Labour Government’s negligence in failing to address the vital issues that face Royal Mail has allowed it to slip down the premier league of European postal service providers.

We are faced with a stark choice: Royal Mail must modernise or decline. Mr. Hooper’s review has at last forced the Government to accept the need for reform—at least that is what we thought from Lord Mandelson’s response to it, and I think that the Minister, after some interrogation, ended up taking the same view in a roundabout manner. I still do not know where the Liberal Democrats stand; I think that they sort of support the report but do not like third-party voting—or something.

However, survival alone is not what Conservative Members hope to achieve. We share Hooper’s belief in having a positive future for Royal Mail if the right
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actions are taken. Given the urgency, why have not the Government seen fit to publish proper details of their plans? Before encouraging prompt action, we must see clear and acceptable proposals. All we currently have is a set of hollow statements by Lord Mandelson in the other place, and a promise that he would provide a full statement early this year.

I remind hon. Members, especially the hon. Member for Stoke-on-Trent, North (Joan Walley), who strangely accused us of dithering, that we are already well into February, and yet no comprehensive details of Government policy have been released. We do not know whether Ministers fear the dissent of their own party, or whether the Government have been unwilling or unable to formulate a policy. Either way, that is indicative of a Government in disarray and lacking in direction or leadership.

Perhaps we need to look at Labour’s manifesto, in which the party commits to a publicly owned Royal Mail, or the Warwick II deal, as mentioned by the hon. Members for Morecambe and Lunesdale (Geraldine Smith), for Ynys Môn (Albert Owen) and for Stoke-on-Trent, North, to ascertain why Ministers minimise the public air time they give their part-privatisation proposals. We note the 131 Members of Parliament who signed the anti-privatisation early-day motion. However, the issue is ultimately for Labour, not us. What we are interested in is saving Royal Mail and checking that the Government have the policy, the resolve and the leadership to deliver on that. At the moment, we have no such confidence. Are they, as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said, buckling at the knees?

We on the Conservative Benches understand Mr. Hooper’s concern that there should be a sale of a stake to a strategic partner, so we welcome Lord Mandelson’s endorsement of partial privatisation. If we are to reverse the downward-spiralling fortunes of Royal Mail, strategic outside input is, we agree, essential. However, as the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) and my hon. Friend the Member for Mid-Worcestershire (Peter Luff) said, important questions remain unanswered in relation to Lord Mandelson’s vague proposals.

What form will a partial privatisation take? How much of Royal Mail do the Government intend to privatise? What price, if any, will they charge for such a stake? Who will keep the sale proceeds—Royal Mail or the Treasury? What type of partner do the Government want for Royal Mail and will any partner be obliged to invest in the company? As my hon. Friend the Member for Wealden said, will the Government also promise that the sale process will not break down into the kind of farce that they delivered in the tender process for the Post Office card account?

Although we support the concept of some form of outside ownership, our support for the Government’s partial privatisation proposals is not unconditional. The proposals must not be just a convenient way to flog assets to prop up a Government on their last legs and desperate to reduce their debt pile at any cost. We agree with Hooper and Lord Mandelson that, in finding a solution, three interdependent aspects must be carefully considered.

First, any new partner to Royal Mail must introduce some much-needed commercial confidence. As admitted by the Minister, at present, bureaucracy and internal
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conflict, which includes a long history of—let us face it—terrible industrial relations, frequently paralyse Royal Mail when it comes to making decisions and bringing about change. That is particularly the case with modernisation. As the right hon. Member for Leicester, West (Ms Hewitt) pointed out, new sorting machinery is on the way, and the Royal Mail network will be subject to a review as a result. However, few at present consider that Royal Mail is equipped to bring forward such vital changes. We were pleased that the Minister accepted that outside experience will be invaluable in moving Royal Mail ahead, although we consider that a careful review of the qualifications of any third party as a strategic partner will be essential.

Secondly, the Hooper review maintains that private investment will be required to modernise Royal Mail fully. We do not know how much that will be and we are unable to verify any figures, because the Government have refused to provide any such details. Can the Minister replying to this debate confirm that when he comes forward with privatisation proposals, he will provide details of the likely capital requirement, so that the House can properly assess those proposals?

Thirdly, and perhaps most problematic of all, as pointed out by my right hon. and learned Friend the Member for Rushcliffe, the right hon. Member for Leicester, West and the Chairman of the Business and Enterprise Committee, my hon. Friend the Member for Mid-Worcestershire, current estimates of the pension deficit vary widely, but we all know that it is the largest problem that Royal Mail faces. Worse still, the deficit is growing, in what is a turbulent economy.

We have voiced serious concerns about the Government’s intentions in that regard. By taking over the entire responsibility for the pension scheme on an unfunded basis, the Government could quite easily raid the fund’s £22 billion of assets, thereby bolstering the nation’s balance sheet, which has been saddled with mind-boggling levels of debt, in the short term and piling on unknown billions of liabilities for future generations. Absolutely nothing that the Government have said today gives us any confidence about what their direction will be in that regard. I join the right hon. Member for Neath (Mr. Hain) in calling for the Government to provide their proposals, and the sooner the better.

The Minister now needs to reassure the hundreds of thousands of postal workers who are members of the scheme that a future Government will not have the ability to strip them of their benefits. One thing is for sure: with a revaluation of the pension fund due in the near future—I think in the next month or two—the Government cannot put off dealing with the issue any longer. The consequences for working members of the scheme could otherwise be very bleak, and they would certainly not thank the Government for their continued inaction.

So a variety of issues need to be looked at together. Mr. Hooper noted that a strategic partnership with a third party, effective regulation and the need to deal with the pensions deficit were all connected, and all necessary. We agree with his view that we cannot pick and mix between these issues, and that they need to be dealt with at the same time, although that was clearly not the view of the hon. Member for Nottingham, East (Mr. Heppell).

11 Feb 2009 : Column 1476

My right hon. and learned Friend the Member for Rushcliffe, my hon. Friends the Members for Cotswold (Mr. Clifton-Brown) and for Wealden, and the hon. Members for Blaenau Gwent (Mr. Davies) and for Ynys Môn all pointed out that the importance of maintaining the post office network and retaining the universal service obligation was assumed in all of this. Combined, they are an essential element of our society, providing a lifeline to communities up and down the country. As Hooper’s review said, they are part of our economic and social glue, but their future is inextricably linked with Royal Mail.

Let us also keep in mind that the price control regulations are due to be revisited in 2010, which could seriously impact on the process of part-privatisation and modernisation. Royal Mail’s dominance of the market ensures the need for strong regulation. The Hooper proposals for a merger of Postcomm and Ofcom are generally welcomed, although as my hon. Friend the Member for Mid-Worcestershire said, we will need to be satisfied that emphasis in the merged entity will be placed on the development of specific postal industry expertise.

Rumours abound that legislation to enable privatisation is imminent. Will the Minister now confirm when this is going to happen? We strongly urge the Government to initiate the Bill here in this elected Chamber, and not in the other place. We believe that this elected House is best qualified to deal with matters of such importance, even if most of the Department’s unaccountable Ministers sit in the other place. I am sure that that sentiment is shared by many hon. Members here.

Royal Mail, like the Labour Government, stands on the brink. The difference, though, is clear. While redemption is beyond this Government, Royal Mail can yet recover and prosper. There is a final opportunity for the Government to revive Royal Mail instead of continuing to drag it down. We urge them to release and rapidly implement appropriate proposals, and to set Royal Mail on the course to recovery set out so comprehensively in the Hooper review.

6.47 pm

The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): Royal Mail and the Post Office form an important part of the social fabric of UK society, along with the universal service obligation, which the Government put into primary legislation for the first time in 2000. It is right that we have had a passionate debate on the future of Royal Mail, and I pay tribute to my hon. Friends for the contributions that they have made this evening.

My right hon. Friend the Member for Leicester, West (Ms Hewitt) made a very brave speech. She has a great deal of experience in these areas, and she talked about the fact that far more automation was necessary in the Post Office. I absolutely agree with her about that. My hon. Friends the Members for Morecambe and Lunesdale (Geraldine Smith) and for Stoke-on-Trent, North (Joan Walley) are long-standing champions of Royal Mail and the Post Office. They hold strong views on these matters, and I want to tell them that there will be more opportunities to debate the Government’s policy proposals in future.

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