Examination of Witnesses (Question Numbers
140-159)
RT HON
LORD MANDELSON
AND RT
HON PAT
MCFADDEN
MP
7 JULY 2009
Q140 Chairman: We will hold you to
that, and the next time we have you we will test it out. Let us
move to the Royal Mail Group. First of all, briefly, our report
on post offices which came out this morning. It is the report
that you effectively asked for as a Department. We were happy
to do that. Sadly, because it contains so little criticism of
the Government, it has had little notice from the media this morning.
Lord Mandelson: I am sorry about
that.
Q141 Chairman: Unlike our previous
report, which rather upset you, Secretary of State, for which
I apologise—or, no, I do not at all actually!
Lord Mandelson: It takes more
than that to upset me. You call that "upset"? You should
see what I am like when I am upset!
Q142 Chairman: I am very glad that
I have not seen it! One technical question, because I think that
some of my colleagues want to ask some more political questions.
The Postal Services Bill, which apparently now lies in limbo—I
am not entirely sure of its exact status or what the intentions
are—contains some very important regulatory changes, bringing
Postcomm within the remit of Ofcom, which this Committee supported.
It is a very important change. It sounds a bit technical to the
outside world, but we now have a regulatory vacuum created where
neither organisation knows where it is going. It is really important
that the regulatory changes are brought forward. They are not
part of the financial package in the same sense as I can see that
the pension deficit, capital, and part-privatisation were. I can
understand your wanting to link those. Regulatory change stands
apart and separate and is crucial for the health of the system
now; so what is going to happen to the regulatory environment?
Lord Mandelson: Could I first
of all say that I welcome the Committee's report that you have
issued today. Thank you for undertaking this work. We asked you
to do it and you have done it very thoroughly, and we will consider
your recommendations in detail. I certainly agree with the Committee
that identifying new opportunities and ways of doing business
are key to ensuring a long-term positive future for the Post Office.
I lead a cross-Whitehall group to ensure that the Government is
fully joined up in securing these changes and making sure that
as much business as possible is put through the post offices.
You are absolutely right to keep up the pressure. We have chalked
up some early successes with the Department for Transport and
the issuing of photographic driving licences. The Home Office
want to ensure that people can apply for new biometric passports
and ID cards at local Post Office branches. All this is very encouraging
and we will continue to pursue—
Q143 Chairman: I should make a public
apology to HMRC. They sent rather a late letter to us with some
quite constructive ideas. They did not respond in time for our
report but they also came up with some ideas.
Lord Mandelson: Do you want to
add anything before I turn to regulation, Pat?
Mr McFadden: Not really, other
than to stress the point that it is not as though nothing has
happened in the period since the Committee began work on the report,
which I think was about January or February. The announcement
from the Department for Transport is important, not just in terms
of its own size, if you like, but as a potential platform for
other things. We have spoken about this before, and one of the
enormous potential areas for the Post Office network in the future
is this notion of identity management. That goes through driving
licences, passports and ID cards. The Post Office could secure
a large part of this work potentially and it could be very important
to them. I think it is important to stress that, because it is
very easy for everybody to say, "The Government should give
more work to the Post Office" and, through the Post Office
card account contract for pensions and benefits and the Department
for Transport contract, we have shown that we will do that. However,
it would be wrong to think that, if we just gave the Post Office
the type of work it has always done in the past, that would be
enough; because, with the best will in the world, even having
secured the POCA contract, probably the numbers picking up their
pension at the Post Office will go down over the years.
Q144 Chairman: I do not really want
to spend too long on the Post Office.
Mr McFadden: It is just to stress—
Q145 Chairman: We agree with you.
Mr McFadden: It is your own report
that I am talking about and that you were raising. The important
thing is yes to the idea of having more government work, but that
will have to go with the grain of how people live their lives
and want to do things as well. While government work is important,
it is probably one of three main areas which are critical to the
Post Office's future, the other two being mail work and banking
and financial services.
Q146 Chairman: We agree. The only
real criticism in our report was the pressure, in Digital Britain
actually, to force people online. Not to go with the grain of
people's wishes but to force them into a model the Government
imposes on them. It is a debate we will have on another occasion.
Let us get back now to the regulatory issues on Postcomm—
Mr McFadden: Just a moment on
that. I think that we have to be careful there. When we allow
people the potential to do things in either way—either do
it at the post office or online—we do see interesting trends.
These may be uncomfortable sometimes; but, for example, car tax
online started off with half a million people a month, now over
a million, half of them doing it outside normal office hours.
Q147 Chairman: We know this. Can
we move on to a larger group—
Mr McFadden: It is important.
You have to give choice to people as to how they access public
services.
Q148 Chairman: We have to give them
choice. Let us back that as an agreement and move back to the
regulatory issues on Postcomm and Ofcom. What is going to happen
to Postcomm?
Lord Mandelson: Let me say first
of all that I am disappointed that market conditions in the postal
sector have made it impossible to conclude the process of identifying
a would-be partner, a strategic minority partner, for the Royal
Mail that we could be confident would give value for money to
the taxpayer. There has been a general worsening of conditions,
as you know, in the postal sector worldwide but certainly in Europe,
where profit expectations have fallen for major European operators.
However, this does not mean to say either that the need for change
and modernisation of Royal Mail has gone away; it most certainly
has not—indeed, with every week that passes we see the need
for transformation of its business growing—nor does it mean
that the Government has had second thoughts about the relevance
and importance of the Hooper review's proposals to bring about
that much-needed transformation. We remain entirely committed
to those proposals and we would like to see them implemented when
market conditions allow. Of course, the three parts of the legislation
mean that, with the Bill not being proceeded with at this stage,
the third part concerning regulation is stalled, as are the first
two parts of the Bill. I will be discussing the Government's future
regulatory approach with the board of Postcomm. I will be asking
them for their views, as well as sharing the Government's views
with them, given the need, as we see it, to introduce a wider
communications perspective to regulation of the Royal Mail. Postcomm
will continue to regulate the postal market for the time being;
they will not do so in a vacuum. They have powers to carry out
their function and they also have a framework of policy, of guidance,
offered by the Government, and that will be—
Q149 Chairman: I am not going to
labour the point but I think that it is a very unsatisfactory
situation for the individuals involved in Postcomm and for the
whole mail market, both Royal Mail Group itself and its competitors;
because Postcomm is deemed to have failed. That is one of the
reasons that the merger is going to take place, and this Committee
supports it. So now you have a failing organisation that is continuing
to function in a very important market, facing huge commercial
and technological challenges, and it is not linked to the other,
broader political questions. I think that this is therefore a
very serious matter for the Department to address.
Lord Mandelson: Postcomm itself,
of course, has acknowledged that it would like to draw on Ofcom's
knowledge and experience of wider communications markets, to help
it develop its own regulatory strategy. I welcome that open-mindedness
on Postcomm's part and I will be writing to Postcomm to give clear
guidance on how I believe they should tackle regulation of the
market going forward; so they will not be operating in a vacuum.
Chairman: We will agree to differ on
that.
Q150 Mr Hoyle: Do we need Postcomm?
If you are going to instruct them on what they need to do, why
not just do it yourself then? That might be a quick way, Secretary
of State, and save some money.
Lord Mandelson: They are an independent
regulator, set up by statute.
Q151 Mr Hoyle: Of course, but the
question is do we need them?
Lord Mandelson: That is a matter
for Parliament to judge.
Chairman: It has not been given the opportunity,
because you have withdrawn the legislation.
Q152 Mr Hoyle: Absolutely, and I
am glad that Parliament is important again.
Lord Mandelson: Would you like
us to go full steam ahead with the legislation, Mr Hoyle?
Q153 Mr Hoyle: We do know that the
cost of paying the Chair of Ofcom is £200,000. I think that
even you would find that excessive.
Lord Mandelson: I am not quite
sure what the relevance of that point is to the Government's policy—
Q154 Mr Hoyle: It is relevant to
the cost of operating quangos.
Lord Mandelson: ... on regulation
of Royal Mail, but if you are inviting me or urging me to proceed
with the legislation, then obviously I will take into account
what you are saying.
Q155 Mr Hoyle: The less quangos the
better.
Lord Mandelson: You do not want
it regulated at all?
Q156 Mr Hoyle: I did not say that.
Lord Mandelson: You just want
competition to operate freely?
Q157 Mr Hoyle: Let us be honest.
If you want competition, let us have competition that is equal
competition that also has a universal delivery service involved
for everybody who competes. You will not give us that, so the
point is that you are not going to have competition. Now then,
shall we move on to the next question?
Lord Mandelson: I am absolutely
open to any question you wish to ask me.
Q158 Mr Hoyle: You have a view of
30% as a figure for a sell-off. We have seen the part-privatisation.
Using your own analogy here, is that long grass or is it on a
well-manicured bowling green at the moment?
Lord Mandelson: I do not think
it is on either, actually—either the manicured or the long.
Q159 Mr Hoyle: A bit of rough, is
it?
Lord Mandelson: We are in the
hands of the markets here and, as markets cheer up, profits improve,
and the bidding process becomes possible then, as the Government
has said, we will be prepared to take this forward.
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