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Lord Skelmersdale: Before the noble Lord, Lord Dearing, rises, perhaps I may say that I am absolutely amazed by the Minister's answer. I said rather cheekily on Second Reading that I had the habit of privately marking his speeches. I shall not bore the House with the mark that I have given the one we have just heard, but he made the most extraordinary comment. He said
that the balance sheet would be restructured, as we all know, by 2002. He then said that no decisions had been taken at this early stage. "No decisions" presumably means no decisions. Why then are the Government boxing themselves in by including anything at this stage in subsection (2)? Why are they not reserving their position and doing so by order when they believe it to be necessary much later in the process?
Viscount Goschen: Further to the points made by my noble friend Lord Skelmersdale, the Minister explained briefly where the figure of the £5 billion came from. He said that it was the result of a commonly used formula. Perhaps the Minister would let the Committee know, in slightly more detail, where the £5 billion comes from, because I believe that without that it is very difficult to interpret the degree to which subsection (2)(f) is important and what percentage of the total that might comprise.
Lord Dearing: I owe the Committee an apology. Before speaking I should have declared an interest as a Post Office pensioner. I now do so. In thanking the Minister—and I do so most sincerely because I welcome his agreement to look at a couple of points—I should like to ask him not to give an answer now but to reflect on whether a private sector company, such as one he knows well, would have distributed that £1.8 billion or whether it is more normally the custom of such companies to retain perhaps 60 per cent—a goodly percentage—of the surpluses for future investment; and, believe me, the Post Office will need to make major investments.
Baroness Miller of Hendon: Before the noble Lord withdraws his amendment, will the Minister answer the question that my noble friend Lord Goshen asked a few moments ago?
Lord Sainsbury of Turville: I should be delighted to do so. Let me first of all deal with the point that the noble Lord, Lord Dearing, made about the payment of dividends. Except in the case of a private company, most of those sums of money would have been paid out as a dividend. But clearly some of it would have been retained for the purposes of investment. I do not think that that is in dispute between us. That is why a careful decision has to be made about where the line is drawn on this issue.
I turn to the question of how we arrived at the figure of £5,000 million as the current limit on the total indebtedness to the Government. We sought advice from our financial advisers, Deloitte & Touche, as to an appropriate figure for the limit on the total indebtedness to the Government. I think that one will find that a conventional indebtedness restriction imposed by the articles of association of nearly all public companies is a multiple of their adjusted share capital and reserves. Typically, large companies have multiples of between 1.75 and 2.5 times that baseline.
The report and accounts of the Post Office for the year ended March 1999 shows that there were reserves of approximately £4,300 million, including holdings of
National Loans Fund deposits and gilts of about £2,500 million. In advance of any detailed decisions on the agreed restructuring of the Post Office company's balance sheet, we took it as a reasonable assumption that the balance sheet would have neither investments nor debt at the time of its reconstruction. This would imply shareholders' funds of about £2,000 million, assuming no further revaluation of assets. Taking the usual multiple of 2 to 2.5 times shareholders' funds produces a range on the indebtedness limitation of £4,000 million to £5,000 million. We have taken the top end of that range for the purposes of the Bill.
Lord Skelmersdale: The Minister was generous in answering my noble friend. I did actually ask him why subsection (2) was needed at all.
Lord Sainsbury of Turville: It is a matter of common prudence that there should be restrictions on this process, even if there is considerable room within those restrictions. We cannot have a situation where there is no limitation on the amount of money that could be put into the Post Office. That would seem to me to show a complete lack of regard for financial control from the Government.
Lord Skelmersdale: I did not make myself clear the first time. Given that the restructuring is not going to be completed and the Government will not have made a decision until the spring of 2002, why are they boxing themselves in now; why do they not reserve the power to themselves to do this by order at a later stage when they do know what they are doing?
Lord Sainsbury of Turville: It seems to me sensible. Again and again in this Chamber, the issue has been raised that certain parameters should be put around these issues. This is a clear and sensible parameter in view of the general situation. Within those general parameters there is scope to have a series of different combinations of debt and equity in the balance sheet. At one and the same time, that provides flexibility in the light of what we might want to do at a particular moment and keeps parliamentary control over the total sum involved.
In answer to the noble Lord's amendment, I have agreed to look at the matter again in order to ensure that the interaction between the clause he highlighted and the overall figure made sense in the total picture.
Lord Skelmersdale: As far as we can tell at the moment.
Lord Sainsbury of Turville: Within the sensible parameters that we have laid down.
Lord Dearing: Duly impressed by the sensible parameters, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
4.30 p.m.
Schedule 4 [Transfer to the Post Office company: tax]:
Lord Sainsbury of Turville moved Amendment No. 73:
- Page 82, line 5, at end insert—
. The Post Office company shall, on and after the appointed day, be treated for all purposes of value added tax as if it were the same person as the Post Office.").
The noble Lord said: In moving Amendment No. 73, I shall speak also to Amendments Nos. 128, 133 and 134. They relate to tax provisions, in particular value added tax. The purpose of the tax provisions is to ensure that the transfer of properties, rights and liabilities from the Post Office to the Post Office company under Clause 62 are tax neutral. This means that under the provisions, the Post Office company will not receive any tax disadvantage as a result of the transfer or any tax advantage.
Amendment No. 73 is a deeming provision which has the effect that, on or after the appointed day mentioned in Clause 62, the Post Office company will be treated for all purposes of value added tax as if it were the same person as the Post Office. This will mean, for example, that no charges will arise from changes to the Post Office's VAT group.
Amendment No. 133 amends the references to the "Post Office" in the Value Added Tax Regulations 1995 to the "Post Office company". Amendment No. 128 means that any amendment made to subordinate legislation by virtue of Schedule 8 to the Bill, such as the amendment to the VAT regulations 1995, does not prejudice the ability to make future changes to that subordinate legislation under existing powers
Amendment No. 134 relates to rural rate relief for post offices under the Local Government and Rating Act 1997 that applies to Scotland. This amendment substitutes references to the Post Office and the Post Office Act 1953 which are used to define a post office qualifying for rural rate relief with,
The amendments should ensure that existing post offices operated by the Post Office continue to be eligible for rural rate relief after the transfer to the Post Office company. Furthermore, a post office established by any universal service provider would also qualify for relief.
Equivalent amendments to the Local Government Finance Act 1988 for England and Wales and the Rates (Northern Ireland) Order 1977 in respect of Northern Ireland have been included in the Bill at Schedule 8. I beg to move.
Lord Skelmersdale: In the light of my interest in statutory instruments, perhaps I may ask a question on Amendment No. 128. I am not sure how the grouping
I was somewhat confused because I cannot see in Schedule 8 a single statutory instrument that is done away with. I can see all kinds of enactments which are changed by virtue of Schedule 8, but with the exception of the Rates (Northern Ireland) Order, which is the equivalent of a Northern Ireland Act of Parliament, I can see nothing. Can the Minister help me out?
"a universal service provider (within the meaning of the Postal Services Act 2000) and in connection with the provision of a universal postal service (within the meaning of that Act)".
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