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Baroness Miller of Hendon: My Lords, I did not say whether I agreed, I simply asked whether the Government agree with the regulator's proposals. I did not say what was my view; I asked what was the Government's view.

Lord Sainsbury of Turville: My Lords, as I explained, the proposals are just that: proposals for consultation. As I said, the regulator has extended the consultation period and it is for him to seek views from the company and everyone else who wants to make representations and then make his decision.

I hope that I did not say—because it is not in the text of the Statement—that Parcelforce is going totally back into Royal Mail, only the part of it that relates to the universal service obligation, which involves parcels weighing up to 20 kg. I also share the respect of the noble Baroness for Allan Leighton, whom I know from personal experience to be a good retailer, which is a skill the Post Office needs. I agree with the noble Lord, Lord Razzall. The point is that we have given it commercial freedom for the first time ever. What he said was correct: it has had the commercial freedom but not the experience necessary to deliver on what it should have been doing.

It is for management and the trade unions to sort out industrial relations. They must sort them out, if they are to create a profitable and successful business in the new world of commercial freedom. The universal service obligation is the first, overriding responsibility of the postal regulator. That is his priority and comes even before any question of competition. It is not a question of subsidies. The first

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responsibility of the regulator is to make certain that the company that has the universal service obligation can maintain it profitably.

4.41 p.m.

Lord Clarke of Hampstead: My Lords, just over two years ago, I had the dubious pleasure of forecasting today's announcement in the House. With due respect to the Minister, his office, and the Minister in the other place, it is no good his trying to blame previous governments for the state we are in today.

At the 1997 election, the people of Britain were asked to vote on a manifesto that included protection of the Post Office, the universal service and the workers in the industry. I declare an interest as a former postman and a former official of the Post Office Workers Union. It is no good blaming other people; we have had five years of this Government. In the first couple of those five years, people messed about and did not make up their mind. We knew what the Government wanted to do, but that was not on the cards. The idea was to give the Post Office commercial freedom. Much has been said about that. The Post Office has had two years to make commercial freedom work. In those two years, nobody has addressed the major problem—underfunding.

In the previous debate, to which the noble Lord, Lord Razzall, referred, I said that one penny on postage would produce £182 million. If it had been two pennies—still the cheapest postal service in Europe—we could have wiped out the deficit that the Post Office faces today. I shall not go on; I will have plenty of opportunity in the future. I hope that the House will debate in depth the Government's failure to honour the commitment that it gave the British people and the failure to maintain the service in which I worked for over half a century.

I could do a delivery to businesses in Hampstead in the morning; do a 9 o'clock collection; deliver parcels between 10 o'clock and 12 o'clock; do a 12 o'clock collection; and still go on the sorting before I went home. It is no good the Government blaming Post Office management. The problem is that the service has been starved of the capital it needs to do the job. Parcelforce was always integrated with Royal Mail. It was divided into distribution and collection, and parcels were separated out. People said that that was nonsense at the time, but we had to learn the hard way.

I shall ask a question specifically about the enhanced redundancy packages. The Post Office pension fund is made up of two elements: the former Post Office staff superannuation scheme and the Post Office pension scheme. One of those is a shared cost scheme; the other is based on the Civil Service scheme. Under the trust deed of one of those schemes, there is the ability to enhance redundancy payments by six and two thirds of service, to make it a better deal. I want an unequivocal assurance from the Minister today that no money from the Post Office pension fund will be used to fund the redundancies that are to follow. If I am right in my suspicion that it will be, can I have an assurance that any money that is used will be returned

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to the pension fund within a reasonable time—a maximum of five years, rather than something like 40 years, which will probably be the Government's answer?

We will have a chance to talk about industrial relations, so I shall not deal with that subject now. Today, I am sad that the predictions have come true. Only one group of people is to blame for the situation in the Royal Mail, Parcelforce and the Post Office: the British Government. They have failed lamentably to serve the British people and the people who work in the postal industry.

Lord Sainsbury of Turville: My Lords, the noble Lord, Lord Clarke of Hampstead, can fairly claim to have foreseen this. However, I think that his arguments were wrong. Today's events have nothing to do with the Post Office Act or with starvation of capital. It is, of course, true that any organisation that has a monopoly and raises prices can get out of trouble, but today's events have everything to do with the management of the Post Office and the situation that it is in as regards costs and the growth of revenues.

Over 10 years, Parcelforce has never made a profit. It has losses of £400 million. That is nothing to do with the Post Office Act. That business has not focused on its structure, adapted itself to the changing marketplace or controlled its costs. After 10 years of losses and two major attempts to put in capital investment, it is now time to make certain that it gets back onto a profitable basis.

I do not believe that it would be possible under the terms of the pension fund for it to be used to make redundancy payments, even if there were a desire to do so. If I am wrong about that, I shall write to the noble Lord, Lord Clarke of Hampstead. I think that it is simply not possible, and it would not be desirable.

Lord Crickhowell: My Lords, I must press the Minister to answer the question asked from the Liberal Democrat Front Bench today and in the recent debate when he failed to answer it.

We have heard much about commercial freedom, but there is a universal postal obligation, and we have a regulator. We have also heard that the regulator has proposed opening up a substantial tranche of the most profitable parts of the Post Office's business to competition. How can one have true commercial freedom in a situation in which there is a universal postal obligation and a regulator who proposes to open up some of the most valuable parts of the Post Office's business? What happens if that leads to further substantial losses? Those questions were pressed in the recent debate and have just been pressed by the spokesman for the Liberal Democrats. In the previous debate and again this afternoon, the Minister failed to address that issue.

Lord Sainsbury of Turville: My Lords, that is not strictly correct. I answered that specific point by making it clear that the first responsibility of Postcomm—the regulator—is to maintain the

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universal service obligation. That is the regulator's priority. Only when that has been achieved can he consider the question of competitive forces. If he introduces competitive forces and liberalisation, and that means that the universal service cannot be delivered by the body that has the obligation, he will have failed.

In a situation in which there is, essentially, a monopoly, there is no surrogate for market forces unless there is a regulator. Commercial freedom in a monopoly situation is meaningless. The commercial freedom will be within a market situation set by the regulator.

Lord Dearing: My Lords, I declare an interest as a Post Office pensioner. I am not sure which scheme I belong to—one or the other. This is a sad day for those of us who care about the Post Office. I guess that goes for all of us. However, the appointment of Allan Leighton is good news. I congratulate the Government on securing his services.

In the Statement, the Minister referred to the tremendous potential of the Post Office. I agree with him. In saying that, however, and in saying that the decisions on the monopoly rest with the regulator, had he noted that Allan Leighton is recorded as saying that Postcomm's proposals represented "death by a thousand cuts"? I wonder if the Minister can be so confident of this great potential if the man they have just appointed is right?

Secondly, the Minister will be aware from correspondence of my concern that the regulator, in taking his decisions, may not be required to have regard to the national interest in all respects. I would be grateful if the Minister could, today or on another occasion, enlighten me.

The whole House is concerned about the future of the Post Office. I am not defending a monopoly. I think that to some degree it has to go but, if we are to emerge from all of this with a very prosperous business, leading the post offices of Europe, it is a case of how fast and how extensively.

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