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Unfortunately, Richard Hooper’s clarity on the necessary reorganisation has not yet found its way into the Bill, nor even into government policy as laid down in press releases and Command Papers—nor, no doubt, into what happened at the private meeting referred to by the noble Lord a few moments ago—that have been appearing at intervals on the departmental website and elsewhere. Although we would not want to limit unduly the sort of partnership that a private sector company might consider appropriate, I must say that the Government do not have a reassuring record in negotiating difficult deals with private sector companies. There is a great deal of concern about the sort of package to which they might accede in their haste to improve the dire public finance figures.
Even the final percentage to be sold off is unclear. The Bill seeks only to ensure that a majority shareholding remains in public hands, but the Government’s Command Paper 7560, published alongside the Bill, states at paragraph 4.8 that,
It will be interesting to learn from the Minister how he arrives at that rather arbitrary-sounding figure. Does it have an economic justification, or is it merely the product of desperate arbitrage within a viscerally divided Labour movement? Perhaps the Secretary of State will explain in his winding-up speech.
We on these Benches will ensure that the Bill receives the line-by-line scrutiny in which, I believe, this House excels, in order to clear some of the fog, counter some of the rumours and answer all the questions. The speed with which the Secretary of State has produced this Bill has left a number of stakeholders out in the cold. After hearing the Minister—I pay tribute to his experience and the contribution he has made—I feel particular empathy with the current employees of Royal Mail, who effectively are being excluded from this key debate about their future.
As the two wings of the Labour Party in Parliament become evermore entrenched in their views, as we have heard today, the employees seem to find themselves in no man’s land nervously watching the shells explode overhead and waiting for one to fall directly on them. Their jobs and pensions are being drastically amended by decree from on high, with little or no discussion or consultation. That is no way to conduct such an important process. This Bill contains no provision to allow employees to participate in the part privatisation of Royal Mail. We shall certainly be seeking to insert a scheme for some form of employee share ownership.
Nothing underlines the failure of Labour’s management of Royal Mail for the past 12 years more clearly than the provisions in Part 2. Here, we are talking about burdening the taxpayer with billions of pounds of unfunded liabilities. It is only because the Government have already drawn us into trillions of pounds of debt through their mismanagement of the wider economy that their failure here has not been more widely recognised and condemned. Unfortunately, this Government’s refusal to address the problems of the Royal Mail in a timely manner has led us to a place where there seems to be no other honourable, acceptable or equitable way out. We therefore regretfully agree with the Hooper
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However, this Bill fails to meet the standards for which one might reasonably hope. Some critically important questions are left unanswered and, once again, important provisions are missing. The situation is not helped by the imminent revaluation, which is expected to change the figures dramatically and drastically in the wrong direction. Clarity also needs to be established about what will be left behind in the Royal Mail and Post Office pension pots. We certainly shall look to insert proper transparency to ensure that the public and Parliament are, and remain, fully aware of what they are taking on.
As with the first two parts, Hooper’s conclusions on Part 3 are very clear, especially with regard to,
at paragraph 83. When, as Hooper highlights, even basic facts are disputed, it is clear that there needs to be a proper market analysis and consequential adjustment of the regulatory process. We support the transfer of regulatory responsibility from Postcomm to Ofcom, not only because of the breakdown in the current relationship, but also because of recent developments in the communications sector. We hope that Ofcom, with its greater experience of sectors where there is rapid technological change, will be able to develop a proportionate and appropriate regime that weighs competition objectives against the overriding necessity of maintaining and supporting the universal service obligation.
However, again, this Bill falls short. It certainly transfers responsibilities to Ofcom and establishes the duty to secure provision of the UPS, but the abrupt and enormous extension of powers and the incorporation of an entire sector into a regulatory regime are being proposed with an almost total disregard for the concerns of firms that are going to be drawn into the regulatory net. We need to look carefully at the regulatory objectives. We are told that these provisions are the very model of modern drafting for a modern regulatory regime, but the proposal seems to be that the establishment and maintenance of a fair and balanced regime are to be left entirely in the hands of Ofcom. It will possess newly minted nuclear options such as the imposition of a levy, with little or no clarification about the possible circumstances in which such draconian powers might be implemented.
Ofcom of course needs some flexibility to respond effectively to the market review, but we should not accept the extension of regulation into an entirely new sector without a full debate about this market and the supposed consumer detriment that regulation is supposed to address. These provisions will not ensure proportionate regulation, nor do they provide for a properly transparent and independent assessment of the decisions that Ofcom will make in response to any developments the sector might undergo in the future. Of course the Hooper report made a categorical recommendation that Parliament should have a significant role in ensuring that the regulator acts appropriately, and to help achieve that objective the adoption of a risk-based approach
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This Bill is welcome so far as it goes. The noble Lord, Lord Clarke of Hampstead, has just indicated his intention to take the very unusual step of dividing the House at Second Reading. It seems fair for me to make the House aware that, if it does come to that, personally I shall be very comfortable walking through the voting Lobby shoulder to shoulder with the Secretary of State. However, our support in principle at this stage should not in any way be interpreted as a carte blanche for Ministers. This may be a necessary Bill, but it is far from being a perfect Bill. This House is at its best when it undertakes detailed legislative scrutiny, and, without seeking to pre-empt your Lordships’ intentions, I believe that the future stages of this Bill should see substantial changes made. I hope that this legislation will be in better shape, particularly on the detail, when it leaves this House, and I look forward to working with the Secretary of State and his colleagues in the coming weeks, and possibly months, to help bring about that desirable outcome.
I am sad to say that I believe this Government have sold the Royal Mail short and sold the country short. We deserve a better Government and a better Bill, and it is our firm and avowed intention to help deliver that.
4.08 pm
Lord Razzall: My Lords, I join other noble Lords in commiseration for the sad death of Lord Dearing. By modern standards, and certainly by the standards of your Lordships’ House, he died at a very early age. His death is a tragedy that we should all mourn.
As the noble Lords, Lord Mandelson and Lord Hunt of Wirral, indicated, the Post Office and the Royal Mail undoubtedly have a long-term problem that requires action. I thought that the Minister’s gentle admonition of the noble Lord, Lord Clarke of Hampstead—with his nostalgia for a Post Office and Royal Mail service from Camden to Candleford, which I do not think anyone picked up at the time—was entirely appropriate, because I do not think that even the noble Lord, Lord Clarke of Hampstead, would think that Dorcas Lane would be an appropriate choice to run the modern Royal Mail and Post Office.
Both the other parties in this House—not the individuals concerned but the parties—have contributed to the problems facing the Post Office and the Royal Mail. As the noble Lord, Lord Clarke of Hampstead, indicated, it was the previous Tory Government who for many years took the pension holiday that largely led to the pension deficit. He did not attribute blame for that, perhaps because he is looking for the votes of Conservative Members for his amendment. Had the holiday not been taken, the Post Office’s pension problems would be significantly smaller. He also did not refer to the fact that the Treasury clawed back much of the profit that especially the Royal Mail made
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Labour’s hands are not entirely clean either. Who knows whether this Bill and these solutions would have been brought forward had the Minister, in his earlier incarnation, remained responsible for the Royal Mail and the Post Office? However, more than 4,000 post offices have closed in the period since he left that position and, notwithstanding the subsidy that the Government are putting into the Post Office network, without the stabilisation that the network requires, that process is continuing. The noble Lord, Lord Clarke, is also correct that the Government failed to provide a regulatory system that protected the Royal Mail from unfair competition after removing its monopoly on delivering letters and parcels.
We have now, eventually, got a Bill. The noble Lord, Lord Hunt of Wirral, is correct to ask why it has appeared so late in the day, but we are where we are, and this is a once-in-a-lifetime opportunity to get the structure of the Royal Mail and the Post Office correct. The Bill provides the forum to do that. I agree with the noble Lord, Lord Hunt of Wirral, that this House is at its best when it is dealing with detailed proposals and amendments and trying to get legislation right.
The approach of these Benches to the Bill, and our ultimate decision on whether to support it, will not be “shrill”, which is a potential admonition from the noble Lord, Lord Mandelson. We will not be shrill, but we do have five tests on which the Government will have to deliver if the Bill is to pass.
I think the Secretary of State agrees with the first test—although the devil, as always, will be in the detail. The Bill must guarantee the Post Office’s future as a public sector, public service organisation. It must be separate from the Royal Mail and have its own board of directors and direct access to finance. I think that the Government also agree that the Post Office must remain a wholly public, government-owned enterprise. The Post Office must be given the power to enter into business agreements with other businesses in the mail sector, and I shall give one example. There is no reason why, in the new incarnation, the Post Office could not act as a mini depot for the collection of parcels.
The second test from our Benches is that the Bill must deliver the substantial investment which the Post Office network desperately needs to give it a sustainable future. At the moment, the Bill deals only with what will happen to the Royal Mail, but this is an opportunity for the Post Office to be put on a proper financial basis. As I said, although the Minister is correct that significant funding has gone into the Post Office lately, I do not think anyone believes that that has solved the problem. The Government need to set up for the Post Office network an investment fund that will fund branch modernisation, open new branches where gaps exist, provide start-up and investment capital to sub-postmasters and promote the provision of local and central government services by sub-post offices.
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When the Minister made the Statement before Christmas a number of us on these Benches got the impression that he was going to be innovative in trying to secure the future of the Post Office. We look forward, in the course of the Bill, to proposals from the Government on how to exploit this huge, unexploited retail network throughout the country. One obvious opportunity would be to create a post bank to deliver financial services for all, particularly the financially excluded.
The third test, with which I think the Minister agrees—
Lord Tebbit: My Lords, the noble Lord is making some extremely interesting points. Can he be sure whether such investments would be regarded as some form of public subsidy and have to be cleared by the Commission in Brussels, or would we be able to do that without reference to the Minister’s former masters?
Lord Razzall: My Lords, I suspect that in the current climate, with the question of subsidies into the financial sector, doing that for the Post Office would be the least of our problems, bearing in mind the subsidies that are going into the banks.
The third test that we will be looking for, and I think the Minister agrees with this, is that the Bill must guarantee a full six-day-a-week universal service obligation. I disagree with the remarks of the noble Lord, Lord Clarke of Hampstead; if the Bill goes through in this form, it will be the first time that that has been enshrined in statute. I am not aware that the noble Lord, Lord Sainsbury, whatever his skill and influence, actually got such an obligation enshrined in statute for both letters and parcels.
The fourth point, on which we have general agreement in this House but which is not yet enshrined properly in the Bill, is that the Bill must ensure a competitive future for the Royal Mail and not leave the company at a disadvantage to its rivals. The point that the noble Lord, Lord Clarke, has made was correct, and the noble Lord, Lord Hunt of Wirral, touched on that. The existing framework does not provide a level playing field for the Royal Mail, and we need a structure under which competition for the Royal Mail must either pay a proper price for final mail delivery or be made to pay a levy. That levy should be placed by the regulator on other mail operators that do not undertake the universal service obligation, to pay towards its cost.
The other point under that heading is that we believe the Royal Mail should have the ability to borrow on capital markets, a point alluded to by the noble Lord, Lord Clarke, but not with the detail that he intended.
The Minister touched on the next point, and I welcome the remarks made by him and by the noble Lord, Lord Hunt. We feel that a major way to transform the poor industrial relations that have dogged the Royal Mail would be to provide a fair ownership structure properly reflecting the interests of all the shareholders. This is a one-off opportunity to give the employees of the Royal Mail a big stake in the management and ownership of the business, which will enable them to buy into the essential changes that
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As the noble Lord, Lord Hunt of Wirral, and I have said, we wish to bring forward significant amendments in Committee to reflect the principles that we have both articulated. I fear that whatever sympathy we might have with the noble Lord, Lord Clarke of Hampstead, we cannot possibly support him; were his amendment to be put to a vote and carried, we would not have a Committee stage at which we could bring forward the amendments that we wish. It is not for me to make the intellectual argument against him; I am sure that the noble Lord, Lord Mandelson—his noble friend—will do it better than I could. We cannot support the amendment for that reason.
The noble Lord, Lord Clarke, spoke with worthy nostalgia of the past of the Post Office and Royal Mail. If there really is no problem with the Royal Mail, can he explain why the extensive lobbying which we have all received from the CWU and related organisations came in the form not of letters but of e-mails? I should have thought that that fact demonstrates a problem with the Royal Mail which the Government need to address.
I look forward to Committee, where we will endeavour to enshrine in legislation the five principles that I have articulated. In that way, we will get a Bill which can preserve the future of the Post Office and Royal Mail.
4.21 pm
Lord Neill of Bladen: My Lords, I intend to focus exclusively on Part 1 of the Bill. I shall be making a point with which the Minister is already familiar; he heard me expound it very briefly in another forum the other day.
Essentially, I want to direct attention to the nature of the relationship between the incomer—the third party, which will bring in expertise and other things I shall mention—and the existing Royal Mail Group Ltd and its board. I want to make one point which will perhaps be novel in the context of this debate. I am not particularly concerned with questions of ownership. My point would arise even if the strategic partnership took a form which did not involve any transfer of shares. I make this point because, by chance, as counsel, I was involved in a case called Bermuda CableVision Ltd and Colica Trust which came out of Bermuda to the Privy Council in London in 1998; the appeal case is at page 198.
The issue was whether the Bermuda television operators could show that they controlled the company because they complied with the statutory obligation of having 60 per cent Bermudian ownership and 60 per cent
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What do we know about the new third party? What have we heard? The Hooper report says on page 14:
“We recommend a strategic partnership between Royal Mail and one or more private sector companies with demonstrable experience of transforming a major business, ideally a major network business”.
Per Hooper, the incomer does not necessarily have to be someone who has been in the network business. That was the ideal.
Hooper makes it quite clear that the existing company is simply not coping. The previous page, page 13, states:
“The company urgently needs commercial confidence, capital and corporate experience”.
Hooper gives details of that. Incidentally, in relation to capital, he makes the following remark, which may nowadays seem slightly out of the true Bill:
Hooper says that the Government already have enough financial commitments, so there must be a newcomer who will bring in some money and access to corporate experience. He continues:
“Royal Mail needs access to the corporate experience of one or more private-sector companies which have successfully managed complex change on a similar scale”.
So the “whizz-kids” to whom the noble Lord, Lord Clarke of Hampstead, referred are the people who will have to be brought in to get the show on the road.
That is a rather broader description of who the third party will be. The White Paper of the noble Lord, Lord Mandelson, accepts the recommendation for a strategic partnership and cuts the possible “partners” down to a single “partner”. It is not until we get to the Explanatory Notes that we read anything about this partner. Paragraph 11 states:
“Strategic partnership: Royal Mail should enter into a strategic partnership with a private sector firm that has demonstrable expertise in transforming a major network business”.
Not a word of that is in the Bill; it is in the Explanatory Notes—it is a gloss on the Bill. There is no definition of who it is we are looking for. How many firms in the world have this expertise? We do not know; we are not told; we do not have the evidence.
What problems will arise? Let us look at this simply from a commercial point of view without beginning to get excited about public ownership and private ownership. What issues will arise when the newcomer is introduced? For example, of whom will the board of directors consist? What will be the balance between the newcomer and the old guard—I call it that without any disrespect? What about the adoption of new technologies and techniques? Let us suppose that the new company and
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What about money? First of all, there will be a sale of 30 per cent of the shares, which is the figure that has been mentioned today. Some money will come in from that. But what about new capital for the expensive machinery and so on that will have to be acquired? As I read his report, Hooper is looking to the new company to bring in that money itself or with its colleagues or companies. How will that money be provided? Will it be in the shape of loans? What about repayment? Will there be guaranteed repayments to the third party? Let us suppose that it goes straight into the business and is used forthwith? Then, the newcomer will look for a kick-back. He is putting his money in and not getting any interest, but he is hoping to get something out of it. One can therefore see all sorts of problems arising.
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