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Equally, more pertinent questions could be asked. Why, for example, did it take so long for Royal Mail to get machines capable of sorting A4 envelopes? Obviously, A4 envelopes were not a standard size and therefore

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should not be considered. The fact that so much of the mail we now receive comes in that format suggests that somehow the management was always behind the curve and that this was a logistics company still run as a government department. Despite the fact that it had been incorporated in the late 1960s, it was very much run at the top by civil servants or by those who had what was largely a Civil Service attitude towards business. Certainly, we had a succession of Secretaries of State and Ministers who, for the 25 minutes they were allowed to look at this operation, came up with a couple of bright ideas but, before they had a chance to articulate them, were moved on somewhere else. Therefore, we did not have the kind of political accountability and investment programmes that we wanted.

It was clear that everyone associated with the Post Office believed that it was the finest service in the world, but there was a lack of what I might call disloyalty towards the management. Indeed, my good friend Lord Clarke of Hampstead is the exemplification of that. Somehow, as a trade union officer whose hand should never have been far from the throat of his employers, he seemed to spend most of his time agreeing with them about how the business was run. Even today, an organisation such as the CWU, which has a sad record in industrial relations, never seems to want to question to any great extent the status quo, which has served the industry and the workers extremely poorly over a long period. Today, after pay rises of 36 per cent over the past seven years, we are still talking about a basic rate of £347 a week for men and women who are expected to go out five days a week in all kinds of weather delivering our letters, having spent an unconscionable amount of time doing the boring and needless job of sorting the letters when there is equipment available to do it.

I happen to believe that it is not the purpose of the Labour Party or the trade union movement to defend low-paid drudgery and call it the best postal service in the world. If there are means to change the efficiency of a business, it is incumbent on the owners of that business to do what is necessary. If that is to happen, it has to be done against a background of a collapse in the postal service as we know it. We usually talk about improving investment and enhancing business services against a background of increasing demand, yet we know that 8 per cent of the letters business will disappear this year, and that will probably account for in excess of £5 billion worth of revenue. We know that that cannot be afforded by this company, which is beset with problems relating to the pension fund.

I do not doubt that in Committee we will have debates on the nature of the pension fund deficit. Certainly, the very helpful document produced by the Library suggests deficits of a frightening order, the simple servicing of which would deny Royal Mail the means of investing in anything. If we had a means of pump-priming the Royal Mail, it is no longer open to us without European scrutiny, the application of state subsidy, regulation and criteria of a kind which make the whole business of borrowing far beyond the easy, neat solution you thought it was.

The combination of the decline in the revenue stream represented by letters, the inability to borrow and the size of the pension deficit therefore requires us

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to take action. That is not action that we could have taken or would have needed to take 10 years ago, or that was even part of the Tory list of ambitions when they were in power without a majority. This has come upon us very quickly. To those who have come down from the mountain of Warwick with the tablets of stone, I say what Keynes is repeatedly quoted as having said: when the facts change our conclusions have to change as well. In the past three years, the facts have changed so dramatically that we need to look at the alternatives.

The alternative is not increasing the price of letters and promising we will deliver them more quickly. At the moment, most of the service targets are being met and we are making profits, but nothing like the order required to meet the deficit, investment or whatever. However, it is interesting that we are making profits in the Royal Mail in all four areas. GSL, on the Continent, was regarded as one of the dubious options when it was first acquired; and Parcelforce, which for years was a basket case, was regarded as an exemplar of inefficiency. Now, because of the digital revolution, the opportunities afforded by Amazon-type businesses means that they are getting the lion’s share of the distribution of parcels across the country. To make that fully efficient we need investment.

Over the years, I have looked at contractorisation in varying forms. Twenty-five years ago, the Prime Minister and I spent a year of our lives trying to stop the contractorisation of the dockyards. It has now been shown to be a very effective way of running individual businesses, whether dockyards or, I hope, Sellafield. Unfortunately that model does not apply when one is dealing with a multi-centred logistics business which needs a web of support under it. I do not think that is appropriate. Therefore, the point made about the Government by the noble Lord, Lord Neill, is of value. We must discuss that in Committee.

It is abundantly clear that we will need not just financial investment but cultural and business investment. The Civil Service culture, which pervades a great deal of the management structures of the Royal Mail, lacks not only money but what the economists used to call entrepreneurial acumen; it lacks the business discipline of the bottom line. My contention is that if we can get the investment which should come from private participation—we do not know the scale or the personalities but there are models and the contractorisation model is not irrelevant—we will see management changing and the replacement of the celebrity-style management that we have had, with big names coming in, being partially successful, picking the low hanging fruit and doing remarkable things as regards efficiencies, to which my colleagues have already referred.

Not only do we need money for the first tranche of investment, but we must ensure that we have the management to enable that money to give us far greater resource, liberating the forces within this great business to achieve what has so far been beyond its grasp. If we can do that, we will provide a future not just for the pensioners who deserve it—over the years, they have been badly paid and need some degree of security in their retirement—but also for the young

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people who will need to come into the business. The business may not remain 100,000 strong, but it will be a major player in this country and the kind of player which, before too long, young people can be pointed towards and told, “This is a business which could be a job for life”. That is what we want. It was a job for life for some of our colleagues here and they have a nostalgic affection for it. I think that some of the nostalgia is misplaced and that the affection is somewhat exaggerated, but nevertheless we have an opportunity now to have a British logistics company in public ownership which will be a credit to all who work in it and a credit to us who support it today.

5.10 pm

Lord Soley: My Lords, I find myself in agreement with a lot of what my noble friend has just said, but I want to take us back to the opening speech by the Minister. He drew attention to the history of this subject. The noble Lord, Lord Hunt, said that there has been a long history of being uncertain about how we approach the reform of postal services in the United Kingdom. I have great respect for my noble friend Lord Clarke, who is intensely passionate about this, but we did not do him, the workers in the industry or the union any favours when we tried so hard in around 1999 to meet the concerns of employees about the reform that we were talking about bringing in. It was not really about delay and uncertainty but about trying to meet those concerns. We created a structure that helped things forward, as my noble friend Lord Clarke said, but crucially did not enable us to have postal services that confronted the new means of communication and operated on an equal playing field with continental Europe. This particularly worried me at the time and I made my views known. At that time, continental Europe was investing massively in modern postal services. We were not. We created a situation that met many of the concerns of the workforce—not just of the CWU, but of management as well—but in doing that with the best intentions we did not free the service sufficiently to allow it to take the actions that it needed to take to stay ahead.

Enough has been said already about the internet and so on for me not to have to repeat it, but there is a plus side as well. The Post Office could operate some services in electronic form and it has gained immeasurably from the parcel service. Many people now buy online and the deliveries come as parcels. My kids order online and a day or two later along comes a vehicle to deliver a packet. We can expect the parcel service to go on doing well and it is important that we enable it to do so. With the changes that we have seen in communication in the past decade or so, we have not given ourselves a postal service that is allowed to make the maximum of that potential. My concerns of some 10 years ago that we were not going to place the Post Office on a level playing field with European competitors have come true. That is rather sad. We need to make improvements.

My next point goes back to what the Minister said in his opening speech. It is impossible to portray the Bill as a privatisation issue. Private sector money goes into the Royal Mail but, if we look at Clause 4 and the associated clauses, we cannot say that that is privatisation.

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It is clearly not. The Bill enshrines in statute that the Royal Mail stays in public hands. Attempts to describe it in any other way are mistaken. I know where the CWU comes from on this; it is saying that, by allowing a percentage of private money to come in, the Bill opens the door for a future Conservative Government—which may or may not happen—to go all the way down the road of privatisation. However, the danger of privatisation does not come from the possibility of another Government bringing in another Act; it comes from not having a service that is good enough to win the support of the public. If a service wins the support of the public, Governments will tend to leave it alone. If it does not, Governments will interfere and intervene, sometimes well and sometimes badly, but they will do so because that is what Governments have to do.

Concerns over a universal service at an affordable price are answered in Clauses 28 to 30. Indeed, what my noble friend has done very well with the additional clauses, Clauses 27 to 40, is to enable powers to be brought in to ensure that anyone else who comes in as a provider is expected to operate on a fair basis. The powers are there if needed to ensure that they must pay part of the cost if there is an additional cost to the universal provider to carry that service through. That is long overdue but very good.

Then there is the pensions issue. To some extent, that takes me back to my opening comments. If we had had this Bill back in 1999 or 2000, we would not have the pensions problem that we have and Post Office workers would not be faced, as they have been for some years, with acute concern for their pensions, as my noble friend Lord Clarke described with such passion. We should have introduced the Bill many years ago. That was not because of delay for the sake of it. It was one of those things that happen often in politics where you try to meet the concerns of people who will feel the effects of legislation and, in making the compromises necessary to achieve that, you endup with something that is less effective than it could have been.

I noticed that my noble friend said that he was warm to the idea of having a people’s bank. I would like him to raise the temperature and become a bit hotter about it. The people’s bank approach has something very strong going for it. Again, for some years, I have wondered whether we could not have done more. It would have done a lot to help post offices around the country if they had been able to provide banking services, in a way that they are more than capable of doing. If you link that with the online services available, there is real potential. I speak as a supporter in the sense that, when I go to draw some cash from the post office in the House of Commons, I use my card and the Post Office benefits. There are many ways in which that service is already available but could be expanded.

The key to the Bill, as was commented on by my noble friend Lord O’Neill, whose remarks I agree with to a large extent, is that it brings in new capital and additional ideas and management, which can really place the postal services where they can compete with what is happening in continental Europe. If they cannot compete and if we leave them in their present situation, in the long run we will lose the service about which my noble friend Lord Clarke feels so passionately. We will not do anyone any favours if we do that.

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The Bill is necessary. Yes, we should look at some of the detail, as I am sure my noble friend would agree, but the Bill is right. We need to do this; in many ways, we should have done it many years ago. If we had, the postal services in the UK would be in a far better position vis- -vis their European and other competitors both here and overseas.

5.18 pm

Baroness Turner of Camden: My Lords, first, I thank my noble friend for the detailed explanation that he has given us of what is a very complex piece of legislation. I have read much of the material that has been issued about it by the Government, which has been helpful, and from the union, the CWU. I am a former union official and my sympathies are with the union in this matter because I am really unhappy about the core proposals in the Bill.

I agree with the objectives: the desire to maintain the universal postal service and to ensure that Royal Mail finances are on a stable foundation for the future. I gather that those objectives are fully supported by the union. Its paper makes clear that it is willing to enter into negotiations to ensure that modernisation takes place. Its objection is to the proposed sell-off of 30 per cent of the Royal Mail, to a private, probably foreign-owned company. As we have heard today, that is presented as a partnership arrangement but, to the union and to many others, it looks like privatisation. I must say that it looks like that to me—perhaps privatisation by instalment. It is said that this will have the effect of introducing managerial expertise into the Royal Mail. How is it intended that it will do this? Will it provide any measure of control for this new partner? Will it have a day-to-day role in management? None of that is clear from the Bill.

Until recently, when the current economic crisis is producing a bit of a rethink, successive Governments have been under the impression that private means competence and that public is the reverse of competence. I now speak as a consumer since I am retired, and that is not my experience. Almost the first thing that a private organisation does is to try to cut costs. Its shareholders, after all, have to be satisfied. So they reduce staff. If one phones up to complain, an automatic voice always tells you if you want one thing, press 1; if you want another, press 2; and if you want something else, press 3. Then the voice says, “All our advisers are busy, but you are in the queue”.

Contracted-out services in hospitals are often awful. Again, I have had cause to complain. As for the railways, once, there were staff such as porters on platforms to help people like me, but not any more. And that is not to mention the problems of PFI, which will involve future generations in substantial sums of money. There are many other issues which privatisation should cause future Governments to be wary of. These companies do not always offer a better service to the people they are supposed to serve. In any event, the union maintains that there was a government commitment not to privatise Royal Mail, which is not disputed by the Government. It is simply held that the minority partnership is not privatisation.

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The other major problem is the pension fund, which is dealt with in Part 2. This certainly looks even more complicated. But why is the deficit so huge? It seems that the Government were well aware of the decision to take a pension contribution holiday, which went on for 16 years. This must have contributed to the deficit. It is not the only pension fund where former employees have been living longer or where the stock market has collapsed. The Government have proposed a new scheme, which is set out in the paper available in the Library. But it is made clear that the changes proposed, including taking over the deficit by the Government, will take effect only,

Obviously, the new private partner will not accept responsibility for the pension scheme deficit, so the taxpayer will pick up responsibility for that and the new partner will get the profit accruing from its new shareholding. Is that such a marvellous deal for the taxpayer?

The Government should accept responsibility for the deficit and there should be discussions with the unions on the new pension proposals. There is a strong case for the Royal Mail remaining 100 per cent publicly owned. Everyone has said that it needs more investment, although more recently it has been making a profit. Modernisation does not depend on securing private partner support. The unions have already agreed to participate in modernisation arrangements and have suggested a number of ways in which a new financial package can be secured for the Royal Mail. A new Post Office people’s bank has often been talked about, as it has in the debate today. A full range of financial services which people could trust and rely on could be established. In the present crisis, such a move would be highly popular.

It is clear that the core proposal, the private partnership, is not popular either with the staff employed or many of its customers. I know and approve of the Minister’s objectives. He wants an improved, stable and modernised Royal Mail, as do we all. But the support of the workforce is also important. I urge him to come to terms with the union’s position. It is essential that the staff and their unions are on board, and I do not think that they are at the moment.

5.24 pm

Lord Giddens: My Lords, I begin by joining other noble Lords in paying tribute to the memory of Lord Dearing, of whom it was said by a colleague in an obituary that he was the man least changed by high office of anyone he had met. That was certainly my experience of him. As someone who has spent his life working in universities, I remember Lord Dearing for his massive contribution to the restructuring of higher education—in which, I might say, many of the issues are quite similar to those under discussion today.

The Hooper review on the future of the Royal Mail has been commented on, criticised and in some quarters even vilified, but by and large it is an exemplary document. It is thorough, written in an impartial way and includes detailed comparisons with other countries.

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In drawing up the Bill, the Government have accepted the Hooper review more or less in its entirety, and at least from my point of view they are right to do so. Most noble Lords have skipped across the backdrop to all this as though it is obvious. In a way it is obvious, but it is important to emphasise it. There has been an absolute sea change in our modes of communication. They extend to everyone in our society and have been brought about by the marriage between computerisation and satellite technology, which has given rise not only to the internet but also to a proliferation of new ways to communicate. While I hate to disagree with my noble friend Lord Haskel, his assertion that the paperless office never materialised is not true. That is to neglect the fantastic revolution we have seen in how offices work, so although we still use paper—I am reading from a somewhat scruffy piece of paper now—its relationship to the technologies of communication we now use is vastly more complicated and quite different from what it was even 10 years ago.

As someone who spends some of his time studying broadband, I have to say that this revolution is still only in its early stages, with implications that we cannot yet fully spell out. The consequence I draw from this is that in our postal service we need an organisation that is well capitalised, innovative, highly adaptable and quick on its feet, because this is the milieu in which it will have to function in the future. Over the past few weeks I have spent quite a bit of time poring over the detail of these comparisons. It is true to say that the Royal Mail lags behind postal networks in other countries, and that this can be fairly readily demonstrated. It is true of some comparisons that can be drawn between the Royal Mail and the networks in Germany, France and the Netherlands, for example, and that is in spite of the very considerable progress made in recent years, a point made by several other noble Lords.

The organisation Compass has produced a pamphlet entitled Case Not Made, which no doubt many noble Lords have received either through the post or via computer, because I believe that it was sent to us in both forms. However, my conclusion is that the comparisons made in the Hooper review are indeed robust. You can never make exact comparisons between the services in different countries, but the comparisons that have been made are quite revealing. I think that one can say “case not made” of that pamphlet.

Hooper describes the Royal Mail as a commercial service with strong public obligations, and that is surely an accurate description. The report and the Bill rightly stress the key importance of the Royal Mail to national solidarity and the crucial importance of a universal service with a standard tariff. But the main question we must ask when considering the Bill is whether a wholly state-based organisation is the best way to reconcile these features with the prime need to cope with the radical changes that I mentioned earlier. In commenting on this question and relying on a certain movie title, I want to offer two criticisms and a conclusion.

My criticisms concern some fairly general assumptions that are being made in the debate on the Hooper review. The first mistake I identify is similar to the one

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alluded to by my noble friend Lord Soley: that it is simply fallacious to equate the public sphere with that of the state. It is clearly false to suppose that a wholly state-owned and state-run organisation functions by definition in the public interest. Most public institutions are a mixture, but that does not make them any less public institutions. For example, the National Health Service is run and organised largely by the state but depends wholly on its interaction with the large, privately-run pharmaceuticals industry. Most public institutions are of this kind. I do not propose to invoke the wisdom of Humpty Dumpty, but the somewhat hysterical discussion of privatisation that you see in some parts of the press misses the point; it is entirely possible for the Royal Mail to stay a public institution while having a private sector partner if the organisation of this relationship is well executed and well thought through.

The second mistake is to suppose that bringing in private capital is somehow a reversion to a now discredited past, a kind of new Labour thing that has suddenly become obsolete. After all, it is said that everyone is now turning to the state. But this is an absurd argument. What is at issue in all spheres is more effective regulation and partnership between the Government and the private sector. This will be true of the future of financial systems and the financial markets in general, and it is true of the legislation before us. The important thing is to produce an effective system of partnership and regulation.

My overall conclusion is that the case for why the Royal Mail cannot modernise quickly and radically enough within its existing structure is very compelling. The Hooper report stresses very strongly, as do the Government in the Bill, that these proposals are part of a package and have to be judged as such. I hope therefore that the Government will not back down on the major clauses incorporated in the Bill.

5.32 pm

Lord Alliance: My Lords, I declare an interest as the chairman and main shareholder of a company that is the second largest customer of the Royal Mail.

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