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The Bill has something to do with the European Union. The Amsterdam treaty lays down that any state aid provided to a commercial organisation must be approved by the EU Commission. Therefore, a decision to subsidise the Post Office and the Royal Mail is not entirely in our hands. Postal services directive 97/67/EC, agreed in 1997, and subsequent directives are creating a single internal market for postal services in the EU, and all services must be opened up to competition. That is part of the basis of this Bill. I do not wish to dwell on the EU aspect at the moment, but we have the Bill largely because of EU directives.

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One of my major reasons for opposing the Bill is the proposal to sell off 30 per cent of the business. I do not see why that is necessary, as I shall explain later. I want to know how much the Secretary of State thinks that he will get. How much money will the 30 per cent bring in? What will happen to it when it is brought in? Will it be put into the postal services, or into Royal Mail, or will it bail out bankers? We want to know where that money will go.

As regards introducing new management to bring about change and modernisation, was that not the reason for employing Allan Leighton and Adam Crozier as chairman and chief executive? Were they not supposed to have put things right? It does not seem to have worked because we have the Bill. I do not think that their backgrounds in grocery, chocolate, football, pet foods, newspaper sales and Saatchi & Saatchi equipped them for the job. In my view, other people with much better experience could have run the service a lot better. Who will run the service next? We know that TNT is the favourite foreign firm to come in. Will it run the service? Who will run the service?

Usually, the Government want to bring in people with financial or banking experience. Surely, they will not allow those people to run the Post Office, bearing in mind that they have brought the world almost to financial and economic destruction. Who will they bring in to run the Royal Mail? The Royal Mail should be led by people who know the industry, have worked in it and have leadership skills. Those are the best people to run the industry. I should have thought that Labour Lords in particular would agree with that. However, I guess that is not going to happen. I really cannot believe that these people do not already exist in the Royal Mail. I think that they are there, and I hope that they will be the next people to run the service. There should be no need to bring in people from a foreign mail carrier.

The sell-off of 30 per cent of the business is the thin end of the wedge. The Secretary of State will not be able to give the assurance that that will not eventually lead to full nationalisation.

Noble Lords: Privatisation!

Lord Stoddart of Swindon: Privatisation, my Lords; I have nationalisation on my mind. Furthermore, on finance, when we are spending hundreds of billions of pounds to shore up the banks, why on earth can we not spare some money, to add to the £600 million which already exists, to modernise and diversify the Royal Mail and the postal services? As I said, I understand that the favourite for private partner is TNT. It is hardly a suitable candidate to run the Royal Mail if press reports are to be believed. I read this headline in Sunday Telegraph:

“Royal Mail bid: tax scam”.

I shall not quote the whole article, but it states:

“Employees of TNT were involved in a financial scam in which documents were falsified and backdated”.

Surely, those are hardly the sort of people whom we want to run the Royal Mail. What concerns me most of all is that such legislation should be brought forward by a Labour Government. I have to keep making that

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point because I am so angry about it. Have they forgotten that the Royal Mail and the Post Office services ran successfully as a government department for 150 years? You could post a letter in London at 10 o’clock in the morning and get it at four o’clock in the afternoon. Yet now you cannot get your post until about five o’clock at night in some places. The service does not have to be privatised, and the tinkering over the past two decades has not brought about the improvements that were promised. There is no reason to believe that this Bill will be any different.

What about the other privatisations? Have they been a great success? Ask the people. Do they think that the railways are better? Are they cheaper and more reliable? The answer from the people will be no. When I was the chairman of the land and works committee of the Thames Valley water board, I used to boast about selling water at sixpence a tonne. Now it is getting on for £2 a tonne. I assure noble Lords that water consumers do not believe that privatisation is necessarily the good thing that the noble Lord, Lord Desai, seems to think it is. As regards the energy industry, ask the people who are paying enormous prices whether they think that privatisation was a good thing. My bill went up from £133 a month to £197 a month only a couple of months ago. That must be happening to other people up and down the country as well. Privatisation does not necessarily bring the promised land.

I am opposed to the Bill. I say to my noble friend—not a political friend, just a friend—that if he decides to put his amendment to a vote tonight, I shall certainly stand shoulder to shoulder with him in the Lobby.

6.50 pm

Baroness Morgan of Huyton: My Lords, the easy thing to do today, particularly if we think of the hours and days ahead of us going through the Bill, would be to drop it now, but that would be a real dereliction of duty if we want to secure a strong future for a universal service in the UK. We do not have the Bill because of the EU, as the noble Lord, Lord Stoddart, says. We have the Bill because the Royal Mail is in serial decline and needs a fundamental shake-up. It is not about tinkering at the edges; it needs a fundamental change.

Changes in high-profile public services, especially those to which the public have a strong emotional attachment, are always difficult. Just think of the arguments that there have been at every stage of health service reform. At each and every stage, variously, we have had strongly felt and passionately held views, real fears, protectionism dressed up in other clothing, accusations of privatisation, prophets of doom about the demise of the NHS in all but name—I remember most of them personally. There are those who doubtless still believe that some of that is true, but most people see a massively improved service, which has had investment and the necessary reform and which commissions the private sector intelligently to drive up standards. Above all, patient experience and treatment have improved, but still within a universal service.

Look at air traffic control. When the Government announced the plans for a public-private partnership of NATS in 1998, there was a concerted campaign of

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opposition. Attempts to change NATS, including full privatisation, had been mooted by earlier Governments and dropped. Before the 1997 general election, Labour’s transport strategy had argued that,

It is always instructive to look back at what you have promised, and this strategy holds true today and is relevant in this debate. Genuine public-private partnerships should involve a sharing of responsibility, not a shifting of the Government’s strategic responsibility wholly on to the private sector. There has to be a sharing of risk and the creation of a stable environment for the private partners. Above all, of course, there has to be good value for taxpayers and a good service for consumers.

In the case of NATS, as my noble friend Lord Brooke said, after the consultation it was announced that we would move ahead with the PPP, with 49 per cent government control and 51 per cent in the private sector, including employees in this case. Safety regulation was left with the CAA and safeguards were introduced for employees’ pension rights. I remember, as many of us probably do, the highly charged arguments at that time and some pretty major scare stories around these proposals but, as with other reforms, the rows are now a distant memory and the outcome has been improved performance, effective regulation and a stable workforce that has decent conditions.

We cannot avoid facing up to the challenges that face Royal Mail. The public may feel a level of emotional attachment, but that attachment goes only so far; it is not strong enough to make us go back to letters from e-mails or to be sympathetic when the post is less efficient than we expect and deserve. We must face up to the facts. The status quo is not a tenable option. It will lead only to a larger crisis in the near future. The need for change is compelling. The volume of mail being sent is falling, as people and businesses switch to digital communication. All of us here know that. We posted 5 million fewer letters per day last year than two years ago.

Royal Mail’s performance does not match the best European postal operators. By its own estimation, it is 40 per cent less efficient. Its distribution network and mail centres remain largely unchanged. Despite the launch of the renewal plan in 2002, it is not automated to the same extent as other leading operators. Performance is linked to industrial relations, and industrial relations in the Royal Mail need to improve. In 2007, 60 per cent of all days lost in the whole economy through industrial action were accounted for by Royal Mail. In total, more than 600,000 days of work were lost. Agreements that may be made nationally at the moment have to be made again—or often not—locally.

We have heard about the pension deficit. Royal Mail’s historic pension deficit is one of the largest in the UK, larger than any FTSE 100 company. Sometimes we hear that pricing is the answer, but pricing is not

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going to solve the problem. Increasing postal prices would not generate sufficient revenue to counteract falling volumes; previous price increases have demonstrated that very clearly. Consumers have either used electronic media or reverted to second-class postage. Companies have given their business to competing operators. Relationships with the regulator are notoriously bad. Postcomm has been notoriously difficult, preventing management from focusing time, energy and skills on the consumer and the challenges of the business; too often, management has spent time and resources responding to the regulator.

There will be those who say that competition is the problem, but competition has brought price benefits to consumers and fundamentally is something of a sideshow. Last year, Royal Mail lost £100 million in generating profit to postal competitors but £500 million to digital media. Royal Mail is already expecting a significant further decline. There are those who will argue that this is the back door to full privatisation, but the Hooper report and the Bill absolutely do not do that, nor does the proposal that the company would be broken up into separately owned companies. Indeed, the business will remain in the public sector. The Bill enshrines the universal service in primary legislation. Any further changes would need primary legislation.

We have heard a more recent argument this evening: the Government can pour money into banks, so why not into the Post Office? Apart from that being somewhat trite, the Government are not walking away from the Post Office; they are proposing to tackle the significant pension deficit. This will not be a fair deal for the taxpayer unless there is a strategic partnership to deliver the necessary modernisation alongside it. Remember, too, that the Government have made available funds of £3.5 billion in the seven years since Royal Mail became a public limited company. The tough reality is that, since the Postal Services Act 2000, there has been progress, but not nearly enough, while the challenge from the changing postal market has escalated and will do so year on year. I agree with my noble friend Lord Soley and others that the Act did not go far enough.

There is now a package in front of us that we should support—not the bits that we most like, but all of it in its entirety. It is something of a deal. That does not preclude intelligent amendments from being made. Indeed, we have heard tonight that there is likely to be a move on employee ownership. I certainly would be interested to hear the Minister’s response to that. The proposals before us enshrine the commitment to a universal service and make it clear that this takes precedence over competition. The issue of regulation is seized by including the Post Office in Ofcom’s arena. The access regime will be considerably fairer and much more transparent than is the case for Royal Mail now. As part of the package, the pensions mess will be sorted, which will be a huge benefit to company and employees alike. The proposals for partnership with an experienced operator will lead to faster change, new skills and new capital. The Royal Mail will stay in the public sector.

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Let us be clear that this is not just about capital; it is not about how we get some money into the Royal Mail. It is about the new management skills that are so obviously and fundamentally needed. We need a massive step change if the Post Office is to succeed and if the Royal Mail is to continue as a universal service supported by all. I see this package as a pretty strong and balanced deal, which offers not only protection to the universal service but the opportunities to make that service fit for purpose going forward. It would be short-sighted indeed to reject it.

6.59 pm

Baroness Gibson of Market Rasen: My Lords, I declare an interest as a member of Unite. As has already been illustrated, parts of this Bill are extremely difficult for many of us on this side of the Chamber. The Bill is about businesses that are very dear to our hearts—the Royal Mail Group and Post Office Limited. Understandably, feelings are running high about the Bill, especially between those who feel that it is wrong to bring any private investment into postal services, such as my noble friends Lord Hoyle and Lady Turner, and those who, like me, feel that there is no option on this occasion.

It is made more difficult because we are discussing the future of dedicated men and women who, in many parts of the country, are more than just workers. They are friends and helpers of those to whom they deliver the mail, especially in rural areas. They know the families and their friends; they keep their eyes on the elderly, the disabled and the new people who have moved into the local community who may need assistance. In many ways, they are in part social workers, as well as postmen and postwomen.

Like others who have spoken, I want to keep our postal service at the highest level possible and, at the same time, to maintain the jobs of postmen and postwomen and provide a proper pension for the many former employees of Royal Mail. I do not agree with some of the criticisms of our current postal service. Perhaps I can put in a word of caution: anyone who has lived abroad realises what an amazing service we have in this country. Letters are delivered wherever we live throughout the UK six days a week.

We have heard about Europe. I want to give noble Lords a flavour of my experiences in France. I have lived in France for part of each year for the past 20 years. No letter has ever been delivered to my house there; instead, we walk to collect our mail from the central point on the village green where the post van delivers five, not six, days a week. We never meet the van driver and there is a different van driver each day. That is the French system. Do we want that here? I think not.

I read this Bill very carefully and I have no hesitation in supporting many parts of it. I welcome the transfer of the functions of the regulator of the postal service sector from Postcomm to Ofcom, whose first duty will be to protect the universal postal service, something with which I totally agree. I also support the transfer of the horrendous pension deficit away from Royal Mail’s responsibility to that of the Government. I cannot see how the pension fund can be sustained

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otherwise. If it is not, there will be no security for the pensions of all those hard-working men and women who have worked for Royal Mail over the years. Royal Mail cannot pass on the pension deficit to its customers without risking losing them. It cannot afford to continue with the current deficit, which is rising year on year.

We have heard about the 2005 Labour manifesto commitment, but that was four years ago and life, particularly our economy, has changed dramatically since that time, far more than any of us could have predicted. We must not forget that the manifesto also committed us to carrying out a thorough review of postal services. In December of last year, the Hooper report was presented to the Government. It outlined starkly what has happened over recent years and its overall conclusion was that without change the universal postal system would be under threat.

The amount of mail that we post has decreased dramatically while the use of the internet, e-mailing and text messaging has increased equally dramatically. These trends will inevitably continue. Like most of us in this Chamber, I am one of those who are guilty of depriving Royal Mail of its business. In 2005, I always used what a noble friend described as “snail mail”. Now I e-mail whenever I can to answer phone messages, invitations, letters and, of course, the many e-mails that I receive each day. It was because of these dramatic changes in the way in which we use the communication systems that are available, coupled with the pensions deficit, that the most controversial proposal in the Hooper report was made. Hooper introduced the concept of a strategic partner that would have a minority stake in Royal Mail. The Government have decided to adopt this proposal, in my opinion to give Royal Mail a chance to play on a level playing field.

It is quite natural for the CWU to be opposed to the philosophy of any form of privatisation. Many trade unions are opposed because we recognise that the private sector does not hold all the answers. However, we also recognise that Royal Mail needs capital and that the Government have provided safeguards in the Bill. The proposed partnership must be with a company that has a,

This is key to any partnership agreement, which should provide the flexible capital that Royal Mail needs so badly.

As we have heard, the Government are committed to keeping Royal Mail in public ownership and this will be enshrined in law. Additionally, the universal service—letters collected and delivered anywhere in the UK, six days a week, at a single affordable price—will be written into legislation. These safeguards satisfy me that the Bill should be read a second time.

Perhaps the proposals made by Hooper, and accepted by the Government in this Bill, are not perfect, but they provide us with what may be the last chance to get it right. It will be far too late if Royal Mail is allowed to slide into bankruptcy and I am afraid that other proposals voiced recently do not appear to offer a viable alternative. As always, the Bill will be improved as it passes through the House and I am sure that all noble Lords who are taking part in this debate will be involved in that process.

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7.06 pm

Lord Birt: My Lords, Richard Hooper, not for the first time, has done this nation a service. He and his colleagues have set out for us all, with lucidity and force, the grim realities that confront Royal Mail. Whatever wholly understandable sentiment we all bring to this issue—in my case, fond memories over many years of hauling the Christmas post as a strapping lad—the cold, hard facts set out in the Hooper report about Royal Mail’s relative performance are stark and unavoidable.

The postal services are not alone, however, in facing the onslaught of the digital media. Newspapers, broadcasters, music companies and retailers are but some of the many sectors wrestling with the challenges and opportunities that this technological revolution presents. Now, in cruel addition, there is an overlay of intense financial and economic crisis.

If it is to survive, Royal Mail, quite simply, must reinvent itself; it needs to rationalise and to modernise. It must harness the power of new technology to drive a step change in the efficiency and effectiveness of its operations. It must adjust its cost base, particularly its labour costs, to deal with the unavoidable loss of business to e-mail and other electronic communications, as many noble Lords have mentioned. It must focus on the needs of its customers, particularly its heartland business customers who provide the overwhelming bulk of its business. As the noble Lord, Lord Soley, observed, Royal Mail must show real enterprise in grasping the enormous opportunity offered by e-commerce—the distribution of physical products ordered online. It must, in due course, diversify and acquire.

However, Royal Mail at this minute is ill-prepared for these tasks; the whole framework in which it operates is unfit for purpose. It has a single-sector union, unversed in the wider world, and a management and workforce who fail to engage fruitfully. It is an organisation constrained by restrictive practices and resistant to innovation—a hangover from a bygone and unlamented era. Negative cash flows are projected in each of the next five years—it is by far less efficient than the European average. It has a small, solitary regulator, which was well described by the noble Lord, Lord Whitty, which is locked in a loveless embrace with a single, large client organisation. There is sluggish action on investment that is typically associated with state aid. There is insufficient distance between politicians and the entity. It is not a pretty picture. Successive Governments have little cause to pat themselves on the back, and none have today. The noble Lord, Lord Fowler, is surely right when he suggests how different the past 20 years could have been. The noble Lords, Lord Brooke and Lord Whitty, reinforced that point.

We should, however, support this Bill with relief, if not with celebration, because it offers the prospect of a new beginning. It offers the introduction to Royal Mail of expertise and enterprise, speedy access to capital, and empowered and muscular regulation. The noble Lord, Lord Desai, and the noble Baroness, Lady Morgan, reminded us eloquently that there is a better way; we need not be fearful. The Bill, however, will take us only so far. The next 12 months for the

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Secretary of State will be exceedingly testing. A new partner for Royal Mail will be demanding, and rightly so, and will surely require binding assurances from government and unions before it will participate and risk its capital. The noble Lord, Lord Neill, who is not in his place, asked some very pertinent questions on that score. The Government, for their part, will need to be crystal clear and steadfast in their intentions if we are to see Royal Mail’s necessary transformation through to a successful conclusion and to a public interest outcome.

7.11 pm

Lord Rooker: My Lords, first, I join others in paying tribute to the late Lord Dearing. He was a wonderful man and of great help to me when I first came to the House. I always remember the joy of reading about him in Gerald Kaufman’s book, How to be a Minister. It is absolutely magic to read how he came across “Mr Dearing” and the memos that he used to get.

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