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If any progress is to be made, this matter must be considered before Report. If it is not so considered, and the Bill proceeds to the House of Commons unamended, with nothing to show for this entire debate, there will be a train crash in the House of Commons as far as I can see.

I ask my noble friend to ensure that she does not repeat the word “philosophical”. It is a philosophical question. I do not mind using the word about the social democratic model, but why do we have to go round in circles? The Government are saying that this is what the Companies Act says and this is a Companies Act company, so they cannot do what we say. The Government should change the law so that they can do what we say.

I have had no assurance on any of these matters. Now is the time to ask my noble friend and the officials at BERR to go away and think. On that basis, I shall be withdrawing my amendment.

Lord De Mauley: Before the noble Lord withdraws his amendment, I should like to ask the Minister a further question. She suggested that my questions would be tackled under the group containing Amendments 20, 21 and 22. Those amendments deal with reporting as the deal goes forward. I have asked about the situation now as regards the Government’s intentions towards control, and I should be grateful for an answer.



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Baroness Vadera: I am happy to provide the answer under this group of amendments. The Government are committed to ensuring that we have the controls over a Royal Mail company that the ownership of the majority of the shares brings. The noble Lord will be aware of the technical definition that determines control of the provision of more than half the voting shares or otherwise controlling more than half of shareholders’ voting power. Clause 12 follows the definition and ensures that the Government will have the majority of the voting rights in Royal Mail. That would include the appointment of directors, amendments to articles and the issuing of shares to the company. However, as we believe that Royal Mail’s board and management are best placed to run the company and should do so wherever possible without specific political interference, we have ensured that we have the types of controls that are essential to a shareholder.

The relationship and specific rights that would be granted to a partner will be as set out in the shareholders’ agreement. My noble friend the Secretary of State has already suggested that that has not yet been negotiated and it is therefore difficult to have any specific discussion. However, it will reflect a partnership rather than a ceding of control. The Government will have greater control rights than the partner, as would be appropriate for a majority shareholder, but there will be, in key areas, shared responsibility with the partner.

We also need to ensure that the partner has sufficient rights to enable it to influence the decision-making process and to deliver the transformation that is required. That is the purpose of the exercise. We expect the partner to have these shared responsibilities, particularly in operational matters, and a meaningful say in the running of the company, as has been the point of having a strategic partner.

Lord Lea of Crondall: I am very grateful to my noble friend for giving way again, but I think that she has missed the point of the symmetry in the partnership model. How can we be asked to buy into symmetry in a partnership between equals, when all of a sudden only one of the partners has any sort of control on the board? I do not understand. I ask my noble friend to recognise the contradictions of her philosophical position, as she calls it, and then we can make some progress.

Baroness Vadera: I think that that is a clear and complete misrepresentation of what I have said. I said that the Government will have greater control rights than the partner. Indeed, I said that they would have the majority voting rights, which involves the majority rights in terms of the appointments of the directors to the board. I was then going on to explain that within that context, there are certain areas of shared responsibility with the partner. This will be a publicly owned company where the Government have majority shareholder rights; therefore they will have majority voting power and majority appointments rights on the board.

I was then going on to explain what other rights a minority shareholder might have as a partner. Obviously, the purpose of having a strategic partner was to enable it to help with the transformation of the business. Therefore, it was essential, in that context, for it to have certain—



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Lord Lea of Crondall: I hope that the Committee will forgive me for making one final intervention. This is revealing the ambiguity of the Hooper report, which uses the word “partnership” in two totally different contexts, with two totally different meanings. One minute my noble friend is talking about a partnership with a business and its accountability to shareholders with the majority accountability being to the public. But the second use of “partnership”, which is by some sort of osmosis thought to be the same thing—it is a different thing altogether—means partnership with the workforce. The speeches relating to the Hooper report show that there are two types of partnership. This is a partnership between the management, for innovation, and the workforce. Why should the workforce not be an equal partner with these whizz-kids who are supposed to be helping to transform the company? I am not talking about partnership in an equity sense. Does my noble friend agree that the Hooper report used “partnership” to mean two quite different things?

Baroness Vadera: I was of course answering the question of the noble Lord, Lord De Mauley, about the partnership with the strategic partner. In that context, I was providing an answer about that partnership.

My noble friend has already made his points about workers’ representation on the board. We have explained our position and I have said—clearly, I believe—that there is complete acknowledgement of the centrality of the workforce to Royal Mail, its transformation and its future. I say in the context of a previous intervention that it was not our intention to suggest that the employees were a special interest group; I was simply pointing out the requirements of a board director.

Perhaps I may finish my answer to the noble Lord, Lord De Mauley, about the influence of, and the partnership arrangement with, a strategic partner. The point of having a strategic partner is to assist Royal Mail in the transformation of the business. Therefore, it would be a shared responsibility and partnership in operational matters. The shareholder agreement will also set out the structure of the group, which reflects our policy of partnership but with the Government retaining ultimate control. We expect that the majority of board appointments will be made by the Government, including the chairman, and that the partner would appoint a minority of non-executive directors. As my noble friend the Secretary of State has already said, no such agreement has yet been negotiated with a partner, but I hope that my answer gives noble Lords a sense of the direction of travel.

Lord Lea of Crondall: I am very disappointed that two-thirds of the Minister’s reply was to something which is not part of Amendment 9, which stands on its own and has been degrouped. Confusingly, a lot of other material is being replied to. I am talking about a partnership with the workforce. I invite my noble friend to correct herself in writing if she denies that “partnership” is used in the Hooper report in relation to partnership with the workforce. I shall not divide the Chamber on this occasion, but if no progress is made on Report, I probably shall.



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Amendment 9 withdrawn.

Amendment 10 not moved.

Clause 4 : Meaning of “Royal Mail company”

Amendments 11 and 12 not moved.

Clause 4 agreed.

Amendment 13 not moved.

Amendment 14

Moved by Lord Hunt of Wirral

14: After Clause 4, insert the following new Clause—

“Report on impact of re-organisation

(1) Before any order under section 2(1) or 4(1) can be made, the original holding company shall publish a report setting out—

(a) the existing commercial relationship between its subsidiaries;

(b) the impact any reorganisation under this Part will have on this relationship.

(2) The Secretary of State shall lay a copy of the report before Parliament as soon as reasonably possible after its publication.”

Lord Hunt of Wirral: My amendment is prompted by concerns that the reorganisation envisaged by the Bill will lead to a weakening of the relationship between the Royal Mail Group and Post Office Limited. As many noble Lords will know, the current relationship is not just helpful but absolutely critical for the post office network. In fact, neither can exist without the other; that would be unthinkable. Neither organisation can flourish if the other is failing. Nor can one ever leech off the other. This relationship must be about symbiosis, partnership and balance. The inter-business agreement to handle Royal Mail letters provides one-third of the income of post offices. If this reorganisation fractures or even damages that relationship, we will undoubtedly have another round of closures very soon. I say that against the background of the Secretary of State assuring us that no closure will take place, which was surprising but very welcome indeed. However, I still await an answer to Amendment 14. Of course, I recognise that there is no reason why closures should take place. As I understand it, the Bill would open up the possibility for post offices to generate revenue from contracts with private postal service providers in addition to maintaining the existing agreement with Royal Mail.

7.15 pm

Post offices still offer a unique physical network. Despite the many closures that have taken place, post offices continue to provide customer access throughout the United Kingdom. That potential should be exploited to the full. However, there is naturally some concern that reorganisation will undermine the security provided by what is, as I understand it, £356 million a year from Royal Mail. A neat diagram was helpfully sent out from the department yesterday which shows a continuing commercial relationship being maintained between the two. I look to the Minister to give us some more

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detail as to whether the Government expect this commercial relationship to be different from the current inter-company agreement and, if so, in what respect or respects. Has there been any discussion about whether the privatisation deal will contain any assurances about the renewal of the contract on current terms?

There are concerns among stakeholders, which have been expressed to a number of noble Lords, that greater mechanisation will reduce the amount of sorting work that Royal Mail pays post offices to do for it, particularly in rural areas. There is also concern that the end of the exclusive relationship between the two companies and the introduction of possibly unsupportive private management will lead to a reduction of the flat-rate payment that is presently made.

These concerns are not necessarily well founded. Better regulation, the lifting of the burden of the pension deficit and improved exploitation of growing markets such as parcels could all benefit post offices as much as they will help Royal Mail, but this cannot be known for sure. My amendment therefore seeks to ensure that proper thought is put into assessing the risks, possibilities and opportunities. If it is shown that the relationship will be put in genuine danger, steps can and should be taken to protect it before thousands more post offices are threatened with closure. I hope that we shall hear a positive response to these questions from the Minister. I beg to move.

Lord Hoyle: It is important that we look at the effect of any partnership on the companies. The noble Lord is right that the existing commercial partnership and relationship between the subsidiaries should be looked at. I said earlier that the future growth of Royal Mail lies in its parcel services. Its European arm has gone into Europe, particularly to Poland, and won orders. A rumour has been put about by one of the partners that it will take over the successful companies. The relationship between the companies should be set out as soon as possible. If a partner comes in, might it be able to take over one of Royal Mail’s successful parcel companies lock, stock and barrel, thereby depriving it of the expansion that it desires?

Baroness Vadera: I welcome the amendment, not because I believe that it is necessary but because it provides a welcome opportunity to explain some of the proposals in detail. I say in response to the question of the noble Lord, Lord Hoyle, that the strategic partner is invited to look at Royal Mail Group Limited and not at any part separately. Therefore, it is not possible for it to take over separately another element of part of the group. I hope that that sufficiently reassures my noble friend Lord Hoyle on that subject.

I understand the concerns around the protection of the Post Office. The introduction of the strategic partner would have no impact on the relationship between the Post Office and Royal Mail, because this is a currently and contractual relationship, with Royal Mail using the post office network across the country and able to provide access to its products to the public through that network—for example, special delivery, airmail and stamps. On the other hand, the Post Office derives about 30 per cent of its revenue from that relationship. If anything, we believe that, as the noble Lord

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acknowledges, it improves the Post Office’s ability to attract revenue from elsewhere. I therefore assure the noble Lord that the reorganisation will not lead to weakening the relationship between the Post Office and Royal Mail.

Royal Mail will remain publicly owned; that is on the face of the Bill. The partnership is a commercial partnership, and the Post Office will continue to offer Royal Mail services through its network. Income from Royal Mail is very important to the Post Office and to sub-postmasters; vital business derives from it, from consumers and small businesses.

The noble Lord asked about the post office network. The proposed regulatory regime allows Ofcom to oblige access to POL for other mail providers in certain circumstances. These changes being proposed provide new opportunities for the Post Office to focus on its own challenges and create a better and more vibrant future for its network. As noble Lords will be aware, we provide a subsidy of approximately £150 million a year to the Post Office. In this context, it is absolutely vital that we protect the taxpayers’ interests as well, in particular to ensure that there are no leakages of that subsidy to Royal Mail—and even more so when there is a strategic partner.

The noble Lord asked about further details of the contractual relationship between the two businesses, which are commercially confidential. It covers the pricing of about 30 products, the details of which would be of great interest to the competitors of both the Post Office and Royal Mail alike and which it would be inappropriate to provide.

We hope that, in addition to the opportunities for further revenue that this Bill will provide the Post Office, we will strengthen the Post Office through creating a new board and its own non-executive chair, which will provide greater support to the Post Office’s management team. There has been some concern in the past that the Post Office should have the commercial freedom to provide services to other postal companies; as I have said, Clauses 34 and 44, which will be debated after the Easter Recess, will provide the regulator with the powers to compel access to the post office network for other postal companies in certain circumstances.

I hope that noble Lords have found helpful the chart that was circulated to them. I am very happy to discuss it and to put it on the record, if there are any questions about the organisation of the chart.

Lord Hoyle: Just to clarify what my noble friend said in reply to my question, am I right in thinking that the partnership would be with Royal Mail Group Limited? It is not Royal Mail Holdings but the Royal Mail Group. If that is the case, my fears are not abated; in fact, they are intensified, because that would mean that the profitable side—the parcel business—is within that. Therefore, we could be in the position I described of taking over the profitable side of Royal Mail.

Baroness Vadera: I am a little unclear whether my noble friend is suggesting that the partnership should be with Royal Mail Holdings, which would then mean that the partner would own shares in Post Office Limited. I am sure that is not his intention.



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Lord Hoyle: I am sorry. I am sure that we are saying the same thing—I am not trying to be awkward. The partnership is coming in to help Royal Mail, and it will be the efficiency of the Royal Mail Group Limited that it will be looking at, which is on the chart. But the Royal Mail Group Limited contains not only letters, as it says on the chart, but the parcel division. I am very concerned that that is the growth area for the future and that it could be put in jeopardy if it is taken over by the partner.

Baroness Vadera: Perhaps we could clarify this separately. I would be very happy to have a meeting to discuss this, because it is clearly a confusing issue.

Lord Hunt of Wirral: I am very concerned about all this. I thought that it was much clearer than I now think it is. When the opposition Benches put forward the idea that a report should be laid before Parliament by the Secretary of State so that we could clarify these things—in particular, the impact that any reorganisation under this part will have on the relationship—we were only asking for Parliament to be kept in touch with what was happening, so that we could discuss this and look at it again. So I would like to test the opinion of the Committee.

7.27 pm

Division on Amendment 14

Contents 89; Not-Contents 115.

Amendment 14 disagreed.


Division No. 1


CONTENTS

Anelay of St Johns, B. [Teller]
Astor, V.
Astor of Hever, L.
Attlee, E.
Barker, B.
Bates, L.
Bath and Wells, Bp.
Bottomley of Nettlestone, B.
Bradshaw, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Carnegy of Lour, B.
Cathcart, E.
Chester, Bp.
Chidgey, L.
Cope of Berkeley, L.
Cotter, L.
Craig of Radley, L.
De Mauley, L.
Denham, L.
Eccles, V.
Fraser of Carmyllie, L.
Garel-Jones, L.
Griffiths of Fforestfach, L.
Hamilton of Epsom, L.
Hamwee, B.
Henley, L.
Hodgson of Astley Abbotts, L.
Hooper, B.
Howe of Aberavon, L.
Howe of Idlicote, B.
Hunt of Wirral, L.
Jopling, L.
Kimball, L.
Kingsland, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Laird, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lindsay, E.
Livsey of Talgarth, L.
Luke, L.
Lyell, L.
Maddock, B.
Maginnis of Drumglass, L.
Mancroft, L.
Marlesford, L.
Masham of Ilton, B.
Miller of Chilthorne Domer, B.
Montrose, D.
Morris of Bolton, B.
Neville-Jones, B.
Noakes, B.
Northesk, E.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
O'Cathain, B.
Pearson of Rannoch, L.
Reay, L.
Redesdale, L.
Roberts of Llandudno, L.
Scott of Needham Market, B.


24 Mar 2009 : Column 619

Seccombe, B. [Teller]
Selkirk of Douglas, L.
Sharples, B.
Shephard of Northwold, B.
Shutt of Greetland, L.
Smith of Clifton, L.
Steinberg, L.
Stern, B.
Stewartby, L.
Taylor of Holbeach, L.
Thomas of Winchester, B.
Tope, L.
Tordoff, L.
Trefgarne, L.
Tyler, L.
Ullswater, V.
Verma, B.
Waddington, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Walpole, L.
Wilcox, B.
Willoughby de Broke, L.

NOT CONTENTS

Adams of Craigielea, B.
Adonis, L.
Anderson of Swansea, L.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Bassam of Brighton, L. [Teller]
Berkeley, L.
Bhatia, L.
Bhattacharyya, L.
Bilston, L.
Blackstone, B.
Blood, B.
Borrie, L.
Brennan, L.
Brett, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Campbell-Savours, L.
Carter of Coles, L.
Clark of Windermere, L.
Corbett of Castle Vale, L.
Corston, B.
Crisp, L.
Cunningham of Felling, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
Desai, L.
Drayson, L.
D'Souza, B.
Dubs, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Golding, B.
Goldsmith, L.
Gordon of Strathblane, L.
Gould of Potternewton, B.
Griffiths of Burry Port, L.
Hart of Chilton, L.
Haskel, L.
Haskins, L.
Haworth, L.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howells of St. Davids, B.
Hunt of Kings Heath, L.
Jay of Ewelme, L.
Jones, L.
Judd, L.
Kilclooney, L.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
Lofthouse of Pontefract, L.
McDonagh, B.
Macdonald of Tradeston, L.
McIntosh of Hudnall, B.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Moonie, L.
Morgan, L.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Myners, L.
O'Neill of Clackmannan, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pendry, L.
Pitkeathley, B.
Prosser, B.
Puttnam, L.
Quin, B.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
Scotland of Asthal, B.
Sewel, L.
Simon, V.
Smith of Leigh, L.
Snape, L.
Soley, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Thornton, B.
Tunnicliffe, L.
Uddin, B.
Vadera, B.
Wall of New Barnet, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Whitaker, B.
Whitty, L.
Wilkins, B.
Williamson of Horton, L.
Woolmer of Leeds, L.
Wright of Richmond, L.
Young of Norwood Green, L.

House resumed. Committee to begin again not before 8.37 pm.



24 Mar 2009 : Column 620


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