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31 Mar 2009 : Column 960

EU: Czech Presidency


3 pm

Asked By Lord Dykes

Lord Davies of Oldham: My Lords, the Government of the Czech Republic continue as a “Government in Resignation”, and Ministers and officials will continue to carry out their duties in full as EU presidency.

Lord Dykes: My Lords, allowing for the occasional vagaries of President Klaus, does the Minister agree with the comment on page 11 of today’s Financial Times that this is a problem more in Prague than in Brussels because of the inherent continuity in the troika system and the maintenance of the agendas running continuously over the presidency period?

Lord Davies of Oldham: My Lords, as I have indicated, the president intends to carry on his role in regard to the EU presidency. The reason I swallowed hard over “Government in Resignation” is that I was upbraided on Thursday for the euphemistic terms used at this Dispatch Box from time to time. I want to reassure the House that that was not my phrase.

Lord Anderson of Swansea: My Lords, does my noble friend agree that the current problems were foreseeable and foreseen because of the fragile nature of the Topolánek Government and the idiosyncratic policies of President Klaus? Are not the current difficulties a very powerful argument for implementing the Lisbon treaty as speedily as possible?

Lord Davies of Oldham: My Lords, my noble friend makes a very good and very informed point. With a rotating presidency, which will continue, there will from time to time be internal vicissitudes in states which cause difficulties for the President of the European Union. However, we have every assurance that the Czech President will play his full role until 30 June.

Lord Lawson of Blaby: My Lords, will the noble Lord not reflect on his commendation of what his noble friend said a moment ago in his attack on President Klaus? He is the president of a friendly country, a fellow member of the European Union and a man of very considerable distinction who remains unaffected by the resignation of the Czech Government.

Lord Davies of Oldham: That is so, my Lords, but there is an understandable reluctance at this Dispatch Box to comment on the internal affairs of another country.

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Lord Pearson of Rannoch: My Lords, are the Government aware that decision-making and law-making in the European Union have increased by 25 per cent since the French and Dutch people rejected its proposed constitution? Are they further aware that neither the absence of the Lisbon treaty nor the resignation of the Czech Government will make the slightest difference to the progress of the juggernaut in Brussels, which will just go on abusing clauses in the existing treaties to achieve its aims, as it has been doing for the past few years?

Lord Davies of Oldham: My Lords, the House is accustomed to the noble Lord’s trenchant criticism of the European Union, but the Question concerns the specific issue of anxiety that the internal developments in the Czech Republic might impact adversely upon Europe. I am sure the noble Lord would not want such vicissitudes of that country to affect Europe adversely.

Lord Howell of Guildford: My Lords, as the Government are so anxious to push forward the Lisbon treaty, will the noble Lord at least ensure that his ministerial colleagues in the Foreign and Commonwealth Office have read it thoroughly? When will it be understood that, while the government elites of Europe obviously like the treaty very much, it is not at all popular with the people—not with the Czechs or the Irish, probably not with the French and certainly not in this country? Would it not be valuable to ensure that at least Ministers here have read every detail of it before we push forward with something that most of Europe really does not like?

Lord Davies of Oldham: My Lords, I thought it was leading members of the Conservative Party who did not read documents thoroughly, not this side. I can certainly offer the noble Lord the assurance he seeks. With regard to the unpopularity of the treaty, he will know how many European states have signed up. He may be a little early in suggesting exactly where the Irish people stand on the matter; after all, they are going to vote in October, and I prefer to wait until then.

Lord Lea of Crondall: My Lords, would it not be more relevant to observe that the Lisbon treaty, when ratified, would provide for some permanence between the current six-monthly presidencies so that negotiations could carry on without some of the difficulties that, with crocodile tears, some noble Lords opposite are claiming exist with the present arrangements, while at the same time taking a sideswipe at the treaty?

Lord Davies of Oldham: My Lords, my noble friend is right: the objective of the Lisbon treaty is to come to terms with the enlarged European Community, of which the issue of the rotating presidency is a factor. A proposal under the Lisbon treaty is to strengthen the institutions to render that problem less significant than it otherwise would be.

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Constitutional Renewal Bill [HL]

First Reading

3.06 pm

A Bill to repeal Sections 132 to 138 of the Serious Organised Crime and Police Act 2005, to make provision relating to the Attorney-General, to make provision relating to the ratification of treaties and to participation in armed conflict by the United Kingdom, to make provision relating to the Civil Service, to make provision relating to parliamentary general elections, to make provision relating to the conduct of Members of Parliament and for connected purposes.

The Bill was introduced by Lord Tyler, read a first time and ordered to be printed.

Postal Services Bill [HL]

Bill Main Page
Copy of the Bill
Explanatory Notes

Committee (2nd Day)

3.07 pm

Amendment 20

Moved by Lord De Mauley

20: After Clause 9, insert the following new Clause—

“Reporting provisions

Report on partnership deal: timetable and process

(1) The Secretary of State shall, within one month of this Act being passed, lay before Parliament the expected timetable and procedure of the tendering process to establish a partnership between a Royal Mail company and a private sector operator.

(2) If, at any date between the laying before Parliament of the report and the conclusion of a partnership deal, the Secretary of State believes that any of the details within the report are likely to be significantly different in practice, he shall inform Parliament of the changes.”

Lord De Mauley: Our amendments in this group seek to ensure something that people from every point on the political spectrum agree is missing from these discussions: a clear idea of what sort of partnership we are dealing with. The Bill does not give any indication at all but merely opens up a number of possibilities. The Government’s policy paper is not much better; indeed, paragraph 4.6 specifically mentions several of the possible sorts of partnership that might be established. It lists swapping equity, merging businesses or taking on direct equity interests all as possible avenues to be kept open.

We do not necessarily disagree with there being flexibility at this stage. The Government have taken great pains to reassure stakeholders that there is, as yet, no deal. It is no doubt reassuring that the Government have not yet committed us to a slap-dash deal that does not provide value for the taxpayer or improvement in Royal Mail, but there is no guarantee that this comfortable position will last.

Amendment 20 seeks to establish just how the Government are managing the tendering process. The Government have spoken of this summer being the expected date of any deal, so I presume that they have at least got that far with their policy. I cannot imagine

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that any possible commercial confidentiality would be breached by reporting to Parliament on how far along the negotiations were or whether there had been any significant delay to the timetable. With so much hanging on the establishment of a deal, both Parliament and the public should be given fair warning, not only about when the reorganisation will take place but also when the pension fund liabilities will be taken over and when Ofcom are to get fully involved.

Amendment 21 goes a little further. It would ensure independent scrutiny of any deal to ensure value for money as well as effectiveness. The criteria set out in subsection (2) of the proposed new clause are taken from the Government’s policy paper, in which are set out the criteria against which a potential partner’s suitability is expected to be assessed. Those criteria are all very well, but their inclusion in a policy document does not ensure that they will be met. Recent history has not given us great confidence that the Government are always successful at negotiating the best possible deal. I cannot think of anything more damaging to Royal Mail than a botched agreement that fails to achieve the objectives laid out in the amendment. There have always been worrying news stories about the ethics of one company that has been rumoured to be interested in being involved in Royal Mail.

The assessment of a deal in these terms will go deep into commercially confidential matters, so the amendment would not require anything to be made public until after the deal was concluded and even then would allow the removal of commercially sensitive information. However, it would ensure independent assessment of the deal and some parliamentary scrutiny after the fact.

I hope that the Secretary of State will have no difficulty in accepting the third amendment in the group, Amendment 22. The Government have accepted at paragraph 4.18 of their policy paper parliamentary scrutiny of the amount and distribution of any money received for a minority stake. Despite the promise in that paper, I could find no such requirement anywhere in the Bill.

I hope that the Secretary of State will accept the amendments. They are the bare minimum that we can expect in terms of the transparency of the deal. I beg to move.

Lord Clarke of Hampstead: I start as I did last week by declaring an interest as a former postman, a former union official, and as having a great love for the British Post Office. I wish that I had thought of the amendments. I did think of one or two, which will appear later on, but the positive feature of Amendment 20 is that it assumes that the legislation must be carried before any agreement is secured with a private partner.

This is very important. As well as deciding whether to endorse privatisation, Parliament should be entitled to see what such a deal means. Parliament is surely entitled to a clear view of what a suitable partner may be. Can the Secretary of State explain what discussions are under way with potential partners? My own inquiries and those of union officials—as I used to be—in the Communication Workers Union show that the likely suitors for this bonanza are TNT and CVC. Is the Minister aware of any other companies expressing an

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active interest? Would he care to explain the criteria that the Government believe are relevant in judging the partner as suitable? The Hooper report suggests that it would probably be another postal operator, or at least a firm with experience of network transformation. Do the Government regard those criteria as essential?

3.15 pm

The Secretary of State previously suggested that the Hooper recommendations must be taken in total, which was an unusual response from the Government, given that the Statement was made the same day on which the report was published and they can hardly have had much time to consider the recommendations. That being the case, I draw the Secretary of State’s attention to a series of press reports, all appertaining to TNT, one of the potential partners to come up in government statements. On Sunday 8 March, the Sunday Telegraph carried a story concerning illegal acts undertaken by TNT. Those acts involved the falsification and backdating of documents and were of an extensive character. The company was forced to pay back £48 million to the Inland Revenue; that money involved unpaid tax, penalties and interest. Apparently, TNT also had to carry out a similar inquiry into its tax affairs in other EU countries, including Germany, Belgium and Holland, although the company will not say whether these investigations have resulted in further payments or disciplinary action. That remains a void area. The current chief executive of TNT, Mr Peter Bakker, was in post at the company at the time when those illegal acts were undertaken. Does the Secretary of State regard such actions as examples of the expertise that the Government want to introduce into the Royal Mail?

Amendment 21 has its own value; it says that any deal involving the Royal Mail would not simply be agreed behind closed doors and that there must be some element of parliamentary scrutiny. The amendment suggests that there would be an independent report, which the Secretary of State would lay before Parliament. Of course, there would be problems with such a report in so far as not all the information would be made available due to commercial confidentiality. It is a strange fact that, since 2001, our understanding of what goes on in the Royal Mail is less complete now than at the time of the passing of the Postal Services Act 2000—sad but true. Commercial confidentiality has been used to hide away information that was previously available in every year that Post Office annual reports were published, up until that time. You could look at such an annual report and get the information that you wanted. Today the Royal Mail’s annual reports shed less light on the economics of the company than we obtained 10 years ago.

Be that as it may, I wish to draw attention to proposed subsection (2)(d) in Amendment 21, which refers to,

I am confident that the Secretary of State is already aware of the concern expressed in the Hooper report about industrial relations. The report made it clear that the existing industrial relations in the Royal Mail were poor—and I could go on a long while explaining

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why they are so poor, but I shall not do so today. The report suggests, too, that one of the criteria on which a new partnership would be measured is the ability to transform industrial relations positively. I am sure that the Secretary of State will agree that management needs to be able to carry the workforce with it through major changes; they need to work together. That can be done only if the rationale of the change is made clear to the workforce. If the workforce achieves some benefit from the change, it has to be able to see it. After all, without the co-operation of the workforce, there can be no future for the company, in my view.

I believe that the Minister will agree with my general comments on industrial relations so far, but will he comment on the current problem that TNT—this possible suitor or predator, as one of my noble friends called it in our debates last week—faces with its workforce in Holland? There was a report on this issue in the Guardian on 10 March, from which we learnt that TNT wanted to cut the wages of workers by 5 per cent. Since that time, I can confirm that further information shows that TNT aims to cut the wages of postal workers in the Netherlands by between 5 per cent and 15 per cent depending on status. Does the Minister believe that it is acceptable for a profitable firm to cut the living standard of its workforce in that manner? Does the Minister believe that cutting wages is a necessary part of transforming industrial relations in Royal Mail? After all, we are entitled to ask whether this is the expertise that is lacking in Royal Mail. Is this what the Government are looking for—a company with such a record? Certainly, we cannot say that TNT would bring to Royal Mail better skills at raising profits. After all, a comparison of the final-quarter results in 2008 showed that Royal Mail’s profits are standing up to the recession better than those of TNT.

Nor can we say that TNT would bring an extra element of mail security to Royal Mail. After all, TNT famously lost the data on disks entrusted to it by the Department for Work and Pensions. It must be something unique about TNT's approach to industrial relations that makes it attractive to the Government. Surely not; after all, the Government are committed in their manifesto and the Warwick 2 agreement to securing “rewarding employment” for postal workers. Does the Minister agree that cutting wages by 5 per cent to 15 per cent is not the route for securing rewarding employment in Royal Mail?

Amendment 22 also has value. It allows Parliament to examine the intentions of the Government on the disposal of any money paid to the,

“Treasury, the Secretary of State or any nominee of either of them”.

That is important as we have heard so much loose talk about what the strategic partner is supposed to bring to the assistance of Royal Mail in the way of finance. I very much doubt whether the aim of any strategic partner is to assist the finances of Royal Mail. Certainly, that would not seem to be the case with TNT.

On 9 March, a number of newspapers including the Guardian covered a story about the conflict between TNT and Royal Mail. In that story, the Royal Mail's chief executive, Adam Crozier, accused TNT of trying to poach customers from Royal Mail's profitable European parcel subsidiary, General Logistics Systems. Some

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Members of the Committee who were present last week will recall the exchange that we had about GLS. I know that the Government are aware of the problem. The papers reported that Adam Crozier had sent an e-mail to the Government about it. Will the Minister confirm that the Government have read the correspondence with Royal Mail's chief executive officer? If so, will the Minister explain what the response was?

Perhaps, too, the Minister can now understand why my noble friend Lord Hoyle and I raised questions of the noble Lord, Lord Tunnicliffe, in last week's Committee. After all, it appeared that TNT has been trying to get its hands on GLS outside the process that we have been discussing on privatisation. Indeed, the Royal Mail's chief executive officer claimed that TNT has been trying to damage the Royal Mail's current business. Does the Minister believe that damaging the business of Royal Mail is a sign of a suitable potential partner for Royal Mail? Does the Minister believe that TNT's interest in Royal Mail will result in its further fragmentation? After all, if TNT wants to siphon GLS off now, would it not be likely that TNT would want to strip down other Royal Mail operations? I look forward to the reply from the Secretary of State.

Lord Hoyle: I will not address what my noble friend Lord Clarke has just said because I agree with every point he made; many of them went over points I made last week. I want to look at Amendment 22 because it raises other issues that I hope my noble friend will reply to when he gets up. It talks about the report on the partnership deal and the disposal of revenue. One of the things that has not been quantified is the amount of investment that Royal Mail will need. The Hooper report talks about hundreds of millions of pounds. My noble friend the Secretary of State has talked about the need for hundreds of millions of pounds, but could that be quantified a little more? Does it mean £400 million or £500 million? Whatever does it mean?

The amendment talks about the disposal of any money paid to the Treasury or any nominee. I am suspicious about what might happen to any money that comes from a private partnership. Will all of it go to Royal Mail? Will it go into investment and the modernisation of Royal Mail, or will part of it be swallowed by the Treasury? I am rather suspicious that the Treasury will want to get its hands on some of the money that is coming back. I would like, first, the required level of investment to be quantified and, secondly, an assurance that all of the money raised will go into the investment and modernisation that, we have been told, is needed. Will part of it go to the Treasury coffers? I await my noble friend’s reply on these points.

Lord Christopher: Will my noble friend clear my mind on a specific aspect of the future? The amendments largely deal with the Bill as it is. Assuming that it becomes an Act, what nature of company does my noble friend envisage? Will it be a quoted or limited company? There will be two shareholders: the Crown—the Government—and whoever wins a contract. On the face of it, a strange valuation issue will arise from those shares. Will they be marketed? Could they be sold? What does the Minister see happening?

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