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Laming, L.
Layard, L.
Lea of Crondall, L.
Liddell of Coatdyke, B.
Liddle, L.
Lister of Burtersett, B.
Lofthouse of Pontefract, L.
Low of Dalston, L.
Luce, L.
McAvoy, L.
McConnell of Glenscorrodale, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Mallalieu, B.
Malloch-Brown, L.
Mandelson, L.
Mar, C.
Massey of Darwen, B.
Mawson, L.
Maxton, L.
Meacher, B.
Mitchell, L.
Mogg, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morrow, L.
Moser, L.
Murphy, B.
Myners, L.
Nye, B.
O'Neill of Bengarve, B.
O'Neill of Clackmannan, L.
Ouseley, L.
Pannick, L.
Patel, L. [Teller]
Patel of Blackburn, L.
Pendry, L.
Peston, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prashar, B.
Prescott, L.
Prosser, B.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Ramsbotham, L.
Rea, L.
Rees of Ludlow, L.
Rees-Mogg, L.
Reid of Cardowan, L.
Rendell of Babergh, B.
Richard, L.
Richardson of Calow, B.
Robertson of Port Ellen, L.
Rogan, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sheldon, L.
Sherlock, B.
Simon, V.
Simpson of Dunkeld, L.
Slim, V.
Smith of Basildon, B.
Smith of Finsbury, L.
Smith of Leigh, L.
Snape, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Temple-Morris, L.
Tenby, V.
Tomlinson, L.
Touhig, L.
Triesman, L.
Tunnicliffe, L.
Turnbull, L.
Turner of Camden, B.
Wall of New Barnet, B.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Wilkins, B.
Williams of Elvel, L.
Wills, L.
Wilson of Tillyorn, L.
Wood of Anfield, L.
Woolf, L.
Woolmer of Leeds, L.
Worthington, B.
Young of Hornsey, B.
Young of Norwood Green, L.

16 Feb 2011 : Column 695


Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Alton of Liverpool, L.
Anelay of St Johns, B. [Teller]
Astor of Hever, L.
Attlee, E.
Avebury, L.
Baker of Dorking, L.
Barker, B.
Bates, L.
Berridge, B.
Bew, L.
Bichard, L.
Black of Brentwood, L.
Bonham-Carter of Yarnbury, B.
Boswell of Aynho, L.
Bradshaw, L.
Bridgeman, V.
Brinton, B.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Caithness, E.
Campbell of Alloway, L.
Carlile of Berriew, L.
Cathcart, E.
Cavendish of Furness, L.
Chadlington, L.
Chalker of Wallasey, B.
Chidgey, L.
Colwyn, L.
Condon, L.
Cope of Berkeley, L.
Cormack, L.
Cotter, L.
Courtown, E.
Crawford and Balcarres, E.
Cumberlege, B.
De Mauley, L.
Deech, B.
Denham, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dundee, E.
Dykes, L.
Eaton, B.
Elton, L.
Empey, L.
Erroll, E.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Feldman of Elstree, L.
Fellowes, L.
Fink, L.
Flather, B.
Flight, L.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freud, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
Glasgow, E.
Glentoran, L.
Gold, L.
Goodhart, L.
Goodlad, L.
Grade of Yarmouth, L.
Greengross, B.
Griffiths of Fforestfach, L.
Hamilton of Epsom, L.
Hamwee, B.
Hanham, B.
Harris of Peckham, L.
Harris of Richmond, B.
Henley, L.
Heseltine, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts, L.
Hogg, B.
Home, E.
Hooper, B.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Hussain, L.
Hussein-Ece, B.
Inglewood, L.
James of Holland Park, B.
Jay of Ewelme, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Cheltenham, L.
Jopling, L.
Kimball, L.
King of Bridgwater, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Lamont of Lerwick, L.
Lang of Monkton, L.
Lawson of Blaby, L.
Leach of Fairford, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lexden, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Lloyd of Berwick, L.
Loomba, L.
Lucas, L.
Luke, L.
McColl of Dulwich, L.
Macdonald of River Glaven, L.
Macfarlane of Bearsden, L.
MacGregor of Pulham Market, L.
Mackay of Clashfern, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Maginnis of Drumglass, L.
Manningham-Buller, B.
Mar and Kellie, E.
Marks of Henley-on-Thames, L.
Marland, L.
Marlesford, L.
Mawhinney, L.
Mayhew of Twysden, L.

16 Feb 2011 : Column 696

Miller of Chilthorne Domer, B.
Miller of Hendon, B.
Moore of Lower Marsh, L.
Morris of Bolton, B.
Neill of Bladen, L.
Neuberger, B.
Neville-Jones, B.
Newlove, B.
Newton of Braintree, L.
Nicholson of Winterbourne, B.
Noakes, B.
Northbrook, L.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
O'Cathain, B.
Palmer of Childs Hill, L.
Palumbo, L.
Parminter, B.
Patten, L.
Perry of Southwark, B.
Plumb, L.
Popat, L.
Powell of Bayswater, L.
Rawlings, B.
Razzall, L.
Reay, L.
Redesdale, L.
Rennard, L.
Renton of Mount Harry, L.
Ribeiro, L.
Risby, L.
Ritchie of Brompton, B.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Rotherwick, L.
St John of Fawsley, L.
Sanderson of Bowden, L.
Sassoon, L.
Scott of Foscote, L.
Scott of Needham Market, B.
Seccombe, B.
Selborne, E.
Selkirk of Douglas, L.
Selsdon, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shutt of Greetland, L. [Teller]
Skelmersdale, L.
Smith of Clifton, L.
Soulsby of Swaffham Prior, L.
Spicer, L.
Stedman-Scott, B.
Stephen, L.
Sterling of Plaistow, L.
Stevens of Ludgate, L.
Stoneham of Droxford, L.
Stowell of Beeston, B.
Strasburger, L.
Strathclyde, L.
Swinfen, L.
Taylor of Holbeach, L.
Tebbit, L.
Teverson, L.
Thomas of Winchester, B.
Tombs, L.
Tonge, B.
Tordoff, L.
Trenchard, V.
Trimble, L.
True, L.
Trumpington, B.
Tugendhat, L.
Tyler, L.
Verma, B.
Waldegrave of North Hill, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Warsi, B.
Wasserman, L.
Watson of Richmond, L.
Wei, L.
Wheatcroft, B.
Wilcox, B.
Willis of Knaresborough, L.
Wolfson of Aspley Guise, L.
Wolfson of Sunningdale, L.
Wright of Richmond, L.
Young of Graffham, L.
Younger of Leckie, V.

Motion B agreed.

2.22 pm

Motion C

Moved by Lord Wallace of Tankerness

Lord Wallace of Tankerness: My Lords, during the passage of the Bill through your Lordships' House there was a very important Committee debate on the Isle of Wight. As I indicated on behalf of the Government at that time, the fundamental principle underpinning the Bill is that one elector should mean one vote. At that stage the Bill was subject to only two exceptions. It was our view that a cross-Solent constituency, comprising part of the Isle of Wight and part of the

16 Feb 2011 : Column 697

mainland, was practicable as the island does not have the challenging geography of the other preserved constituencies. However, the arguments made in that debate, not least by my noble friend Lord Fowler, carried the day in this House. It did so by some margin and with considerable cross-party and Cross-Bench support. This undoubtedly gave us reason to reflect, and we have come to the view that the case against a cross-Solent constituency is persuasive.

That was the objective of the amendment proposed by my noble friends Lord Fowler and Lord Oakeshott. However, their amendment left open the question of whether there should be one seat or two on the island. That was left up to the Boundary Commission for England. There are practical reasons why we have reservations about that. The noble Lords' amendment did not provide the Boundary Commission for England with any instruction on how it should determine the number of seats to be allocated to the Isle of Wight. Nor was any consequential amendment tabled to deal with the matter. The Government consider that if an exception is to be made for the Isle of Wight, it would be consistent and fair for it to be made on the same basis as for the other preserved constituencies in the Bill.

The amendments passed by the other place following a Division provide certainty for the commission by requiring that the island has two seats, and by taking those constituencies outside the formulae for the allocation of seats to parts of the United Kingdom and the calculation of the electoral quota elsewhere in the Bill. Two seats of around 55,000 electors each would be much closer to the electoral quota than one seat of around 110,000. That is consistent with the underlying principle of equality. Furthermore, I understand that the population of the Isle of Wight looks set to increase. Two seats would be likely to move closer to the quota, whereas one seat would move further away from it. It is practical and, as the honourable Member for the Isle of Wight in the other place confirmed in his speech yesterday, it respects the wishes of those who mounted a vocal and, as we have seen, effective campaign to prevent a cross-Solent constituency. I beg to move.

Lord Fowler: My Lords, I will be brief. I thank the Government for listening to what the House of Lords said on my amendment and for the decision that they have taken. My amendment was special in that we were dealing with an island that has only ferries connecting it to the mainland. I said in moving the amendment that it would allow there to be one or two constituencies on the Isle of Wight. The Government have decided to be specific and make two, and that is the right decision.

The only other options would have been to have one massive constituency on the Isle of Wight or, alternatively, a cross-Solent constituency. That cross-Solent constituency would have meant there being one constituency on the Isle of Wight itself, with the remaining 35,000 electors put together with part of, say, Portsmouth on the mainland. It would be divided by 10 miles of the Solent, with expensive ferries being the only means of communication. The constituency would be partly on the mainland and partly on the

16 Feb 2011 : Column 698

island. It is all very well to talk about community but the natural centre of that constituency would have been in the middle of the sea. There is no doubt that such a solution was rejected decisively by the people of the Isle of Wight. Eighteen thousand people signed a petition against it. The councils were against it, as were all the parties-the Liberal Democrats, Labour and the Conservatives.

In our previous debate the Minister suggested, without overstating his case, that there were some who had written in support of a cross-Solent solution. Very courteously, as always, he offered to investigate how many had done so. Unfortunately his reply was not entirely convincing. In his letter of 7 February, he said:

"You asked how many representations received about the Isle of Wight were in favour of the Bill's original proposals and how many were against. The Cabinet Office does not record correspondence in a way that would enable us to readily identify whether the authors were for or against particular issues".

Perhaps that is just as well in the Minister's case, although it raises a few questions about the value of writing to the Cabinet Office on any issue. To be fair, the Minister went on to say that he,

The Minister was absolutely right. I congratulate him and the Government on reaching the decision that they have.

It has been a very long process but the Government have listened at the highest level and the Commons has decided. I thank all those concerned with this campaign, particularly the excellent Member of Parliament for the Isle of Wight, Andrew Turner, who has worked long and hard to achieve this outcome. No one could have done more. I also thank my supporters in the vote on 19 January from around the House-from all parties and the Cross Benches-including those who found pressing engagements when the vote was called and abstained. I thank the opposition Front Bench; it is the first time in my political career that Labour Whips have provided Tellers for any Motion or piece of legislation that I have introduced over the past 40 years.

I make just one further comment. Given the progress of the Isle of Wight debate, no one can be happy with the heavy timetabling in the other place. I know that it is inherited from the previous Government but it prevented the island's MP putting the issue to the vote before it came to the Lords, and virtually prevented him making a speech. I hope that the Government will now look anew at that procedure. Having said that, this amendment, which the Lords have carried and the Government have accepted, seems to me to carry out the traditional function of asking the Commons and the Government to think again. They have done so and I congratulate them on their good sense and on the outcome.

2.30 pm

Lord Falconer of Thoroton: My Lords, I congratulate the Isle of Wight on this great achievement and the noble Lord, Lord Fowler, on the work that he has done to secure it. I wish the people of the Isle of Wight

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well in relation to the conclusion that has been reached. It is a decent outcome. It could have applied to other places but now is not the time to dwell on that. I wish the Isle of Wight good luck. I assume that the conduct of the Government in relation to the Isle of Wight prefaces a good result later in the day on the amendment that we passed earlier.

Motion C agreed.

Postal Services Bill

Postal Services Bill
Copy of the Bill
Explanatory Notes

Second Reading

2.31 pm

Moved By Baroness Wilcox

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, many of us in this House will no doubt be experiencing a mild sense of déjà vu. After all, it was less than two years ago that this House debated a Bill of the same name. That Bill, in the name of the noble Lord, Lord Mandelson, was thoroughly scrutinised and improved by this House. However, the previous Government were unable to take it further, thus we find ourselves debating the same issues once again.

The purpose of this Bill is to secure the ongoing provision of the universal postal service and to safeguard the future of the Royal Mail and the Post Office. Before I turn to the detail of the Bill itself, I wish to explain why we must now take action. The universal postal service is a vital part of our economic and social infrastructure. Individuals and businesses across the country rely upon it, as they have done for nearly 200 years. The United Kingdom has been a pioneer in postal services and it is our duty in this House to do justice to this proud heritage and to safeguard the universal postal service for the future.

The noble Lord, Lord Mandelson, stood before this House two years ago and declared that we were living in a digital age. He is right. Our means and methods of communication are changing, with traditional options, such as the letter, increasingly bypassed in favour of electronic alternatives such as e-mail. The previous Government recognised this and, in 2007, commissioned an independent review of the postal services sector, chaired by Richard Hooper. Hooper was unequivocal about the need for action to safeguard the universal postal service. With the letters market in structural decline, he identified an urgent need for the Royal Mail to modernise and increase its efficiency. To do this, he argued, Royal Mail needed access to flexible capital. Noble Lords then in Opposition, and now occupying these Benches, accepted the recommendations of Hooper's excellent report in full and we were prepared to support the Bill that was subsequently introduced by the previous Government. Indeed, we were sorry that, having left this place, the Bill did not complete its passage through Parliament.

16 Feb 2011 : Column 700

It should come as no surprise that one of the first actions undertaken by my colleague, the Secretary of State for Business, on assuming office, was to ask Richard Hooper to update his report. That update, published last September, confirmed that if we are to secure the universal postal service we need to do three things. Royal Mail needs access to private sector capital and commercial disciplines; it needs to be relieved of its historic pension deficit; and the regulatory framework under which it functions needs fundamental reform. But Hooper's most worrying finding was that Royal Mail's already precarious financial position has actually deteriorated in the 18 months since his original report. The fall in letter volumes has, in fact, been more dramatic than was predicted: we now send 16 million fewer items per day than we did in 2005-a fall of nearly 20 per cent-and experts are predicting further global decreases of 25 to 40 per cent over the next five years. This problem is not unique to Royal Mail but the latter's financial state means that it is not able to respond sufficiently.

To meet the challenges of the declining market, Royal Mail must modernise. Despite some progress, Hooper concluded that Royal Mail is still some considerable way from being best in class. This view is reinforced by Royal Mail's Chairman, Donald Brydon, who told Committee Members in the other place:

"Compared with any other postal operator of quality or substance in the world, the Royal Mail is at the end of the queue in its modernisation".-[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 15.]

I am sure we will hear from noble Lords who will argue that Royal Mail must remain under the protection of public ownership. However, I put it to your Lordships that it is the Government's ownership of Royal Mail that has failed Royal Mail. This company needs to be freed from the constraints of government ownership if we are to give it a chance to succeed.

I turn now to the Post Office and address some of the concerns raised both in this House and the other place, in particular, the concern that this Bill could lead to loss of business for the Post Office, and ultimately to Post Office closures. The Bill will enable the separation of Post Office Ltd and Royal Mail to allow for the private investment that Royal Mail so badly needs while maintaining the Post Office in public ownership. Opponents of the Bill have sought to portray this as a threat to the future of the Post Office. On the contrary, it is an opportunity for the Post Office. Separation will give its management the freedom to focus on getting the most out of the branch network and growing revenue across the whole business. Two thirds of Post Office Ltd's revenue is unrelated to postal services, coming from areas such as financial services, government services and telecoms. It is in these areas that the growth opportunities for the Post Office lie. Government are far from alone in seeing the benefits of separation. The move has been welcomed by the experts at Postcomm and Consumer Focus, and by Richard Hooper himself.

Opponents of the Bill have argued that a privatised Royal Mail might not use the Post Office, leading to loss of business. Scaremongering over this issue was perhaps inevitable but I refer noble Lords to commitments made by Donald Brydon, chairman of Royal Mail, and a man who knows what he is talking about when it

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comes to Royal Mail's commercial decision-making. In his evidence to the Public Bill Committee in the other place, Mr Brydon was clear that before any privatisation occurs, a new commercial contract will be put in place between the two companies for the longest time that is legally permissible. This is not a vague statement of hope. We have the chairman of Royal Mail putting on record his commitment that the commercial relationship between the two companies will continue, regardless of who owns Royal Mail, and your Lordships may rest assured that the Government, as shareholder, will ensure that this commitment is fulfilled. So we can be sure that the strong relationship between the two companies will continue, but with the Post Office in an even stronger position with its own fully constituted board and sole focus on what is best for the network.

However, the Government recognise that as well as the freedom to focus on its future, the Post Office also needs the means and support to do so. That is why we have committed to providing £1.34 billion in funding to the Post Office over the next four years. This will enable Post Office Ltd to undertake a substantial modernisation programme for the network and to maintain the network at its current size. This funding will help to put Post Office Ltd back on to a secure and sustainable financial footing. Once it has a stable financial base, the Bill offers the opportunity for Post Office Ltd to be transformed into a mutual. We believe that a mutual could be the ideal way to meet the distinct social and economic roles that the Post Office plays, giving sub-postmasters, employees, customers and communities a greater say in how it is run.

I should like to make one thing abundantly clear: there will be no programme of closures under this Government. Throughout this debate, we must never lose sight of the real reason for safeguarding the Post Office network. It is not about politics; it is about the millions of British people who rely on the Post Office-in particular, the vulnerable and those in rural and deprived communities. It is about the hard-working sub-postmasters and mistresses-the real-life Dorcas Lanes-who selflessly serve people up and down the country and whose value cannot be measured by profit-and-loss accounts alone. A mutualised Post Office will give these people a real voice, and I hope that noble Lords on all sides of the House will support these provisions.

I turn to the detail of the Bill. Part 1 removes restrictions on the ownership of Royal Mail. This is to enable the much-needed injection of private sector capital and disciplines. As I have already made clear, Royal Mail urgently needs to modernise. Some progress has been made already, which we welcome. But Royal Mail will need to continue the process of modernisation and transformation if it is to succeed in a declining market. This requires both capital and commercial disciplines that the Government simply cannot provide. The taxpayer has already made available billions of pounds for the current modernisation programme, and yet this covers only the costs envisaged three years ago. As Royal Mail's Chief Executive, Moya Greene, told the Bill Committee in the other place,

"When you are in a business such as this, which is in a market undergoing dramatic change, you need to have access to capital

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continuously to keep up".-[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 4.]

I think we can all agree that government is neither the most flexible source of funding nor the most timely. There are competing priorities to consider, and any funding we provide to Royal Mail must go through the European Union's sometimes lengthy state-aid approval process. Besides, government funds are too often accompanied by the spectre of political interference. What Royal Mail needs is flexible investment and commercial disciplines. The private sector is best placed to provide these.

However, a successful company needs more still. It requires a motivated workforce. Royal Mail has some of the best employees in the world, as amply demonstrated in the recent bad weather, and they deserve a proper stake in the future success of the company. That is why the Government have included provision for an employee share scheme which will hold at least 10 per cent of the equity in Royal Mail in the future. This is the strongest legislative commitment and largest stake of any major privatisation, and I hope that your Lordships will support it.

In terms of pension provision, the Bill will allow for government to take on Royal Mail's crippling and highly volatile deficit-a deficit that ballooned from £2.5 billion in 2007 to more than £8 billion in 2010. We should not underestimate what this means to members of the Royal Mail pension plan. Members are rightly concerned about the security and safety of their pensions. Under the Government's proposals, we will stand behind their accrued rights, giving members the security and certainty they deserve. Royal Mail itself will be left in a much more secure position with a smaller, more manageable scheme going forward. This is a good outcome for employees, both in respect of pensions and in boosting the financial health of the company they work for.

The Bill will also enable fundamental reform of the regulatory regime. It will transfer regulatory responsibility from Postcomm to Ofcom. This measure is entirely appropriate, given the convergence of communication markets, and has broad support from stakeholders. Crucially, the Bill will ensure that the primary duty of the regulator in relation to postal services will be to secure the continued provision of the universal postal service. The previous Government recognised the need for this, and similar provision was made in the 2009 Bill. This Government, however, have gone further and have added the requirement that in performing this duty the regulator must consider the financial sustainability of the universal postal service. This will ensure that both the service and its financial health are at the heart of everything Ofcom does in relation to postal matters.

As for the meaning of the universal postal service, the Bill sets in statute the six-day delivery and collection of letters at affordable and uniform prices. Again, I should like to address some scaremongering on this issue. The Government have no intention of downgrading the minimum requirements of the universal postal service. On the contrary, this Bill introduces new safeguards: first, that any changes can be made only after Ofcom has conducted a review of user needs; secondly, that any changes are approved by a vote in

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both Houses; and, thirdly, that prices must remain uniform and there cannot be different minimum requirements in different parts of the country.

There was some debate surrounding the 2009 Bill as to whether it went far enough to ensure fair competition between operators. We have looked again at the relevant provisions and concluded that tougher tests should be met before Ofcom can mandate access to Royal Mail's network. Thus the Bill before us today specifies that mandatory access can be granted only where it meets all of the conditions of promoting efficiency, promoting effective competition and conferring significant benefits upon users of postal services. This is a departure from the 2009 Bill, which allowed for mandatory access where just one of these conditions was met, and is a change that we feel is vital in ensuring the right balance between fostering competition and protecting the universal service. Our position is clear: competition is beneficial, but it should not undermine the universal service.

This Bill also reflects a deregulatory intent. We are clear that regulation should be imposed only where there is a need for it. We are confident that this Bill, combined with Ofcom's existing duties under the Communications Act 2003, gives the regulator the tools it needs to ensure that regulation is focused and proportionate, and that it can deregulate rapidly where there is effective competition in the market. I look forward to debating the detail with the many knowledgeable and experienced Members of this House who are, or have been, involved in economic regulation.

Finally, Part 4 introduces a special administration regime. This will enable special arrangements to be put in place should the universal service provider be at risk of entering insolvency proceedings. Their objective will be to maintain the universal postal service. While we do not expect to use these provisions, they are a sensible and prudent additional safeguard for the universal postal service. The measures mirror those that have been taken in the energy and water sectors.

The Bill is largely based on the same evidence and independent analysis as the previous Government's Bill. However, we have looked at the issues with fresh eyes. The result is a Bill that builds on the consensus surrounding its predecessor, but which also improves upon it. Thus we have a Bill that is better for consumers, who will benefit from a secure universal postal service, and a strong, stable post office network-one that is better for Royal Mail, giving the company the best chance of a successful future while relieving it of a crippling pension deficit. It is a Bill that is better for Royal Mail employees, giving them security over their accrued pension rights while offering them a real stake in the future success of the company through the largest employee share scheme of any major privatisation.

Some provisions before us today will be difficult for some noble Lords to accept. I do not ask them to change their political ideology, but I do ask them to reflect on the fact that the call for action is coming not from this Government alone. It came from the previous Government when they presented their 2009 Bill to the House, and it is coming from individuals who are intimately acquainted with the problems facing Royal Mail and who have no political allegiance, such as

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Richard Hooper, the independent adviser to both the previous and current Governments, and Royal Mail's senior management.

We will spend many hours debating the detail of the Bill and I have no doubt that it will leave the House all the better for your Lordships' attention. It represents not just the latest but the best chance of securing the future of the universal postal service. I beg to move.

2.51 pm

Lord Tunnicliffe: My Lords, I thank the noble Baroness, Lady Wilcox, for introducing the Bill and explaining the Government's position. I will grasp the first note of optimism from her acknowledgement that the Bill will leave the House improved-which can only mean that she will lend a ready ear to appropriate changes. I, too, look forward to today's debate, and in particular to the maiden speeches of the noble Lords, Lord Empey and Lord Dobbs.

My researchers tell me that the Royal Mail was first made available to the public on 31 July 1635 by King Charles I. That certainly indicates a long heritage, but whether it was an entirely happy start only historians will tell us. Since then, it has delivered the post to homes and businesses across the United Kingdom, and has been run as an essential public service in the public interest. Today's Bill would change all that. It would lead to the total sale of the Royal Mail postal service and its separation from the nation's post office network.

We all recognise that the competitive environment for postal operators has changed dramatically. The impact of technological changes such as e-mail, mobile phones and all the other modern ways of communicating continues to be felt. The worldwide postal market is expected to decline by 25 to 40 per cent over the next five years. Of course, action needs to be taken.

There are a number of elements in this Bill that we broadly support, including the principle of employee share ownership, dealing with the historic pension fund deficit and the transfer of regulation to Ofcom. We also agree that the possible mutualisation of the post office network deserves positive examination. However, the central question that the House must ask today and in the coming weeks is whether the Government have made their case convincingly that the way forward proposed by the Bill is the best one available. Secondly, if Royal Mail is privatised, have they made sufficient safeguards for the public interest, in particular in relation to the universal postal service and the future of the post office network?

We believe that abandoning the commitment to keep Royal Mail as a publicly-owned organisation is wrong. Among other things, it would pose a threat to the universal service obligation and to the future viability of the network of post offices throughout the country.

It used to be said that Royal Mail could not change without an injection of private investment and management. However, an important agreement was reached in March 2010 between the Communication Workers Union and Royal Mail, supporting the £2 billion modernisation plan. Both the CWU and management should take credit for the start that has been made. Sir Richard Hooper acknowledged that corporate

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experience has been injected, not least through the appointment of a new CEO, previously the head of Canada Post, who seems to have attracted universal praise.

The Government propose rightly to relieve the company of the historic pension fund deficit, worth £280 million per year in annual payments. There is also general agreement that the access prices set for bulk mail sorters have placed Royal Mail at a disadvantage. The company estimates that the value of this is about £160 million per annum. Investment funds are in place to complete the modernisation programme. In these circumstances, the Government should explain the anticipated capital requirement and why a 100 per cent sale is necessary to achieve it.

Alternative measures to raise capital have been proposed by my party in the past, while other mechanisms have been proposed from elsewhere. There has been no explanation of how best value will be secured for the taxpayer. Will the Government publish an independent valuation? What do they intend to do with the sale proceeds? They have not made clear the timing of the changes. In what way do they intend to discharge their obligation for transparency and accountability to Parliament over the nature of the sale and therefore the type of Royal Mail organisation that will emerge?

The Government have made it clear that they are not interested in who the purchaser is, and have no objection to a sale to a foreign owner. Is there anyone to whom they would not sell? Will privatisation be by a general sale of shares, or by sale to another postal company or to a private equity group?

I turn to the universal service obligation. As the noble Baroness said, Clause 30 sets out the terms of the universal postal obligation. It includes letter and packet delivery, letter and packet collection, affordable and uniform tariffs, registered items, insured items, services to the blind and partially sighted, and legislative petitions and addresses-so far, so good. The Bill proceeds to provide for changes to the level of the USO. Ministers have said they intend to maintain the USO. I do not question their good intention, but why does the Bill not only permit but require Ofcom to review the level of the obligation after only 18 months? The Bill also provides, in certain circumstances, for more than one universal service provider. Ministers may protest they do not intend this, but why does their Bill provide for it? The regulatory framework encompassing the universal service obligation is a very important issue. We will need to consider carefully in Committee whether the regulatory framework designed for a publicly owned company remains as well designed for a privatised Royal Mail.

The Bill breaks the umbilical link between Royal Mail and the network of local post offices, prized by residents of communities up and down the country. It does so in a way that threatens the future of thousands of local post offices. I have no need to emphasise to Members of this House the social value of the nation's post offices. Local post offices are at the centre of many communities. Many thousands of pensioners still collect their pension from their local post office. A nearby post office is vital for many people with mobility

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problems or some form of disability. In many rural areas and poorer urban districts, the local post office is vital.

The postal service is also vital to British business, because 84 per cent of small businesses use Royal Mail to dispatch parcels or express items. The local post office is the usual point of access for them. Again, Ministers protest that they wish to maintain the current network of post offices. They have continued the previous Government's social network subsidy to maintain a network of 11,500 post offices in four years' time. For that, we commend them and thank them. However, there is no guarantee that after that point a privatised Royal Mail will have to use the current post office network to its full extent. As Consumer Focus says,

We would like to hear from the Government what guarantees can be given about the future of local post offices, not just in the next four years but in the medium and longer term. What are they doing to build up the government business that is done through the Post Office? Why was the case for a post bank rejected? The National Federation of Sub-Postmasters has supported the principle of the Bill but it has stated that,

Part 4 of the Bill sets out the provisions for taxpayers to step in through administration if a privatised Royal Mail becomes insolvent. That should put paid to the idea that, once Royal Mail is privatised, the taxpayer will no longer need to worry about or bear any expense for failure. It seems that we are to privatise profit but perhaps nationalise risk.

This is a very serious Bill. It must be considered seriously and in detail in the weeks ahead. Whatever the good intentions of Ministers and the leadership of Royal Mail-and I do not doubt their good intentions-there is no guarantee that the same people will be in place when the crucial decisions are made. We cannot simply rely on good intentions. If the Bill is flawed, as we believe it is, sufficient protection will not exist.

So far, the Government have declined the invitation to secure a 10-year inter-business agreement, which would underpin the link between Royal Mail and the post office network. They have rejected calls to strengthen the commitment to the post office network or the universal service obligation. The Government have still not made the fundamental case for the full-scale privatisation that they have proposed; nor have they addressed the concerns that exist. Like the Minister, I look forward to the Committee stage, when we will probe and scrutinise the Bill most carefully.

3.02 pm

Lord Razzall: My Lords, the importance of the issues dealt with by the Bill could not be demonstrated better than by the number of your Lordships who have put their names down to speak in this very important debate. We also very much look forward to the maiden

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speech of my favourite political novelist, the noble Lord, Lord Dobbs, and that of the noble Lord, Lord Empey, to whom I had better not yet put an epithet.

We have of course been here before, as the noble Baroness said, and I am delighted to see the noble Lord, Lord Mandelson, in his place. Whether he is going to show the scars on his back that he obtained when he was here before, I know not. However, we have been here before and we gave very detailed scrutiny to the Bill that he brought forward when it came to this House but was then, as the Minister indicated, withdrawn before it reached the other place.

As the Minister indicated, the reasons behind the legislation have not really changed since the noble Lord, Lord Mandelson, felt it necessary to bring that Bill forward on the recommendation of Sir Richard Hooper. The competition for Royal Mail from e-mail and the internet continues, resulting in shrinking volumes in its business. I do not know whether noble Lords who received lobbying from organisations that wish to maintain Royal Mail more or less in its current format noticed how much of that lobbying came by e-mail rather than through Royal Mail. That could be no better indicator of the problems that Royal Mail has in competing with the internet. Losses are continuing and, unless they are stopped, they will ultimately be the responsibility of the taxpayer. Then there is the massive issue of the pension deficit, which overhangs Royal Mail's balance sheet.

The noble Lord, Lord Tunnicliffe, was brave enough to accede that this Bill contains a lot of similarities to the Bill that we considered last year or the year before. First, the pension deficit is dealt with and taken on by the taxpayer, as was the case in the Bill of the noble Lord, Lord Mandelson. Secondly, there is improved regulation, and I am glad that the noble Lord endorses the transfer of regulation to Ofcom. As is clear from both Bills-this one and that of the Labour Party-we all believe that that will give better protection to the universal service obligation, which is absolutely at the heart of Royal Mail's business. Thirdly, as in the Bill of the noble Lord, Lord Mandelson, although it goes somewhat further than that Bill, this Bill provides for Royal Mail to have access to private capital.

There are of course a number of additions to the Bill which I suspect the Labour Party will agree with, although they were not in the Bill of the noble Lord, Lord Mandelson. There are new safeguards in this Bill to protect the universal service obligation, as was mentioned by the noble Baroness. First, before any recommendation to alter the universal service obligation can be made, Ofcom is required to take into account the interests of the users. Secondly, there is an absolute ban on any alteration to the uniformity of the service, as the noble Baroness explained, so that different prices cannot be charged in different places and a different service cannot be provided in different places. Most importantly, particularly in the context of the last Bill that we debated-I am sure that this will commend itself to your Lordships-no change to the universal service obligation can be made without an affirmative vote of both Houses of Parliament. Therefore, there is parliamentary control of any change.

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Perhaps I may apologise briefly to my coalition colleagues for the point that I am about to make. I cannot let the moment pass without recording the fact that there are a number of issues in this Bill which are dear to the heart of Liberal Democrats. Of course, a Liberal Democrat Cabinet Minister is responsible for this Bill and a Liberal Democrat Minister took the Bill through another place. The latter is Edward Davey, who has extensive experience of post offices and mail services throughout the world. Of course, there are issues in this Bill that we endeavoured, but failed, to persuade the previous Government to include in theirs. The first is a much bigger commitment to employee shares. As the noble Baroness indicated, if the Bill goes through in its current form, the employee share ownership in Royal Mail will be the largest of any UK organisation. Secondly, the Bill provides for mutualisation of post offices. Liberal Democrats have always been keen on the mutualisation concept. We believe that, when Post Office Ltd becomes a mutual, that will be massively in the interest of all the sub-post offices, which, as the noble Lord, Lord Tunnicliffe, indicated, are at the heart of many British towns and villages.

We have all been assailed by endless lobbying on the Bill, which demonstrates the importance of the issue to the public. There seem to be two overall objections to the Bill, which no doubt other Members of your Lordships' House will voice. The first is that Royal Mail does not need to be reformed. The noble Lord, Lord Tunnicliffe, has said that there has been a significant improvement in labour relations and that the technological developments that are necessary to compete in the modern world can be introduced without any resort to private capital. I do not accept that and I do not think that the coalition accepts that. If we want a comparison we can look at the fact that during the previous Labour Administration, 65,000 jobs were lost in the Royal Mail, at huge personal cost to those individuals. However, if we compare that with what happened since Deutsche Post floated in 2001, Deutsche Post has made an investment of £11.6 billion over the past 10 years in forming and modernising its network. Those two statistics demonstrate very graphically why the Royal Mail needs access to private capital.

The second objection, which the noble Lord, Lord Tunnicliffe, put extremely effectively, concerns why the relationship between the Royal Mail and the Post Office Limited cannot be enshrined better in this Bill. The Government have used two arguments for this, which I expected. First, any attempt to put that on the face of the Bill could be open to legal challenge as regards the privatisation mechanisms and the competition mechanisms. Secondly, and more importantly, it is attempting to say in 2011 what relationship will be necessary between the Post Office and Royal Mail in future years. How can we predict? That must be a matter for commercial negotiation between the Royal Mail and Post Office Limited. It seems almost inconceivable that anyone running the Royal Mail would not want to take advantage of the network of sub-post offices out there to help to distribute the mail. What other network would they use? That seems to me to be entirely a matter for commercial negotiation as the two organisations move into the next five, seven or 10 years.

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The critical issue for Post Office Limited, as the noble Lord, Lord Tunnicliffe, indicated, is how it develops new business. From the Liberal Democrat point of view, I do not think that we will take any lessons from the Labour Party or our colleagues in the coalition Government about closures of sub-post offices. Many of us have campaigned for years to try to keep sub-post offices open while both the Tory Government, under Margaret Thatcher and John Major, and then the Labour Government, under Tony Blair and Gordon Brown, presided over huge closures of post offices. In the commitments that have been made by the new coalition, first on the investment fund, which the noble Baroness referred to, and, secondly, on commitments to explore new ways of developing business for the Post Office, coupled with, as I indicated, the advantages once the post office network can become a mutual, I think that the future of the Post Office is much more secure than it has been for many years.

3.13 pm

Lord Empey: My Lords, I trust that I might be permitted a little latitude as I make some opening remarks to your Lordships' House. As someone who has been a lifelong believer in the union, I find it a great honour to come here, to this Chamber and to this building, and to see it adorned with all the symbols of the four home countries and the history that we have shared together over many centuries. It is also an honour to come here on behalf of those whom I have represented. I have had the opportunity to serve in politics since I was a student and I have spent the past 25 years as an elected representative serving at local, European and ministerial level in Northern Ireland. Coming here is a great honour and I look forward to making a meaningful contribution to the business of your Lordships' House. I thank those officers of the House who have helped me both before and since I was introduced last month. Their guidance throughout that period has been most helpful.

Obviously, coming from my background, I have been involved in the peace process. I see at least one distinguished former Secretary of State for Northern Ireland in his place. We have worked together with others in this House over many years to try to improve the livelihoods and the quality of life of our fellow countrymen as they have faced huge challenges.

When it was made public that I was coming here, I had a number of comments from friends and colleagues and, especially when I arrived here, from a number of your Lordships. I was given some guidance on what to expect. I was told that we have here a concentration of expertise from all walks of life among people who are somewhat freed from the shackles of the day-to-day political cut and thrust that one sees in the other place. I must confess that my experience over the past few weeks has not quite measured up to that, as the circumstances in the House have been a little unusual. With tongue in cheek, I said last week when I was going home for the weekend that I was glad to go back to Belfast to some civilised politics. I am sure that this House will return to that which I was advised was the standard that I should expect.

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I turn to the comments of the Minister. Having had a responsibility for Northern Ireland's economy for a number of years as a Minister, I can say that Royal Mail and the Post Office are issues that perhaps go beyond the narrow confines. The general public do not distinguish between the Royal Mail and the Post Office; they see it all as the same thing. You put your letters in a red box and you used to make telephone calls in a red box. People do not understand the mechanics.

I think that we should look at the issue in this way. This is a serious piece of national infrastructure-it is just as important as broadband and it is just as important as roads and the electricity grid-because the service that it provides is vital in bringing our nation together. I cite Hooper, who said in the revised report in September last year that it,

That is how I see it. If we wanted any evidence that that is the case, during the recent bad weather in December, before Christmas, how many businesses came on to the radio and television to say, "We can't get our money in. We can't do our business. We can't get our products out"?

Although everybody understands the economics that Royal Mail and the Post Office face, we should not underestimate the significance of the service that is provided. We throw large amounts of public money at rural development policies. Indeed, European money comes in which we spend on rural development. We are trying to build up not only tourism but small manufacturing-cottage industries and so on. Many of them rely on Royal Mail services to distribute their products. Many of those businesses trade on the internet. Although they are in a rural part of the United Kingdom that does not have good transport access, they are able to get on a level playing field through the internet. Then they can distribute their products through the services provided by Royal Mail.

I have to say to the noble Baroness that there appears to be a little contradiction in some of the things that have been said. For instance, as the noble Lord, Lord Tunnicliffe, said, the 18-month review seems a little sudden. As I said, I have run a department and I know what a review means, or can mean. We have to be clear that we do not create an undercurrent of uncertainty within the business. We need to be careful about that. Secondly, coming from Northern Ireland, I know that population distribution is significant. We have a large geographical area where the population is spread thinly. That adds extra costs, but it is necessary to create a level playing field so that people in those more remote areas can compete. After all, we are trying to encourage business and to get people to compete and we are telling them that distance should not be a huge barrier to them in building up their businesses.

The population settlement patterns are different in different parts of the country. In some areas, they are concentrated in small villages and towns; in other areas, such as Northern Ireland, they are spread out. When the Government come to look at these issues, it is important that the universal service obligation means what it says. Equally, it is important that we understand that Royal Mail cannot be left with one arm tied

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behind its back, unable to compete, while allowing other operators to cherry pick the good bits, leaving Royal Mail as the deliverer of last resort. None of us would want that, because it will lead, ultimately, to a spiral downwards in revenues and profits. Therefore, the task in the Bill is to ensure that the USO survives in a meaningful way that frees Royal Mail from the shackles of debt and allows it to compete with its rivals, which are steadily eroding its current market base.

If we are serious about providing the meaningful infrastructure essential for the well-being of our economy in the years ahead, we would do well in the coming weeks, as the Bill goes through its stages, to ensure that the USO will survive, that there is certainty, that both customers and workforce fully understand where they are going and that the business is set an achievable target that will benefit all of the United Kingdom in the years ahead.

3.22 pm

Lord Low of Dalston: My Lords, I count it a privilege to rise to offer the congratulations of the House to the noble Lord, Lord Empey, on what I am sure all your Lordships will agree was a most impressive maiden speech.

The noble Lord, Lord Empey, comes to us as a most substantial figure in Northern Ireland politics. He has been a Belfast city councillor for 25 years, as he told us, and mayor on two occasions. He is a Member of the Northern Ireland Assembly. He spent nine years on the police authority of Northern Ireland, which means that he must be blessed with a broad pair of shoulders and a tin hat-perhaps these will equip him well for the political rough and tumble in your Lordships' House. He played a prominent part in the Northern Ireland peace talks in the 1990s and was leader of his party from 2005 to 2010. What is most notable is that he is a man of moderation and a man of peace. He not only has a broad pair of shoulders but clearly has a wise head on them. I am sure your Lordships will wish to hear from him on many occasions to come.

Turning to the Bill, my noble friend Lord Empey talked about the need for certainty underpinning the provision of postal services and the need to secure and firmly anchor the universal service obligation. These issues will figure prominently in my remarks. The Bill clearly has a number of features one can welcome. It provides a basis on which it should be possible for Royal Mail at least to attain a degree of stability. The Government will relieve Royal Mail of the crippling burden of its pension deficit, which was put at £10.3 billion at the most recent actuarial valuation, and the lifting of the restriction on the sale of shares in the Royal Mail Group will provide the means of bringing badly needed capital into the business. It is perhaps a moot point whether this need could not have been addressed while retaining Royal Mail in public ownership, whether through borrowing from the Government or the market. Privatisation is certainly not popular with the public according to a YouGov poll last October, but at least the Bill, if it passes, as opposed to being stillborn like the previous Postal Services Bill, will point a way forward for the business.

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My main concern is with regulation and the universal postal service. Royal Mail welcomes competition, but it maintains that the regulatory regime needs to achieve a more level playing field. That seems to be right. The access headroom rule already means that Royal Mail is competing with one hand tied behind its back. The regulatory regime means that Royal Mail's competitors are guaranteed access to Royal Mail's network at any point and enjoy a guaranteed margin. In other words, Royal Mail is regulated in such a way as to be forced to subsidise its competitors by 2.5p per item, which comes to a total of £160 million. Indeed, 80 per cent of the business is regulated. In introducing the Bill, the Minister pointed to the declining financial position of Royal Mail, but a good case could be made for saying that the draconian regulatory regime has a good deal to answer for in this regard. In order to be able to compete effectively, the proportion of the business that is regulated needs to be reduced so that Royal Mail can negotiate commercially, certainly with its larger customers. The postal service in no other country is regulated in this way. The Communication Workers Union agrees about this so, at a stroke, the Government have achieved the singular feat of uniting Royal Mail and the Communication Workers Union.

This is linked to the universal service obligation or the universal postal service, as it is now to be known. The Royal Mail is currently undertaking a vast modernisation programme costing hundreds of millions of pounds. This is based on the assumption that Royal Mail will continue to provide the universal service for the foreseeable future. Indeed, Royal Mail's whole business plan is based on providing the universal service. However, the Bill designates Royal Mail as the universal service provider for a period of only three years. After that, the regulator can consider allocating the service to another provider or providers. This does not provide a stable planning horizon long enough to justify this level of investment. Something much more like 10 years would seem appropriate.

Such a short timescale also potentially undermines the interbusiness agreement with the post office network, 37 per cent of whose income comes from Royal Mail. Notwithstanding the Minister's professions of good intent regarding the maintenance of the post office network, the loss of Royal Mail business could put many post offices at risk. The unpopularity of Royal Mail privatisation is as nothing compared to the hostility which would attend another round of cuts to the post office network, which is truly seen as part of the fabric of British society, as has already been underlined in the speeches that we have heard.

The universal postal service, a delivery and collection service for six days a week at a uniform and affordable price, is further put at risk, as the noble Lord, Lord Tunnicliffe, has pointed out, by the requirement in Clause 29 that Ofcom should carry out a review of the universal postal service within 18 months of Part 3 of the Act coming generally into force. A review of the universal postal service can go only one way: down, not up. The universal service obligation is loss making, and any private operator will inevitably seek to reduce the burden that it places on them. In the Netherlands, the privately owned incumbent, TNT, which has been

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mentioned as a possible investor for Royal Mail, has described the universal service obligation as a kind of Jurassic park that we should get rid of.

Ofcom, which will take over regulation from Postcomm, will have a primary duty to secure provision of the universal service obligation. In discharging this duty, it must give specific consideration to the financial viability and efficiency of the service. This contrasts with Postcomm's primary duty to ensure provision of the USO, unqualified by considerations of finance and efficiency. This change is not in keeping with the public service character of the USO and can only tilt the balance in the direction of degrading it.

The Bill thus makes the universal service vulnerable, whatever the noble Baroness says. One reason-not the only one, but the one that I wish to highlight at a little more length in the time that remains to me-why this is of particular concern to me is that the universal service obligation is of particular importance to people with disabilities, given their greater reliance on and use of mail services. Postcomm recently carried out some research with Consumer Focus into consumers' needs, which found that people with a disability are more likely to use mail services as a means of communicating than those without a disability, are more likely to rely exclusively on traditional means of communication such as mail, and are less likely to predict that their use of mail for communicating with family and friends will decline in the next three years.

The research also indicated that people with a disability are particularly vulnerable to reductions in the service or increases in a cost that a privatised Royal Mail is likely to push for. They are more likely to rely on second-class post, and are less likely to be willing to pay for specific delivery options or go to a delivery office to collect a package. They also receive less fulfilment mail-the more profitable items for Royal Mail. They also place greater value on the post office network, and use it more heavily for posting mail than those without a disability. There are also just under 4 million Post Office card accounts for the payment of benefits and pensions.

As I have already suggested, the separation of the post office network and Royal Mail could jeopardise the future of the Post Office. I am particularly concerned about the integrity of the universal service obligation because it includes the articles for the blind scheme. This stipulates that Royal Mail must provide, free of charge, first-class postage for packets of up to 7 kilograms in weight that contain letters, books, papers and a range of equipment designed for use by blind or partially sighted people. Nine million items were sent through the articles for the blind service in 2006-07, at a reported cost of £5 million to Royal Mail. A private operator is bound to wish to minimise such costs. The requirement for Ofcom to consider the financial viability of the USO is bound to come into play at this point.

When the previous Postal Services Bill was going through your Lordships' House, I managed to persuade the Government to include the articles for the blind scheme in the universal service obligation. Initially, the scheme was protected only by a complicated series of licence agreements, but I argued that it was not

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enough simply to rely on ministerial assurances. Ministers might fully intend, as I am sure the noble Baroness who has introduced the Bill today fully intends, the articles for the blind scheme to be safeguarded, but who can say what will happen in conditions of financial stringency?

Ofcom is currently consulting on abolishing its Advisory Committee on Older and Disabled People and merging this with its Consumer Communications Panel and the Advisory Committee for England into an advisory committee for the nations and communities. These individual committees were set up to support Ofcom's specific duties to consumers under the Communications Act 2003. With no dedicated committee rooting for the consumer, the practical effect of these changes is likely to be a downgrading in the prominence given to these issues in Ofcom's decision-making.

As we are constantly being reminded, we are experiencing conditions of extreme financial stringency. I can already hear the Minister's words ringing in my ears, "Believe me, I would like nothing more than to be able to maintain the articles for the blind scheme. If it were up to me, how much I would wish it were possible to do so. But sadly it is just not sustainable in the current economic climate".

The present USO is enshrined in statute, or at least it will be when this Bill is passed; I believe it should require an Act of Parliament to change the universal service obligation, or it should at least be guaranteed for a period of five or 10 years. I shall be seeking changes in the Bill in Committee to provide for this.

Sex Offenders Register


3.35 pm

The Minister of State, Home Office (Baroness Neville-Jones): My Lords, with the leave of the House, I would like to repeat a Statement made earlier today in another place by my right honourable friend the Secretary of State for the Home Department.

"The sex offenders register has existed since 1997. Since that time it has helped the police to protect the public from these most horrific of crimes. Requiring serious sex offenders to sign the register for life-as they do now-has broad support across this House. However, the Supreme Court ruled last April that not granting sex offenders the opportunity to seek a review is a breach of their human rights-in particular, the right to a private or family life. These are rights, of course, that these offenders have taken away from their victims in the cruellest and most degrading manner possible.

The Government are appalled by this ruling, which places the rights of sex offenders above the right of the public to be protected from the risk of reoffending, but there is no possibility of further appeal. This Government are determined to do everything that we can to protect the public from predatory sex offenders and so we will make the minimum possible changes to the law in order to comply with this ruling.

I want to make it clear that the court's ruling does not mean that paedophiles and rapists will automatically come off the sex offenders register. The court found

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only that they must be given the right to appeal. The Scottish Government have already implemented a scheme to give offenders an automatic right of appeal for removal from the register after 15 years. We will implement a much tougher scheme.

Offenders can apply for consideration of removal only after waiting 15 years following release from custody-in England and Wales there will be no automatic appeals. We will deliberately set the bar for those appeals as high as possible. Public protection must come first. A robust review, led by the police and involving all relevant agencies, will be carried out so that a full picture of the risks to the public can be considered.

The final decision on whether an offender should remain on the register will be down to the police and not, as in Scotland, the courts. The police are best placed to assess the risk of an offender committing another crime and they will rightly put the public first. There will be no right of appeal against the police's decision to keep an offender on the register. That decision will be final. Sex offenders who continue to pose a risk will remain on the register and will do so for life, if necessary.

Where we are free to take further action to protect the public, we will do so. We will shortly be launching a targeted consultation aimed at closing down four existing loopholes in the sex offenders register. We will make it compulsory for sex offenders to report to the authorities before travelling abroad for even one day. This will prevent offenders from being free to travel for up to three days as they are under the existing scheme. We will force sex offenders to notify the authorities whenever they are living in a household with a child under the age of 18. We will require sex offenders to notify the authorities weekly as to where they can be found when they have no fixed abode. Also, we will tighten the rules so that sex offenders can no longer avoid being on the register when they change their name by deed poll.

Finally, I can tell the House today that the Deputy Prime Minister and the Justice Secretary will shortly announce the establishment of a commission to investigate the creation of a British Bill of Rights, for it is time to assert that it is Parliament that makes our laws, not the courts, that the rights of the public come before the rights of criminals and, above all, that we have a legal framework that brings sanity to cases such as these. I commend this Statement to the House".

My Lords, that concludes the Statement.

3.40 pm

Lord Hunt of Kings Heath: My Lords, I am grateful to the noble Baroness for repeating the Statement, although I have some concerns about the tone adopted in it towards the courts. As she said, the register has existed since 1997. Since then, it has helped the police to protect the public from these most horrific of crimes. Requiring serious sex offenders to sign the register for life, as they do now, has always had broad support from across the House. Our priority must be public safety. The indefinite period of being on the sex offenders register with no option for appeal is automatic for the most serious sexual offences. The register was

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implemented for a reason: the victims of these crimes have suffered and continue to suffer greatly because of the actions of these offenders. Offenders can still pose a threat to the public. The Supreme Court judgment in F and Thompson notes that Article 8 of the European Convention on Human Rights also applies to public safety and the protection of the rights and freedoms of others. With that in mind, we should consider the Supreme Court's judgment and how Parliament should respond.

Clearly the priority must be public safety and the protection of our young and vulnerable people. Does the noble Baroness agree that, while the rights of an individual are important, including those who commit a crime, the rights of families and communities up and down the country are paramount? What is her assessment of the impact of the judgment on those currently subject to the notification requirements-how many offenders subject to them will this affect? What factors does she think will need to be taken into account in any review mechanism for those subject to the requirements? Does she agree that any such review needs to be extremely tough, given the seriousness of the offences and the need to have tough punishments in the eyes of the public? When does she expect Parliament to be able to debate the implications of the judgment? Could she also give me some indication of the timescale for when the changes have to be made?

I also ask the noble Baroness to explain the reasons for the decision of the Government that it is the police who will decide whether an offender should remain on the register with no right of appeal. What is the process? Will it be behind closed doors? Will the chief constable or the elected police commissioner take such a decision? Will the Government publish guidelines to the police and will those also be debatable in Parliament?

Finally, I would like to ask the noble Baroness about a couple of comments in the Statement about the role of the courts. The Statement starts by saying that the Government were "appalled" by the ruling of the Supreme Court and ends by saying that it is time that Parliament, not the courts, made laws and that a commission will investigate the creation of a British Bill of Rights. I rather thought that Parliament made the laws and that it was for the courts to interpret those laws. I hope that she will reflect on the rather intemperate words used in the Statement in respect of the courts; given her wide experience, I am sure that they are not hers. Ministers should be very wary of undermining the role of the courts. I hope that the Minister will take this opportunity to make it clear that that is not her intention. Does she accept that, while Parliament would be called on to enact any Bill of Rights, the courts would inevitably be called on to interpret such an Act in due course?

3.45 pm

Baroness Neville-Jones: My Lords, perhaps I may deal first with the noble Lord's last point about the attitude of the Government to the courts. Of course the Government respect the role of the courts. It is precisely because this is a law-abiding Government who respect the rule of law that we do not regard it as a practical option not to bring forward legislation to ensure that we are compliant with a ruling of the

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court. Nevertheless, there is extremely strong sentiment in the country, which the Government share, about the need to protect the public against the marauding activities of sex offenders, who display great ingenuity in the way in which they go about their offence. It is extraordinarily important therefore to have in place a robust system for the management of those offenders who are not in custody.

The noble Lord raised a number of practical points, which I shall try to answer. We certainly agree with him that priority should continue to be accorded to the safety of the public, which is the purpose of today's Statement. We certainly agree that rights of families remain paramount. Damage can be done to young people by offenders of this kind which lasts for the whole of their lives. We must bear in mind these considerations when we look at the management of offenders in this category.

The noble Lord asked about the factors that would be taken into account in any review process. Perhaps I might explain how that might work. The offender will have the right under this scheme to ask for a review after 15 years. That review will be conducted by the police-it would obviously be a senior policeman-taking into account all the information that they have at their disposal about the behaviour of the individual, what assessment they are able to make of the likelihood of further offence, the gravity of the offence in the original instance and any other relevant consideration before coming to a view.

If the police reject the application for removal from the register, the individual will have the right to ask for that to be looked at again, but there will not be recourse to the court. They will be allowed to present any further factors that they consider the police have not taken into account in coming to their view. The individual concerned will therefore have an opportunity to say why they should be released from the obligations involved in being on the register.

The parliamentary process will be accomplished via remedial order in relation to the Human Rights Act. It will be a remedial order of a non-urgent kind. That means that an order will be made available for public examination as soon as the Government are able. The Joint Committee on Human Rights will have the opportunity, as will Members, to make comments and put across their viewpoint during that process. The Government will then take into account the views that have been put forward. The order will then be laid for another 60 days, after which there will be a normal parliamentary process by affirmative action before the order in whatever form it emerges is adopted. We expect that parliamentary process to be completed sometime in the autumn.

We are looking at the desirability of guidelines for the police. I agree that it would be sensible to have them.

I think that I covered the various points made by the noble Lord. If I have not done so, other Members of the House will no doubt pick me up on it.

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3.50 pm

Baroness Hamwee: I have the same concern as that expressed by the noble Lord, Lord Hunt, about the language used in parts of the Statement. We know how important language is in this area-for example, those who hear what they want to hear manage to ensure that paediatricians are driven out of their homes. One has to be terribly sensitive. On the review and the consultation, I hope that the language of the Statement does not indicate that the outcome of the review is entirely predetermined. Will the views of the trial judges-who, after all, have heard the facts of each case-and of NOMS, whose job, in part, is to assess prisoners for parole, be considered? The offences of those who are covered by the Sexual Offences Act and subject to inclusion on the register cover a very wide range; it must also be the case that there is very wide range of risk of reoffending.

Baroness Neville-Jones: It will be a proper consultation and, obviously, noble Lords and others will be free to put forward their views. On the evidence and information that will be taken into account by the police in the review, I can confirm straightaway that the MAPPA process, NOMS and those who have relevant information will be involved. It is right that NOMS has considerable experience of probationary periods, and the police will be under an obligation, which I am sure they will understand, to make the review both fair and thorough.

Baroness Kennedy of The Shaws: My Lords, it is deeply depressing to revisit this way of dealing with decisions made by the courts. It is familiar to those of us who are lawyers because we had to endure it under the previous Government, when tomorrow's headlines dictated the way in which they responded to a wholly reasonable decision by the courts. In this case, the court decided that there should be an obligation to ensure that people have the right to appeal. It in no way suggested that paedophiles should be removed willy-nilly from the register.

There are occasions where someone should be able to appeal. For example, a young man in his 20s has sex with an underage girl and is put on the sex register. When he is a man in his 40s-married, with a family and holding down a job-it may seem reasonable to him that his name should be removed from the register on which it was placed for something that he did with an underage girl when he was in his early 20s. That is the kind of offence that the court envisaged when it said that there should not be a blanket situation where there can be no appeal whatever.

The reasonable response of the Government would have been to say clearly that an opportunity to appeal should be available, that it will be rarely used but that they support its existence. That is the position that the Government should have taken. I always get the feeling that there is something in the drinking water at the Home Office that makes sensible people lose their nerve and good sense when it comes to these matters.

As to the comment on the need for a Bill of Rights, how would the situation be any different if, as I have heard government Ministers say, all that is contained in the current European Convention on Human Rights

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would be in a British Bill of Rights, but with additional matters included? If that were the case and the Article 6 protections of due process, under which this kind of appeal, in given circumstances, is available, were included, how would it be any different? I suspect that this would be available in a British Bill of Rights, as it is now. Surely good sense should have been the response of the day.

Baroness Neville-Jones: The Government regard what they are doing as bringing them into compliance with their obligations under the Human Rights Act. Therefore we do not envisage that the work of the Commission-and of course the terms of reference have yet to be agreed-would be affected by what we are doing here.

The Government have put in place a review process. Sex offences are extremely difficult to make judgments about and we believe that those who are involved in their rehabilitation, NOMS and the police, who will have had the obligation to supervise their conduct in the interim, are better placed to do that than the courts. That is why we have instituted the review of the process that we have put in place. I also rely on London tap water-I find it keeps me entirely sane.

Lord Mayhew of Twysden: My Lords, I ask my noble friend to come back once again to the last sentence of this Statement and its rather combative tone, where it says that it is time to assert that it is Parliament that makes our laws, not the courts. Will she accept from me that I know of no case whatever in which a court has questioned, let alone rejected, that statement of constitutional functions; and that the court's function is to apply laws, either made by Parliament or specifically adopted by it?

Baroness Neville-Jones: Indeed, and we are saying that it is the correct moment to reassert the constitutional principle.

Lord Prescott: There is no doubt, as has just been said, that it is Parliament's right to make the laws and the courts' to interpret them. However, what worries me most of all, as with the Statement in the other place regarding prisoners, is the difficult issue about private and personal rights and about freedoms. In our Human Rights Act, that is a balance between Article 8 and Article 10 as well as other articles. That is to be interpreted by the courts-in this case, our Supreme Court. Presumably they will not be saying similar things about the judges in this particular case as they said about the Council of Europe.

If a new bill of rights is to be considered, presumably that balance between the public and private interest has to be established. Who will determine what that balance is? Will it be the Government, reacting to the publicity about certain unpopular cases? Or will we leave it to the judges to make their decisions, and, if we disagree, change the law? At the moment the Government seem to be running before the publicity, and then, as with the prisoners' case, saying, "We back the Court of Human Rights". That is the judgment we are facing today. I worry about the attitude of this Government in respect of personal rights.

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Baroness Neville-Jones: Perhaps I could point out to the noble Lord that this piece of legislation, which the courts have decided is not entirely proportionate, was passed under our predecessors, the Labour Government. This Government, in the light of the Supreme Court's judgment, are now putting in place a mechanism that we believe will restore proportionality that evidently the courts thought was lacking.

Lord Carlile of Berriew: I apologise to my noble friend for interrupting her earlier. Given the real and perceived importance of this issue, will my noble friend help the House by explaining why the Government feel that it is best to deal with this by a remedial order, which, although there would be consultation, is not capable of any form of amendment? We have until the end of the year to deal with this and the matter could better, one might suggest, be dealt with by addition to primary legislation currently going through Parliament, which would be open to amendment by Members of both Houses. Furthermore, does my noble friend agree that the one thing the Government cannot and would not wish to do is to exclude the potential for judicial review, where a decision has been taken that is perverse or otherwise Wednesbury unreasonable?

Baroness Neville-Jones: My Lords, ideally, the police will be aware of the fact that their judgments in any given instance could be subject to judicial review. The law has not changed in that respect. As for the previous question about the alternative legislative route, I am not a lawyer and I hesitate to get terribly far into this terrain. I was advised that this was regarded-as there is no obvious legal vehicle in which to incorporate this particular bit of legislation-as related to our obligations under the Human Rights Act, and that it was a speedy and sensible way of bringing us into compliance.

Lord West of Spithead: My Lords, I have to say that I was rather depressed by this Statement. I had not intended to speak at all. When I was a Minister, I tried to produce things not for the Daily Mail but for the House. I have a feeling that this is for the Daily Mail, not for the House. On a number of occasions, I was pretty grumpy about decisions made in the courts, but I do not think that I would ever have allowed a piece of paper like this to come out. Some of the wording used is quite intemperate, and I think that that is very unfortunate. I know the noble Baroness well and I know that she would not have drafted it in this way. I do not know how we can go about tackling this in some way so as to make it clear that this is not the view, because what is being said about the courts is really quite stark. A number of noble Lords have spoken about this, and there is no doubt at all that it is up to the courts to interpret the law. I do not think that there is any doubt at all that Parliament makes laws, not the courts, as the noble and learned Lord said. That has never been disputed. I find this quite extraordinary. Is there some way in which to temper this Statement, because I do not think that it is the sort of Statement that should be made? I think it is very unfortunate.

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Baroness Neville-Jones: The noble Lord made his point several ways round. The Government are acting in conformity with the principle that they must be in conformity with the law, which is why they have brought in this amendment to the law. We perfectly well recognise that the courts interpret the law and are acting on that principle.

Lord Macdonald of River Glaven: Will my noble friend acknowledge that there is great disappointment on these Benches, too, at the tone of this Statement? Some of us had hoped that the days when these sorts of Statements would be made about the judges and the courts had gone with the new Government, and are very disappointed to see that, perhaps, they have not. Why do the Government appear to believe that, with regard to appeals against the inclusion on the sex register, the police are better placed to do justice than the Queen's courts?

Baroness Neville-Jones: My Lords, I think that I explained in response to an earlier question that it is very hard to judge the merits with these particular offences, particularly in relation to expectation about future conduct. Therefore, we feel that those closest to the individuals or offenders concerned, who have been monitoring their conduct, are best placed to take an informed view and come to an informed decision about the balance that needs to be struck thereafter between the freedoms that can be accorded to the individual and the rights of the public to safety. This is a very practical view of how to come to the best decision possible.

Baroness Farrington of Ribbleton: Can the Minister please explain to me-because I do not understand-why the Government in their Statement make the assumption that individual police officers in particular places will necessarily, or even ever, have detailed knowledge of the individual who is making the appeal? I have some limited experience in local government. The only time I have actually ever cried in your Lordships' House was on reading the story of the north Wales child abuse inquiry. The people who may be the most dangerous are often the most mobile and disappear all over the place, reappear and then get lost. Why the police? I am particularly concerned about that aspect.

Baroness Neville-Jones: My Lords, individuals on the sex offenders register are very closely supervised-and quite rightly. Therefore, the police, NOMS and others have very detailed knowledge of the behaviour of the individuals concerned. We keep on coming back to who is best placed to make what most people would regard as a fairly difficult judgment about likely prospects for the future, given the nature of the offence and the sort of people involved. It is for those very reasons that we feel that this is the best place to do it. The noble Baroness is quite right that people do try to disappear. That is precisely why, in severe cases, limitations are placed on people's freedom of movement and why they have to notify before they go anywhere. That is one reason why the Government are taking the opportunity to strengthen that provision.

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Lord Thomas of Gresford: My Lords, can I express my sense of shame at hearing the language that has been used in this Statement? It is precisely the sort of thing that we attacked for years when we were in opposition and I am very sorry to hear that this headline-grabbing language is being used again. Like the noble Baroness, I simply do not understand why applications for the removal of a name from the register should not be made in an open and transparent way before a court. After all, it is the court that imposes the sentence of 30 months, which is the threshold when a person is placed upon the register for life. I see no principle-I see nothing-in this Statement that would assuage my feelings about it.

Baroness Neville-Jones: The noble Lord has certainly made his point. I fear there is very little that I can add to what I have already said, by way of explanation to the House, on why the Government have taken the view that they have about the right place to take this decision.

Postal Services Bill

Postal Services Bill
Copy of the Bill
Explanatory Notes

Second Reading (Continued)

4.06 pm

Lord Jenkin of Roding: My Lords, I can tell the House and my noble friend on the Front Bench that I very much welcome this Bill. I welcome the decision to separate Post Office Ltd from the Royal Mail; I welcome the prospect of Post Office Ltd becoming a mutual; I welcome the decision to privatise the Royal Mail; and I welcome the decision to transfer the regulation from Postcomm to Ofcom. However, as will become apparent, I am a bit concerned about the future of the competition which currently operates in the handling and sorting of letter mail. It seems to me that the Bill risks converting the Royal Mail from a state-owned business into a legislatively protected privatised monopoly and, if that is right, I cannot believe that that is in the full interests of users.

I speak with the experience behind me of having been the Minister who launched the process that led to the privatisation of British Telecom nearly 30 years ago. We had British Telecom as a nationalised monopoly and it became apparent that there was no way that it was going to raise the capital that it needed to finance its expansion and research, and all the rest. Therefore, we eventually privatised it. That was met with almost foreseeable opposition, particularly from the staff, who thought that it was almost the end of the world. The fact of the matter is that when it was privatised the staff happily not only took their free shares-of which there was a large tranche-but went into the market and bought the shares. I therefore take with some circumspection the opposition of the unions to the privatisation of the Post Office. I will return to the parallels in a moment, if I may.

Competition in the mail market was introduced in 2004. There is little doubt that that has led to more customer choice and to prices being lower than they otherwise would have been. It has certainly led to a slowing down of the reduction in volumes. As a number

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of speakers have mentioned, one of the really key issues here is the growth of e-commerce and e-communication. The introduction of competition has also led, particularly for businesses, to reduced postal bills. That has been to the advantage of customers. Above all, it has led to a considerable spur for Royal Mail to come to grips with a long legacy of inefficiency and the refusal to modernise systems to improve its service to customers.

It is also right to say-this has been established by independent research-that it has led to a significant boost to the UK economy. We have heard echoes of that in the debate. Royal Mail has argued and continues to argue that competition is a major cause of its woes. It is not competition from competitors that is reducing Royal Mail volumes; overwhelmingly, it is competition from e-commerce. As a user of e-mail with now limited outgoing mail, I entirely understand that. The figures that I have been shown suggest that for every £10 of reduction in the volume handled by Royal Mail, £9 is due to e-commerce-e-mail and so on-and only £1 to competitors. Furthermore, contrary to the arguments that one hears from Royal Mail, it does not subsidise its commercial competitors. This argument was also voiced by the noble Lord, Lord Low, and there were hints of it in the speech of the noble Lord, Lord Tunnicliffe. On the contrary, commercial competitors have to negotiate a price for the last mile of delivery so that their products can be handled by Royal Mail. It is a negotiated price, which is backed up by the legislative provision in the earlier Act for the right to access.

Therefore, the House may ask why I am concerned. I start from my firm belief that there needs to be a robust competitive framework in this as in other businesses and that it needs to be firmly at the heart of the Bill. I should have thought that the great majority of people would accept that. However, when one looks at the Bill itself and some of its details, to which we will want to come back at a later stage, there seems to be a marked shift away from the principle of competitive access to the Royal Mail that was inherent in the 2000 Act.

At this point I return to my experience of the privatisation of BT. BT was a natural monopoly-an almost total monopoly in line telecommunications. Therefore, regulation of prices was essential to protect the public. The formula of RPI minus X was developed and formed a central feature of that regulation. However, the second requirement was that there had to be access to the market for competitors, and that it had to be guaranteed. I stress that one cannot draw parallels too closely between Royal Mail and British Telecom but one result was the huge growth in telecommunications, including the growth of the mobile telephony system.

I was the Minister who refused to allow BT to become an operator of a mobile system, simply to make sure that there was competition. I heard the former chairman of Vodafone tell a meeting that his company was worth around £80 billion at that time. Someone asked him what he ascribed that to. He said, "It was the refusal of the Government to allow BT to become a mobile operator". When I asked him when I would get my share I am afraid there was not a very happy answer.

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However, that process was so effective in ensuring competition that in the end it was possible to dispense with the price controls on BT. There you have the example of a nationalised monopoly that turned initially into a privatised monopoly, subject to regulation but with free access to competitors, and then into a very viable system. No one wants to return to the previous monopoly. Very few people argue that Royal Mail should stay a state monopoly. We have not really heard that argument as we had the previous Bill introduced by the noble Lord, Lord Mandelson. I look forward to his speech.

However, far from encouraging more competition, this Bill seems to be dealing with the matter the other way round. There appears to be a good deal of pressure on the Government to limit and hamper the competition, as I am sure there was on the previous Government. Indeed, it may have led to the previous Bill being abandoned in another place. The CWU and Royal Mail have certainly tried to hamper the competition. I think that this has been partly driven by the recognition that the Royal Mail has found it extremely difficult to secure agreement to the necessary modernisation. One thinks particularly of the final stage of electronic sorting which happens in every other country but is still not happening in this country. I suspect also-I hope that my noble friend can reassure me on this-that there is a very natural desire on the part of the shareholder executive in BIS to maximise the price that it will get for the sale of Royal Mail by restricting the competition. That is what it looks like but perhaps my noble friend can reassure me that that plays no part whatever in the Government's modernisation.

Nevertheless, the fact remains that some of the provisions in the Bill, especially Clause 37, which gives Ofcom, the new regulator, power to impose conditions on access to Royal Mail as the universal service provider, seem to be aimed more at restricting the access rights of competitors than protecting the consumer. I shall explain very simply how that works. Under the 2000 Act, Ofcom-it was then Postcomm-could not impose a USP access condition unless it appeared to it that the condition was appropriate for one or more of three purposes: promoting efficiency; promoting competition; and conferring benefits on the users. However, this Bill says that all three purposes have to apply, not just one of three. To gain access to the Post Office network, a competitor has to satisfy each of the purposes relating to efficiency, competition and benefits. In my noble friend's speech from the Front Bench, I caught a hint that that was intentional. I therefore ask: can the Bill be said at the same time to be promoting competition; and if not, why not?

Clause 43 deals with the proposed universal service compensation fund. Perhaps it will be necessary to use that in the last resort but it most certainly must not be used simply to shield Royal Mail from the necessity of getting rid of its inefficiencies. Those are details to be discussed in Committee but I make a strong plea that the Bill should not risk losing the gains which have come since 2000 from the introduction of a competitive regime. It should not give the regulator powers that could materially prejudice the position of competitors.

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With many others, I warmly welcome the prospect that Royal Mail should be able to operate in the private sector as a successful and profitable business, but it must be competing strongly and fairly. It must be right, from the point of view of mail users and the industry as a whole, not to risk the advances that have been made over the past 10 years.

4.20 pm

Lord Christopher: My Lords, I certainly do not come to this Bill with particular hostility: it is easier to consider than the previous one. I suspect that that is due largely to the passage of time, and perhaps some lessons were learnt. I apologise to the noble Baroness on the Front Bench. Due to the excitement this morning I missed the first six or seven minutes of her introductory speech.

My concern is the problem of unintended consequences. I am lucky enough to live next to a farm that is approached by a road which is about three-quarters of a mile long. The local farmer is constantly called out because people's sat-navs have directed them up that road. Come rain or shine, they get caught in the mud and snow. I am anxious that the Bill should not be a sat-nav and that we should try to ensure that it produces what we and the electorate really want.

The trailblazer in the privatisation of post offices was the Netherlands-although I find it easier to say Holland. That process began in 1989 when that country's Government began to sell its post office in tranches, and by 1995 they had lost their majority control. There have been several changes in name of the Netherlands post-all prefaced by "Royal", of course. It was called PTT Post, TPG Post and is now called TNT Post. It is run by the multinational company TNT. What has happened since then? These are the problems that I want to ensure we avoid. One of the issues is minor in a sense, but I suspect that it is also quite a populist one. That country's red post boxes have become orange. I do not recommend that we change the colour of ours. We should make sure that it does not happen here, but I am not sure that such a provision should be in the Bill. We have similar problems with telephone boxes.

In the Netherlands, 90 per cent of the post offices have closed. I shall return to that issue later; as a Member on the Cross Benches has already mentioned, it is a key issue in the Bill. Post boxes in the Netherlands are now emptied only once a day. Ours are emptied certainly twice and perhaps three times a day. In the Netherlands there are considerable complaints about lost post. To some extent, we have similar complaints here. TNT has not been prepared to recognise some of these problems in the way that we would expect. On lost post, TNT is quoted as saying, "As a company we are not in a position to deliver the post on time, particularly on Saturdays or Mondays". The Netherlands allowed competition. New firms are paying low wages that have markedly impacted on TNT's profits. TNT is proceeding with a policy of employing part-timers and franchisees in order to reduce the working hours of its staff to three days a week. If we want to proceed with a different service from that, we may have to provide some form of continuing subsidy.

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The managing director of TNT, Peter Kunz, said that the universal service obligation-this may have been referred to earlier-was,

Do we want this here? I do not think so and, as I said earlier, my concern is that the Bill and the Act should ensure that this sort of thing does not happen.

I am not sure that the noble Lord, Lord Razzall, who is not in his place, was correct to say that Royal Mail was still making losses. If he did not say that, I am happy to be corrected. It may be making net losses, but it is certainly making a gross profit and the difference, if there is one, is the cost of maintaining the pension fund, which we know is being dealt with in the Bill.

I have no faith in golden shares or any of these things. We must ensure that the universal service obligation is effectively protected in perpetuity, because that is what the British people wish.

On the issue of regulation, according to the Post Office-or rather, Royal Mail; like lots of people, I see them as one-an effective subsidy of £160 million is being given to competitors who are cherry-picking what they want and requiring Royal Mail to deliver the rest. We must meet the objective of a level playing field, especially on price and across all postal business-this is not limited to letters.

I turn to the issue of shares to employees. I saw this with BT which, with respect to the noble Lord, Lord Jenkin, was a significantly different case from this. As the chairman of a modest investment company, I was faced with a dilemma by the then investment manager, who asked, "What do we do about the BT share offer?". It was opposed by the TUC and the union. There I was, with a different hat on and different responsibilities. I said, "You'd better buy them. The worst that can happen is that they sack me". Of course, they did not. The shares opened the next day at a significant profit and within weeks or months, all the shares given to the employees of BT were sold. I hope that, when this happens, in whatever form, we will ensure that the shares are held in a trustee fashion to benefit the working people, and not individually, because I assure the House that they will not keep them. There will be a significant change in that respect.

I see this as a bit of a comparator for British Rail. I am not arguing about scale or making a political point; it is water under the bridge and one would not do it today in the way that it was done. People were skimming off profit. A good deal was sold off during the exercise, and significant sums were pocketed by the ex-employees who had acquired it. There is also a continuing subsidy to the railways. As I meant to say slightly earlier, I do not expect answers from the noble Baroness to all the points that I have raised today because, with respect, I would much prefer more considered answers. However, I would be grateful if the noble Earl, Lord Attlee, who has responsibility for the Department for Transport, would let us know what has been paid to the railways in the form of subsidy since they were privatised. I think that most of us would be very surprised at the scale of the figure. I hope that my point will become clear as I go on.

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The Bill must include clarity on the arrangements for the sale, or whatever else it may be. It must state its nature and limitations. The Bill is negative; there is no indication that there are limitations. I find it much easier to say who may not buy it than who might. I do not think that the queue to buy it is any longer now than it was in the days of the noble Lord, Lord Mandelson.

We must ensure that no asset-stripping occurs. Reference was made by, I think, the noble Lord, Lord Razzall, to the investment by Deutsche Post. That investment has been made in the parcels business-the one thing that is clearly growing and making profits in Royal Mail. If you sold Royal Mail to me, I would want to see how much capital profit I could make out of selling the parcels side of the business. I believe that these things have to be preserved in the totality of the business. What is the timescale of the sale? I am worried about it being done with some urgency, as I do not see the need for that.

I understand, informally, that a valuation of the business has been made. I have not seen anything about it but it is essential that we do see it. The coalition is about openness. I believe that the public, never mind your Lordships' House, are entitled to know the valuation of what the Government are seeking to sell. What are the scale and scope of the valuation? Does it, for example, include land and building assets? When was it done and who did it? We know none of these things. If a valuation is not needed for any other reason, one is needed if Royal Mail is seriously going to be split from the Post Office, because assets owned by Royal Mail will go to Post Office Ltd. Therefore, I hope that we shall have some openness on this and that the details will be published so that the world can know exactly what we are seeking to sell.

With regard to post offices, the Crown offices are a complication. They are already in the position of securing a significant benefit from the subsidy that the Government have made available to post offices. A table has been produced by Post Office Ltd in relation to the different sorts of post offices. One huge group-local post offices-could by no stretch of the imagination be continued, either because of the government subsidy required to maintain them as things stand, or because post masters and mistresses will be unable to make sufficient income from them. Many of us love and support our local post offices but a typical local post office could lose 65 to 75 per cent of its income as things stand under the Bill. Thirty-seven per cent of their business comes from Royal Mail. Notwithstanding the need for competition and profitability, it seems to me that somehow or other we need to sustain that sort of business. Therefore, what is the hurry?

I am unclear, as I am sure is the noble Baroness, exactly what mutualisation of the Post Office means in practice. It is one thing to set up a mutual to run a building society or whatever, but dealing with 50,000 post offices owned in different ways is very much more complex. I think that we should have clarity on that before we decide that it is a road to go down. I do not wish Ministers to come back here saying, "Our intentions were good. We meant to do it, but". That would be unsatisfactory on an issue of this importance to Britain.

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Mr Hooper has already answered one of the questions that appeared in his first report about the capacity of Royal Mail to provide the skilled management required. He said that that has been done with the appointment of Miss Moya Greene.

We are left with two inescapable issues, one of which is achieving capital. Questions have already been asked about how much they want, when they want it and how might it otherwise be obtained. A lot of questions need answering before we can comfortably go ahead with this Bill as it stands. I ask the Government to think carefully before Committee stage. It would be unfortunate if we were to face a raft of amendments when common sense tells us that some of these things should be dealt with beforehand.

The point of my question to the noble Earl, Lord Attlee, was about the social value of the Post Office and Royal Mail network-no one argues with this-which has been put at more than £2 billion. We either want to ensure that that continues or we want to throw up our hands and say that it has nothing to do with us. I echo the noble Lord, Lord Empey, in this. I thought that his contribution was most helpful. We must try to get this Bill right. If we do not get it right, another generation will say, "They got it wrong". Looking back 10 or 20 years, we can see other privatisations which we would all have wished to see done a little differently. We must not have an early cheap sale, with people walking away with money.

Perhaps I may offer a blue-sky solution to this: take time to think hard about a Post Office bank. I draw your attention to Northern Rock, which is now a bank. It is ripe for something to happen to it. What would be better, what would be more popular in this country than converting Northern Rock into a Post Office bank with a sort of holder-trustee role for the Royal Mail and Post Office network? I hope that the Government will think about that.

4.37 pm

Lord Mandelson: My Lords, first, I extend my welcome to the noble Lord, Lord Empey. I knew him well. We worked closely together when I was Secretary of State for Northern Ireland. Judging by his maiden speech this afternoon, I believe he will make a very distinctive contribution to this House. I am also looking forward to the maiden speech of the noble Lord, Lord Dobbs. I was just talking to him outside the Chamber when a colleague of his came up and hailed us both as "the men of fiction". I am not quite sure what he meant by that.

Some things never change. This Bill is a bit like the repeat of a bad dream with its unhappy ending. The noble Lord, Lord Razzall, who is not in his place, referred to the scars that I bear. I can assure the House that I bear them fairly lightly, but it is noteworthy that the scars, such as they are, were inflicted not by this House but by another.

Yet again we are debating the Royal Mail and the structure and regulation needed to secure the universal postal service which the public demand but which-this is the crucial factor-we all depend on much less because of digitalisation. We are debating the same,

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broadly unchanged, Royal Mail which can and should perform like a modern logistics company but which retains too many of the characteristics of a government department. There is nothing wrong with government departments-I miss them greatly-but they are not commercial organisations, which the Royal Mail needs to be.

The Royal Mail needs a settled existence, which is why I cannot go along with my noble friend Lord Christopher in suggesting that we should drag our feet for a longer indefinite time. To create such uncertainty for the Royal Mail would be a tremendous disservice to it as an organisation and to its customers. No, it needs a settled existence, but one different from the structure and the regulatory framework in which it is currently operating. That is why the previous Labour Government introduced their legislation, which shared the same aims and objectives as the Bill-indeed, I notice that many of the clauses are similar-albeit with one significant difference: we proposed to keep the Royal Mail in overall public ownership.

Others before me have described how digital communications have transformed the Royal Mail's world and its market. That does not need further elaboration from me. That means that the Royal Mail has to reinvent itself. It must rationalise and modernise, as almost every other postal service among developed countries has done. It must harness all the new technology available to it to adjust its cost base and show real enterprise and innovation in the services it provides.

The Royal Mail has started to do that, but is it really capable in its present form of changing in the way, to the extent and at the speed that is needed? My answer to that is no; the answer of the coalition Government is no; and the answer of the previous Labour Government was also no. It is just too unprepared, too unfit. It does not have the right commercial structure to operate it. It has a single company union, which is, frankly, too remote from the wider world. It has relations between management and workforce that must be further substantially improved to enable change to take place at a faster pace. The company has a single client regulator that is not only overly constraining, in my view-I will come back to that-but insufficiently versed in the wider digital world. It is dependent on state aid, which is, frankly, slow and inadequate for what it needs to do.

For all those reasons, the Government have no alternative-just as we found when we were in office-but to bring forward a Bill that enables a fresh start to be made. I am very sorry that Labour MPs came under considerable union pressure to derail the previous Bill. The CWU succeeded in its aim, which was regrettable for this reason above all. In defeating our Bill, the CWU paved the way for the Bill that we are debating today. Quite literally, the CWU has, through its actions, become the midwife of the Royal Mail's privatisation.

Lord Brookman: I thank the noble Lord for allowing me to make a comment. I know the leadership of the post office workers' union-I have worked with them at the TUC for many years-and I do not acknowledge the picture that the noble Lord has painted of the

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Luddite trade unionists who work on behalf of Post Office and Royal Mail workers. They are good people doing their best for ordinary working people.

Lord Mandelson: I rather regret that my noble friend used the word Luddite in relation to the employees of the Royal Mail. I did not use that term, and I very much regret that it should be so misapplied, as he has misapplied it, to the overwhelming mass of employees of the Royal Mail who know that they need to embrace change but, I fear, did not and do not have the leadership of the union to enable them to do so in the way that they need and wish to.

The task now is to make sure that the new Bill secures the Royal Mail's future and the viability of its business model, underpins the universal letter delivery service that the public require and rely on and sustains the relationship between the Royal Mail and the nationwide post office network. This needs to be got right in this Bill. These goals are chiefly dependent not on the Royal Mail's ownership but on the new legislative framework of regulation which the company will operate within. I have no doubt this needs extensive rethinking. I say this frankly: Labour did not get the Royal Mail's regulatory regime right early on when we introduced legislation, and that is why we proposed extensive reform in our Bill.

In my view, the priority for debate and amendment in this House should concern chiefly the clauses of the new Bill concerning future regulation. This is the nub of the issue and where the greatest and most detailed examination needs to take place because we need regulation that enables Royal Mail to compete without both hands tied behind its back. This means regulation which recognises the unique role of the Royal Mail as the universal service provider and its need to be profitable in delivering the service. It must also provide the basis for attracting much-needed new capital to the company and experienced management who can provide skill and expertise.

I accept that it is at least arguable that under Labour's original legislative proposal for a strategic partner in a minority position in the company, it might have been hard to attract the required capital and management strength, and that, from this minority position, it might have been too difficult to bring about the necessary change to turn round the company. In any case, this is history. What I cannot accept, though, is that a so-called foreign presence in the ownership of the Royal Mail is somehow treacherous or bound to lead to disaster, as we have heard expressed again and again in the other House. Deutsche Post and TNT in the Netherlands have shareholders from across the world, including Britain, and international alliances between Europe's postal operators will be widespread in the future. We do not have a nationality test for investment in Britain. The previous Labour Government were implacably opposed to such a thing, notwithstanding the wider review of takeover rules that I initiated. We are successful in Britain at attracting inward investment. In former utilities, we now have EDF, RWE and E.On, for example, and many people's jobs in Britain depend on that investment and that ownership. So let us not have false, little-Englander sentiments injected into the debate.

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Our examination of the Bill should focus instead on the detail of the new system of regulation, on which I hope the Government will be open to argument and persuasion. However, we cannot let this moment, an opportunity for reform, end in failure again. Royal Mail, once reformed, will then need stability and to be allowed to get on with its job, and in that context I welcome the fact that from Labour's Front Bench we have not heard a commitment to renationalise the Royal Mail should it pass out of state ownership. This is sensible. As with gas, water and electricity in the 1980s and 1990s, Labour moved from a position of flat-out opposition to change, to a decision not to renationalise, to an embrace of these utilities performing well in the commercial sector. I suspect that history will repeat itself should privatisation be achieved.

My last observation is only that there is probably a wider moral to the Royal Mail saga: that when difficult issues come along, we cannot just run away from them. There is a Labour way to change things, and for us that meant bringing in a new partner but in minority ownership. When that Labour way does not happen or is stopped, the issue does not go away. It comes back, sometimes with a solution in a less palatable form than we originally wanted. That is exactly what has happened here, just as the then Prime Minister and I warned would happen if our reform and our Bill did not go ahead. I am only sorry that our warnings fell on deaf ears at the time.

4.51 pm

Lord Dobbs: My Lords, I rise on a somewhat nervous knee to address this House. The warmth of the welcome that newcomers receive here is well known, and I am immensely grateful for it. I have had the honour of being introduced here by two of my longest-standing friends in politics. I advised the noble Lord, Lord Hunt of Wirral, at the very start of his parliamentary career 35 years ago, and he is now returning that favour with his characteristic gentleness and humour. As for the noble Lord, Lord Tebbit, I have been a friend of his and his very special wife Margaret for almost as long. I began working closely with him at a time when he was referred to in another place as a semi-house trained polecat, and I was described as his baby-faced hit-man. Time changes many things. I am unsure whether that polecat has yet morphed into a pussycat, but the baby face has, I fear, melted into middle age. I am fortunate to have many friends of long standing in this place, but I would like to mention one in particular. I have been a colleague and friend of the noble Lord, Lord Sharkey, for a quarter of a century. Today we sit on different Benches, but when we started here together he was kind enough to send me a simple message: "Brothers in arms again". Those words sum up beautifully the very special spirit of this House.

I crave one further indulgence, if I may, to say how superb has been the support given to me by the staff, particularly the Doorkeepers, whom even now stand at the ends of the Chamber like my own Praetorian Guard, discouraging both invader and deserter alike.

When I first heard from the Prime Minister that he wished to take the surprising risk of sending me here, I was standing in the queue at my local post office in

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the beautiful Wiltshire village of Wylye, which, like post offices in almost all rural areas, has faced the whirlwind in recent years. On a crowded afternoon such as this, it is not necessary for me to spell out in detail the ferocious impact that the closure of rural post offices has had on the central fabric of village life; the noble Lord, Lord Empey, and many others here this afternoon have already done that. I therefore applaud wholeheartedly the Government's initiative in deciding to invest additional money in the post office network and, among the many other things in this Bill, their determination to sustain the rural post office network. Yet the additional funds, as generous as they are, will not be a panacea. Many rural post offices are hanging on by their fingertips. They still face immense challenges, and they deserve better than they have been given in recent years. In 2007, Post Office Ltd announced a massive closure programme. Many local communities were not properly consulted. I had plenty of experience of that failure myself and Consumer Focus, the statutory body for the post office consumers, concluded that communications from the public during this period were treated as nothing more than a necessary evil. Rural post offices are far too important for such a process to be repeated.

In welcoming this Bill, may I draw one point to the attention of my noble friend Lady Wilcox and offer one suggestion? The point is this: Post Office Ltd statistics suggest that we still have more than 11,000 post offices in this country. That is not correct. More than 800 of that total are not really post offices at all, but what might better be termed "postal outlets", part of what is called the outreach programme. Many of them are former post offices that have been redesignated as outreach partners. They lack any real security. In the case of Wylye, for instance, we had a post office one day and an outreach partner the next. It offered almost identical services; the same personnel, the same premises and the same hours-even the same post box. The difference was that the income the shopkeeper received for this work had dropped by more than two-thirds. There is no longer any pension; no sickness pay; no holiday entitlement. In many rural areas, far from the post office subsidising the shopkeeper, it is the shopkeeper who is now subsidising the post office.

They do this because of their sense of civic duty-a desire to carry on serving the community. In that, they truly are the big society come to life. Yet, the good will on which many rural postal outlets survive is evaporating and one day will run out. Close the post office or outreach service and we will be forced to watch the disappearance of all the other associated services-many of which are entirely unpaid but are the sinews of village life.

I would ask my noble friend if she would take to heart the very different nature of these outreach services and keep a close eye on them. They are desperately vulnerable and the current reporting requirements contained in this Bill may not be adequate for that job. It would be futile to insist that there be no further closures-sometimes circumstances will dictate-but perhaps I may encourage her to consider the following. When a rural post office or outreach service is facing closure, a minimum of 16 weeks' notice should be given to the local community-particularly parish

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councils-so that it can have sufficient time to come up with an alternative solution that might keep the postal outlet open and keep alive the host of other vital associated services. Rural communities are incredibly resilient. They can be very inventive. They should be given the chance to show what they can do to help themselves.

Post Office Ltd's own code of practice talks of a six-week consultation period, but its record of consultation is not good. Six weeks is not enough-not when so much is at stake. I would ask my noble friend Lady Wilcox to strike a blow for the rural big society and help strengthen village life in this way.

The red eye of the digital clock is staring at me, warning me that I must not overstay my welcome. Winston Churchill used to talk about having, "so much more still to do, and so little time to do it". I believe he was talking about alcohol, but they are wise words for anyone making their maiden speech. I thank you for your patience. I look forward with tremendous anticipation to finding my place here among you, as a keen and enthusiastic supporter of this Government, if never quite their slave; and, most of all, as a patient, wholehearted and faithful servant of this House.

4.59 pm

Lord Hunt of Wirral: My Lords, we have heard a brilliant maiden speech. Comparatively few of us follow in the steps of the great people of the past in creating phrases that become quoted and are everyday phrases in our lives, such as those coined by my noble friend. I was thinking:

"You might very well think that. I couldn't possibly comment".

However, I know that we are all thinking what an outstanding speech that was-and I am the one who can comment on it, and I will. It was 35 years ago that the now noble Lord appeared in my life-I am reminded of the radio programme: "35 years!"; it seemed an age. I am not sure why the Guardian coined the phrase "baby-faced hit-man", but this personality came into the by-election in Wirral to write my speeches, coin my phrases and take over the campaign, and suddenly I was transported into the other place with the largest Conservative majority anywhere in the UK, so I have known for some considerable time of his outstanding speech-writing and famed organisational skills.

As my noble friend Lord Tebbit knows too, my noble friend Lord Dobbs has gone on to be a successful chief of staff but, in particular, a superb writer of-I think-17 novels now. We got a sense of that in the speech that we just heard, and he is now a valued Member of this House. If I am allowed another phrase of his, I shall say that he has just given us a remarkably effective demonstration of his being the epitome of elegant elocution; the last word was slightly different in House of Cards. I am sure that we will hear many great speeches from him. Today was the first in what I hope will be a long line of effective contributions, for which we thank him.

I declare the interests shown in the register, particularly my being a partner in the national commercial law firm of Beachcroft, where I have in fact been a partner for 42 years. I pay tribute to the speech from the noble

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Lord, Lord Mandelson, my former close working colleague in the British Youth Council. It was a remarkable insight into what we are debating. Having heard the other, very effective maiden speech from the noble Lord, Lord Empey, I say what a debate we are having.

I suppose that we are a fortnight late for Groundhog Day; noble Lords may remember the film starring Bill Murray, in which the leading character was doomed to relive the same day again and again. As my noble friend Lord Razzall said earlier, this debate has a remarkably similar feel to it to many others that we have had. Of course, we had the Second Reading of a Postal Services Bill on Tuesday 10 March 2009. On that occasion all the Front Benches were in favour of it and, after some process, the Bill was improved. The three main recommendations of Richard Hooper in his excellent first report-private sector capital, pension reform and regulatory reform-were not only accepted but embraced by this House. The title of that report, Modernise or Decline, could not have been more apposite. Sadly those dissident voices that were heard from time to time, particularly in the other place, eventually won the day, despite the best efforts of the noble Lord, Lord Mandelson. For once, the noble Lord's powers failed him. It was one of the few occasions on which a Bill with overwhelming all-party support was withdrawn. Now, almost two years on, we are here again.

So what has changed? As the noble Lord and other speakers have pointed out, we now find the Royal Mail in a financial situation that has deteriorated further. Its core market is declining at an even faster rate than predicted, and a dangerous chasm is opening up. The accounting deficit on the pension scheme has more than doubled and, to quote Sir Richard Hooper's latest report,

I could not agree more.

It is no exaggeration to say that unless the serious structural problems are urgently addressed, the future of the universal postal service, or UPS, could be in serious jeopardy, which would be unacceptable. Despite its declining core postal market, the Royal Mail remains the only entity that can preserve the UPS. As Richard Hooper rightly observed in that second report on the future of the Royal Mail, commissioned by my colleagues in the coalition Government, the UPS,

There has been a further development, which is acknowledged in the second Hooper report; namely, that the Royal Mail has changed in a positive direction its management. The need for private capital has intensified, but the need for private sector expertise has now been addressed. New management has brought with it a completely revised and revived sense of mission. I compliment Moya Greene, the chief executive, and her team on having achieved just that. The need now is not for some kind of hybrid, collaborative arrangement with external investors and expertise from the private sector, because Royal Mail possesses the necessary expertise. This new Bill, which I warmly welcome, offers privatisation rather than public/private partnership and is entirely fit for purpose.

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I am also delighted that Ministers in the department have heeded calls to involve employees in the sale. The Conservative and Liberal Democrat parties have long agreed that a degree of co-ownership and employee involvement is essential in privatisations such as this. We supported the noble Lord's Bill, but he may recall that we pressed him to be more explicit in ensuring that widening employee share ownership was an objective of the legislation. How to engage employees in an exercise of this kind is of critical importance, and balance must be achieved in a number of respects. Above all, as several speakers in this debate have pointed out, employees must be offered a genuine and meaningful stake in the new enterprise, but managers must retain the power to manage. An important firm such as this must never be vulnerable to being held to ransom by an unrepresentative cabal of activists, be they employees or whoever else.

The coalition agreement commits the Government to the following:

"We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership".

As my noble friend has just pointed out, the Royal Mail will become part of the big society. The details of this will be worked out by us all in Committee, but, in principle, it must be the best way forward. Many of us, of course, have had a hand in the privatisations of the past. I was the junior Minister given the responsibility of taking through the legislation to privatise British Gas. I confess to the House, privately, that I was never aware that the uncle of my boss, the late Lord Walker of Worcester, was actually Sid. So in appealing for Sid, I had not realised that I was appealing not only to the wide world. However, it became a successful privatisation in the spirit that my noble friend then always dreamed of. There is no need to reinvent the wheel and I am sure that my noble friend and her ministerial colleagues will draw upon the considerable expertise that is available and at her disposal in this House.

However, I stress that time is not on the side of Royal Mail. It was the height of irresponsibility for the previous Government to take up so much important parliamentary time with this legislation only to abandon it. We were never quite sure why it was abandoned but it seems to have been on the grounds of political expediency. It is very much to the credit of Vince Cable, Ed Davey and my noble friend the Minister, strongly supported by their Conservative colleagues, that they now seek to succeed where Labour lost its nerve and so signally failed.

The urgent need to address the secular decline of Royal Mail was first identified in the 1990s by the Major Government and then, through a parliamentary Statement, on 17 December 1998 by the Labour Government. We have wasted enough time. The time has surely come to give to the Royal Mail the opportunity that it craves, not only to survive but to flourish. I hope that all sides of the House will see that, by giving the Bill our constructive support, it could be on the statute book by the summer. Then, and only then, will the Royal Mail be transformed into the success story that it deserves to be.

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5.12 pm

Baroness Kennedy of The Shaws: My Lords, I, too, add my warm congratulations to our two maiden speakers, the noble Lords, Lord Empey and Lord Dobbs, who undoubtedly will add to the riches of this House. It is wonderful to have them here.

The Post Office plays a special role in our society. It is one of the best known and respected institutions and is vital not only to our economic life but to our social and community life. It regularly delivers to every address in this country-on average 75 million letters every working day of the year-and the nationwide network of post offices is visited each week by the equivalent of half the population. If noble Lords are reeling at the statistics, so did I.

I applaud efforts to modernise a resource which is so precious. I, too, want it to work ever more efficiently and effectively in our contemporary world, where there is an increasing reliance on electronic communications, on the one hand, and, on the other, a burgeoning of online shopping which increases package delivery. The Post Office needs to evolve new ways of working; it needs to be better at business. Technological advances should be absorbed and the local post office should be strengthened as a source of community cohesion.

I say immediately that there are pluses in the Bill. I, too, support the way in which the Government seek to deal with the pension deficit. I, too, am in favour of the transfer of regulation to Ofcom, although I would like to play a part in the detail of the regulations. I also welcome the idea of employee share ownership, as long as it is not just icing to make palatable a privatisation which may, in many ways, be distasteful.

However, I am alarmed at the route the Government are taking, and I am not alone. Polling has shown that the public do not want to see the privatisation of Royal Mail. They see it as the turning of a public service into a private monopoly. This is regardless of political party-it was interesting to see from the polling that members of the Conservative Party were just as concerned as members of other parties. A majority see this policy as a threat to the six-day delivery service and they suspect that private providers will not want to subsidise unprofitable parts of the universal delivery system. They believe that privatisation will lead to higher prices. The experience of the privatisation of other services, from rail to gas, supports their suspicion.

The noble Lord, Lord Empey, made an important point that, to the public, the Post Office and the Royal Mail are all one-the public fear that, despite promises that are being made by the Government, their local post office will be put at risk of closure. I know the Government have promised that there will be few closures of major post offices and they have made a commitment to maintaining 4,000 large post offices and 2,000 smaller outlets operating out of local shops. However, analysts have shown that the restructuring of the post office network through setting up mutuals will probably deprive post offices of, certainly, at least a third of their income unless other ways are found of filling that. I am very happy at the idea of mutuals-I

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like the John Lewis Partnership idea-but sub-postmasters who run sub-post offices out of retail shops, after discussion among retailers, have expressed concern that, without new business, the mutual concept will not make economic sense.

It was very entertaining to listen to the noble Lord, Lord Mandelson, rebuke the unions, Labour MPs and others who rejected his own Bill. However, what he seemed to forget was that a much more imaginative, radical and exciting proposal was made around the same time by the think tank Compass, which proposed that the Royal Mail be turned into an independent company, based on the structure that was created ultimately for Network Rail. A restructured Royal Mail and Post Office, operating as a not-for-profit company, would have the ability to borrow and to invest in new technology without affecting government borrowing limits. Creating such a not-for-profit company would have also put a halt to the ridiculous business of separating out the Royal Mail from the Post Office. However, as the noble Lord, Lord Tunnicliffe, has said, this is a classic case of selling off that which is profitable to the private sector but holding in national ownership that which is non-profitable. You privatise the money-making element and let the taxpayer carry the cost of that which is risky.

I did not hear the noble Lord, Lord Mandelson, mention the inadequacy of the management of the Post Office when he was criticising the current regime. The managers are, in many ways, lacking in entrepreneurial spirit, overpaid and part of the problem. I hope that the new man who is coming in to lead will make the changes necessary-

Lord Mandelson: It is a woman.

Baroness Kennedy of The Shaws: It is a woman, is it? Well I am sure that will be better. If it is a woman then it is bound to be an improvement.

All I can say is that, while there has been criticism of the unions, there seems to have been insignificant criticism of those who managed. When Compass came up with the proposals for a not-for-profit company, it was argued that the unions would have to come on board; that they would have to be willing to enter into a new and real partnership with new management, with the public and with Government; and that they would have to agree to new technology and abandon old practices in sorting offices. I am sure they could have been won round to that proposal, but sadly the Government opted for the sell-off that is in this Bill.

I have sat through many debates in this House in which noble Lords have expressed concerns about the destruction of communities and I have listened as they talked about the glue that holds society together. The social value of post offices cannot be underestimated, yet here we are with an opportunity to modernise the Post Office and Royal Mail in ways that strengthen those ties but we have baulked at taking that more radical way forward. A sense of community is reinforced by citizens in an area sharing certain resources whatever their social background-the local library, the primary school and the post office. A modern post office

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should be reinvented, as we have heard others say, as the shop window of local and central government as well as the provider of postal services.

When I chaired the Power report, one recommendation that we made was that there should be the creation of local democracy hubs as centres of information and advice about the working of our polity. Those hubs provide the public with the right channels for complaint or provide an opportunity to contribute ideas to good governance; they are a place to find out about local initiatives, and are where voter registration could take place. There is no reason why the Post Office could not take on that kind of role. It would also be the locus for passport and licence application and the local centre for pension and other social entitlements. All this could be added to the remit of large post offices, making them the interface between government and the citizen. They could house offshoots of Citizens Advice, providing advice on debt and advice on small legal problems. If communication is your raison d'être, why not introduce some computer terminals so that those who have no computers at home, including the elderly and disadvantaged, can send e-mails. With the assistance of someone in the post office, they would be able to use the new technology for which they do not yet have the skills. Post offices should be the centre of high street community life, as well as fulfilling the functions mentioned by the noble Lord, Lord Dobbs, in outreaching rural areas.

The big disappointment in this Bill is the failure to use the post office as the site of the people's bank. I heard laughter when that point was made by the noble Lord, Lord Christopher, but whole sections of the public want only simple high street banking, with none of the high-risk casino components that put savings and mortgages at risk. They want banks like the old Trustee Savings Bank and the National Girobank, which were put out of business by the banking industry. A people's bank could be all that many citizens want and, in addition, could lend like credit unions to poor but prudent citizens in need of small loans to keep them from the loan sharks. Those people's banks could even be a way of exploring micro-financing in some communities, so that small groups of neighbours can come together to support each other's borrowing to establish small, self-sustaining businesses. We see it working in other parts of the world and, in fact, being tried out in my home city, where the Grameen banking system is being used to help people set up in businesses that do such things as hairdressing, laundry systems, ironing services and clothing alterations. Those are small things that keep families together and help to sustain them.

If the big society has meaning, this Bill should really be rethought to encompass some of the ideas that are around, of which the Government have taken no account. I know that they have put a lot on their own plate, but this piece of policy could benefit from a great deal further thinking. I know that I will be going into battle with the coalition Government on the privatisation aspect of the Bill but, on the reinvention of the post offices, I hope that with others around this House I can make a more constructive contribution and help to see ways in which to revitalise the post office system.

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5.23 pm

Lord Kennedy of Southwark: My Lords, I add my congratulations to the noble Lords, Lord Empey and Lord Dobbs, on their excellent maiden speeches. I have had the pleasure of speaking to the noble Lord, Lord Dobbs, and I am sure that I will shortly have the pleasure of speaking to the noble Lord, Lord Empey. I look forward to their contributions in times ahead.

I have a number of comments to make on the Government's proposals in this Bill. I have no issue with the injection of private capital or private finance into the Royal Mail. Noble Lords will be aware of the proposals made by the previous Government. As noble Lords have said, there are a number of similarities in the two Bills. I want to see a successful Post Office and Royal Mail. However, I am not clear about the employee share ownership scheme and hope that the Minister will be able to talk further about this when she responds. How will the shares be distributed, what can employees do with them and what are the benefits of the proposals?

I hope that during the passage of the Bill through this House we will explore the issue of protecting the name "Royal Mail". I am sure that the Minister will say that there is no need to worry about that and that any new owner would be daft to change the name. Well, people do daft things all the time. I recall the short-lived Consignia, whose rebrand was reversed in haste in 2002. I am pleased that the Government are not proposing the sale of Post Office Counters.

At this point, I declare an interest as a member of the Co-operative Party and a big supporter of mutuals. The possibility of the Post Office moving to mutual status at some point in the future is interesting. Again, we need to explore that further as this Bill progresses through the House. It could be a welcome part of the solution to the problems of the Post Office. I know that the Minister is aware of my support for the development of credit unions in this country; we have had a conversation outside the Chamber and I recently asked her an Oral Question on that subject. I am very supportive of the link-up between the Post Office and credit unions. By developing the credit union back office, millions of people would gain access to credit union services at any post office in the country.

I contend-and I think that many noble Lords would agree with me-that the big society is in some trouble. We have again had a relaunch from the Prime Minister. It could be said that this would be a good example of the big society, as I understand it. I suggest to your Lordships that the passage of this Bill is an ideal opportunity to explore these proposals further. It is certainly one of the growth areas that the noble Baroness referred to when she opened the debate.

I am pleased with what the Minister said about protecting post offices and that there will be no further closures; I made a careful note of that. I am particularly pleased that noble Lords on all sides of the House recognise the central position of post offices in supporting communities. In any link-up, the Post Office needs to be successful both in rural communities and, just as importantly, in deprived communities in our towns

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and cities, as it is central to community life. I welcome the proposals to deal with the Royal Mail pension fund, as I do those to transfer the regulator's obligations to Ofcom.

In concluding, I concur very much with the remarks made by the noble Lord, Lord Low of Dalston, about the universal postal service obligations and the Minister's remarks that the Bill will benefit greatly from consideration by your Lordships' House. I hope that we will be able to suggest amendments that will improve the Bill and that those amendments will be considered carefully and in some cases accepted before further proposals are brought back at Third Reading.

5.27 pm

Baroness Howe of Idlicote: My Lords, I, too, congratulate the noble Lords, Lord Empey and Lord Dobbs, on their quite excellent maiden speeches. I also start by thanking the noble Baroness, Lady Wilcox, for the excellent way in which she introduced this government Bill. It is clear that the Bill is welcome in a number of ways; equally, it is clear that all of us share a number of concerns about how the future will work out for this service-this serious piece of national infrastructure, as the noble Lord, Lord Empey, put it so well-particularly for one of our nation's most cherished institutions, the Post Office.

The Post Office is clearly valuable to all of us but it is uniquely placed to cater for vulnerable and deprived groups. It is also the largest retail network of its kind in the country, with more branches than the major high street banks combined. It has also gone above and beyond its statutory obligations to ensure that it provides accessibility and additional services for those who require them. This is especially true for their disabled and elderly customers.

The Post Office has recently conducted access audits across the whole of the branch network. A temporary team of 50 managers visited over 850 branches and talked with sub-postmasters about their plans to improve accessibility within their outlets. I enjoyed listening to the noble Baroness, Lady Kennedy of The Shaws, about the potential of her further ideas for how they could be even better used. Part of the audit showed that impressive information was gathered about accessibility and facilities, such as low payment counters, induction loops, alternative language availability and other services. Of course improvements are required but the erosion of this valuable network would be disastrous for those who rely on such services. Today I will consider how any deterioration in the network's strength might best be prevented.

First, the Bill is a welcome attempt to address the dire situation facing our universal postal service-Royal Mail and the Post Office. Let us be in no doubt that the future of the two companies, though structurally separate, will be entwined after the passage of the Bill, thankfully. The Bill goes a long way to addressing the problems Sir Richard Hooper identified in the immediate crises facing these companies, as many people have referred to. Perhaps most importantly, it alleviates the crushing burden of the £10 billion historic pension deficit. This alone costs the company around £300 million a year, so that is a most welcome development. It also

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allows Royal Mail to continue on the long and sometimes tortuous path of modernisation-although at a faster pace, I hope.

Secondly, a healthy, vigorous Royal Mail is critical. I am sure your Lordships will be united in wishing to see the business look to the future with greater financial certainty and a substantial investment to meet the needs of rapidly changing consumer demands. Only by modernising and meeting the needs of modern consumers can Royal Mail generate the income to meet properly its universal service obligations. In turn, this should enable it to operate a commercially productive relationship with the Post Office long into the future.

Thirdly, the Bill attempts to address the regulatory landscape in which postal services operate, which the noble Lord, Lord Mandelson, and others have mentioned. There is wide agreement that the current framework has failed. However, I have my doubts as to whether the Bill does enough to provide change in this area. There is a bizarre situation, which others have mentioned, whereby the taxpayer and domestic mail users subsidise private companies to the tune of around £160 million a year through privileged access to the Royal Mail network. I am sure all noble Lords would like assurances that such a scenario does not continue. Again, if the bleeding of funds away from Royal Mail through such regulation continues, it will adversely affect its ability to put business through the Post Office.

I have spoken in support of the Bill as it stands, but what is of concern to those of us seeking to protect the national network of post offices is how little is included on the future of Post Office Ltd. The Bill makes provision for a possible mutualisation of the Post Office. Like others, I welcome that idea but how this will happen is unclear and very much a matter for the Government of the day, whenever that day comes. I believe the Minister for Postal Services has also stated in another place that this will be very much on the horizon some time after 2014. What is of concern to parliamentarians seeking to protect the post office network is the extent to which its future will be at the whim of the policy of the Government of that time, and not subject to the legislation before us.

The present Government have committed to a £1.34 billion funding package to transform the network, which is, of course, very welcome, as, indeed, is the commitment to maintain the network at its current level with no further programme of closures. Nevertheless, when Ministers are trying to tighten the reins on public expenditure, the level of government business being put through the Post Office becomes even more crucial. Until very recently, such business was the most important source of revenue for sub-postmasters. It also raised footfall through their branches and made their ancillary businesses viable. However, as we have all heard, government business has declined dramatically over recent years. Indeed, in 2008, the Government very nearly took away the contract for the Post Office card account-a critical source of revenue-but for the last-minute intervention by worried senior Cabinet Ministers at that time.

The current Government have promised to make the Post Office the "front office for government". What I, your Lordships, sub-postmasters, consumers,

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and many other interested parties would, I am sure, like to hear are specific proposals and commitments on how this can be achieved, and when. Therefore, I look forward to hearing detailed assurances from the Minister when she replies.

5.36 pm

Baroness Wheatcroft: My Lords, first, I welcome the maiden speeches that we have heard from the noble Lords, Lord Empey and Lord Dobbs. As a newcomer to this place myself, I am delighted to be in such illustrious company.

The Royal Mail is something that the British public hold in high esteem. It is not to be meddled with without great consideration. Many of your Lordships will have chosen to forget that unfortunate episode when, in a silly quest for change, the Royal Mail and post offices were subsumed into Consignia. That expensive exercise was later summed up by the BBC as:

"Nine letters that spelled fiasco".

Consignia did not last long; new management tossed it on the pyre of corporate nonsense. As Ecclesiastes says:

"A good name is better than precious ointment",

and, despite its occasional problems, the Royal Mail undoubtedly retains a good name because it delivers a remarkable service.

However, the need for change in the business is pressing. The Bill enables that change. It seeks to separate Royal Mail from the network of post offices. They are separate businesses with a trading relationship that we are assured will remain. However, guarantees of that, at least for the medium term, might be appropriate. The current chairman of Royal Mail has given his absolute assurance of that continuing relationship, and there is every reason why we should trust Donald Brydon. However, as part of our review of the regulatory framework, we might, for the benefit of post offices, seek something stronger. Even the best chairmen do not last for long in corporate Britain.

I wish to make two points, one on each of the organisations which will emerge. The first concerns the crucial proposal that the Royal Mail should be sold entirely. Its need for a new life freed from the constraints of the public sector is clear. There is a future for Royal Mail despite declining volumes. Direct marketing may be junk mail to some of us but is potential revenue for Royal Mail, so is much that is purchased via e-commerce, the business which has taken over from mail order. The picture is not all gloomy.

The universal service obligation must be maintained but we have to be realistic about this. The Bill gives Ofcom the right to review the sustainability of that obligation. It needs to be measured against genuine demand. A recent survey found-admittedly by a narrow majority-that individuals and small businesses would consider a move to a five-days-a-week service if reliability could be upheld. We should remember the outcry at the loss of the second daily delivery. I contributed to that outcry. Some said that it would be impossible to live without that second delivery. Life went on and business did not, on the whole, suffer.

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