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My plea now is that we should aim to float the company through an IPO, rather than to sell it to a corporate bidder, almost certainly from another country.
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Yet, since the success of those early privatisations, the proportion of UK-listed shares owned by individuals here has been on a downward trend. From a height of 54 per cent, it had by 2006 sunk to 13 per cent, and the most recent figures from the Office for National Statistics put the proportion at just 10 per cent. The Bill makes provision for employees to become shareholders, but as we heard from the noble Lord, Lord Christopher, employee shareholders do not always hang on to the stock. A solid core of private investors, however, makes for good corporate governance. These people invest for the long term and take an interest in the company far more than institutional shareholders. Private shareholders turn up at annual meetings and ask questions. Institutional investors are too often the absentee landlords of British business.
An army of "Sids" subscribing to shares in Royal Mail would not be able to turn back the tide of correspondence migrating from letters to e-mails, but they might make a difference. They would see the merit in doing business with the company they owned. They might decide to send greeting cards through the post, rather than merely pressing the button on that abhorrence, the e-card, which is a poor replacement for an enticing envelope arriving through the letter box. For that and for more fundamental reasons, I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government's position is that the sale is open to all comers, but an IPO would get my vote.
My second point relates to the post office network, which this Bill promises will not be sold, although it could be mutualised. Like the noble Lord, Lord Christopher, I should like to hear more details of the proposed mutualisation. Nevertheless, as we have heard, post offices remain a remarkable retail business, each week serving more than 21 million customers. That puts the organisation on a par with Tesco. The Post Office is a trusted brand. Compare that with the banks. The annual trust barometer recently published by Edelman showed that the UK's trust in banks had fallen to just 16 per cent-a 30-point reduction over three years. Hence, I agree with those who this afternoon, led by the noble Baroness, Lady Kennedy, have said that the Post Office is, and should be, an alternative bank. Noble Lords may recall Girobank, launched in the 1960s, but it was not properly nourished and was eventually sold in 1990. Today's climate would surely be more welcoming to such a venture.
The Banking Commission, when it reports later this year, will undoubtedly highlight the need for greater competition in banking. The Post Office could provide it. That is not a novel thought. The previous Government came up with the name, the "People's Bank", although that may have overtones with which
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Baroness Drake: My Lords, I, too, congratulate the noble Lords, Lord Empey and Lord Dobbs, on their maiden speeches. Perhaps I should advise the House that I represented telecom workers, including those in BT, and following union mergers became an employee of the CWU as deputy general secretary of its telecommunications sector.
I am concerned about the regulatory framework within which a privatised Royal Mail will operate and the implications for investment in the company and for the universal service obligation. There is a broad view that the regulation of Royal Mail has been harsh. That is clearly Moya Greene's view. Richard Hooper stated in his report that he was,
The compulsory regime of access to Royal Mail's network, particularly downstream access-local delivery in the last mile-results in Royal Mail subsidising its competitors. As my noble friend Lord Christopher and the noble Baroness, Lady Howe, said, Royal Mail makes an average loss of 2.5p on every letter that it delivers on behalf of a competitor. The subsidy is of the order of £160 million a year.
"Cherry-picking is a big issue ... It basically means that somebody comes in and starts delivering two days a week to Liverpool, Birmingham, Manchester, Edinburgh, Glasgow and Cardiff, and then expects the rest of his or her mail to be delivered by Royal Mail to all the nasty places that cost lots more money".
I am advised that Royal Mail has now lost 60 per cent of the upstream bulk mail market to competition in this way, and the figure keeps rising. It is also subjected to significant price regulation even in the most competitive parts of its market. That regulation has an asymmetrical feel about it. It will not sustain a viable business model; it will not secure major capital investment; and it will not deliver the requisite universal service.
It is clear that a truly universal national service that ensures delivery at affordable prices and meets the country's social and economic needs requires cross-subsidisation. If Royal Mail ceases to be a publicly owned body and becomes a private company, there will be a need for considerable confidence that the Government are giving to Ofcom both the instruction and the power to prevent cherry-picking damaging the
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Market conditions for postal service operators are challenging because of the growth of e-substitution and digital media, as any potential buyer will know. The regulatory settlement must allow the owners of Royal Mail to succeed commercially and bring capital and investment to the company in a manner that meets the needs of the users and sustains the universal service. Ofcom has a good reputation, but experience teaches us-the evidence is there-that regulators do not always get it right, and certainly not first time, when they set the terms and price for network access. This can undermine the level of capital investment in the major network provider. Equally, determining the definition of universal access and service requirements and the extent of the cross-subsidy can be greatly contested, particularly in changing and challenging market conditions, and the citizen's national strategic interest can be lost in that debate.
In postal services it is important that the response to this challenge-because that challenge will be there and Ofcom will have to address it-is not to reduce the extent of the universal service and the products delivered. In fact, in our e-commerce world there is a powerful case for strengthening the obligation. If the new regulatory regime is to place postal regulation within the broader context of the communications market, it is important to remember that for many small businesses, certainly in rural and remoter communities, a universal postal service is as important as broadband access to their ability to participate nationally and internationally in an e-commerce world. The statistics confirm, for example, that internet sales are a growth area in the mail market, with internet shopping estimated to be worth £60 billion a year.
If the Bill does not unequivocally secure a meaningful universal service for all communities across all geographies in the country, many will be disenfranchised from areas of the mainstream-whether that is a cluster or hub of companies in Cornwall or the Highlands or a grandmother receiving a birthday card at her door. More than 10 years ago, I and many others argued passionately for universal access to broadband when regulators and civil servants were saying that such a proposition was unachievable; now, the debate is about speed and the need for universal access is simply taken as a given. Many people and companies cannot universally engage in e-commerce without the logistical back-up of an efficient and affordable universal delivery service.
The Bill sets the primary duty of Ofcom in relation to postal services as securing the provision of the universal postal service, but it also gives the regulator the authority to review what it considers must be provided by such a service. The Bill potentially weakens the universal service obligation. For example, it allows Ofcom to assess the financial burden of the universal
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Indeed, Ofcom is directed to review the minimum requirements within 18 months of the passage of the Bill, which coincides with the time period over which the Government are looking to make a sale. A private company interested in acquiring Royal Mail will act in its own commercial interests and may well seek to push for a narrower definition of requirements or resist a lock-in to the post office network. Governments keen to secure a buyer will be under pressure to maximise freedom for the purchaser. A great deal is left to regulation. There is a real risk that the rigour of a regulatory review in the interest of the citizen and the consumer will be a casualty of the forces of political pragmatism, for whom the necessity of achieving a sale will be paramount.
The House of Lords Delegated Powers and Regulatory Reform Committee, while recognising that many of the delegated powers in this Bill are the same as those in the earlier Bill from the previous Government, drew to the attention of this House that the Bill gives a significant power to the Secretary of State to alter the minimum requirements for a universal postal service. This indicates that parliamentary oversight of changes to the requirements should be strengthened, and certainly that Ofcom's review under Clause 33 should be laid before Parliament in a report. This, I believe, would be consistent with the recommendations in the 2008 Hooper report.
In conclusion, I have stressed what I believe to be both the economic and the social value of maintaining a universal delivery service. However, I certainly do not have in mind Charles I-not known for his willingness to be accountable to Parliament-who, my historian husband assures me, used his Royal Mail officials to regularly open and illegally copy diplomatic mail from the French.
Lord Cotter: My Lords, I am glad to be able to welcome the Postal Services Bill here today. I also welcome the two excellent maiden speeches given by the noble Lords, Lord Empey and Lord Dobbs. When I heard the speeches of the noble Lords, Lord Mandelson and Lord Hunt, I had a sense of déjà vu, which the noble Lord, Lord De Mauley, might share. I hope that on this occasion we shall see a successful conclusion to our deliberations. I apologise to the Minister for not being present for a few minutes at the beginning of the debate. I heard most of her words and shall read the rest in Hansard.
As has already been made clear, everyone expects that some action has to be taken to improve the current situation with the Royal Mail and the Post Office. The Bill addresses that and is designed to improve the current problems that the services face. It is also important to note that the Bill takes a major step forward in committing to at least 10 per cent of share ownership by the employees. That will ensure that there is not a total privatisation. The unsuccessful Bill introduced by the previous Government did not contain such a provision for shared ownership.
It is important that the Post Office diversifies and opens up its services by encouraging new initiatives. Those will include post offices in rural areas perhaps, developing services tailored to customers' needs or providing a one-stop shop for government services in inner-city areas by offering services such as the verification of documents and the processing of benefit payments. I know that there are many other ideas about how to use the Post Office in the future. I welcome the fact that the present Government have committed funds to support this process. We must encourage an entrepreneurial spirit to ensure the Bill's success and generate innovative ideas.
It is a pity that the post bank initiative has not been carried forward in the Bill, as there is room for alternative systems in light of the banking crisis. I ask the Minister to clarify any role that a post bank or similar could have in the future. It is certainly very useful that the consumer can access the big banks' services through post offices, but it will be good if other initiatives can come forward. Recently there has been quite a lot of talk about the expansion of credit unions, for example. The noble Baroness, Lady Kennedy, and the noble Lord, Lord Christopher, spoke about that aspect of the future for the Post Office. Where you have local post offices, it is very important indeed that people feel that they can use them in some form as a bank.
Coming from a small business perspective, I know that the Royal Mail and the Post Office have played an integral part in the running of businesses on a day-to-day basis. Like many others, I welcome the fact that the Bill reinforces the universal service, which ensures that small business's needs are listened to and considered. Some 77 per cent of small businesses say that they use the Post Office to send their parcels to their clients and customers. It is so important that this Bill will be part of the process to ensure that we get good delivery of the mail and a good service locally for businesses and people in all parts of the country.
Mutualisation has been mentioned, and I know that that will be developed when we discuss the Bill in Committee. It is another very important aspect of the Bill in terms of the changes that we can and should make. I welcome the Bill. I believe that it lays down the necessary framework to ensure the future success of the Royal Mail and the Post Office.
Lord Rowe-Beddoe: My Lords, I support the Bill, which, in principle, I welcome warmly, as indeed I supported in principle a Bill on similar matters which the then Government introduced in 2009. The Bill has in many respects cured certain significant defects in the 2009 version.
As many noble Lords have said, there is much probing to be done as well as the tabling of amendments at later stages to ensure that the sale of Royal Mail achieves optimum value for the taxpayer, on the one hand; and, on the other, that it secures a universal postal service which is appropriately enshrined in statute.
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Responsibility for the universal postal service within a private entity must receive greater protection than the Bill provides. Accountability to Parliament needs to be strengthened, and your Lordships may also wish to consider a requirement for primary legislation before any changes to the service can be made.
I welcome the proposal to allocate equity to employees, and I am very pleased to note the considerable improvement in labour relations within the Royal Mail since the arrival of new management. Longer periods between the review of the universal postal service must also be considered both to assist the attractiveness to a purchaser and to provide greater confidence to the public and to Post Office Ltd.
I turn briefly, therefore, to the part of the Bill dealing with the transfer and establishment of the Post Office company. Assurances have been given in the Department for Business, Innovation and Skills document CM 7946 of October 2010. On page 3, it provides six government commitments. I draw your Lordships, attention to the statement:
I echo what some of your Lordships have already said this afternoon. Some provisions of the Bill are too short term for either the new company, Royal Mail or Post Office Ltd to have confidence in their respective business plans. They need an interbusiness agreement of a longer duration than that in the Bill. Whereas I appreciate, as the noble Lord, Lord Razzall, said, that such matters should be more properly negotiated commercially between the two parties, it is the duration of that agreement that gives me concern. I believe that that is crucial to stability for both parties and for the public. Indeed, the duration of any further amended agreements should be considered.
I hope that the Government will consider strengthening their commitment to maintaining the current number of post offices. In her introduction, the Minister referred to certain "myths". Within the current stable of our post offices, I understand that there is some confusion about definition. For example, of the current number up for sale, how many are being blighted by the uncertainty about an interbusiness agreement? How many of those up for sale are classified as "long-term temporary closures"? In regard to Crown offices, am I right in understanding that the guarantee for them expires at the end of this year?
Finally, I am sure that we are all relieved that the pension deficit will be removed. However, perhaps the Government will at some stage inform us of what is planned for the assets of the pension fund, which I understand are estimated at around £26 billion.
Lord Selsdon: My Lords, I think that I have to admit that I am standing here today only because of the Post Office. As a hereditary Peer, I have to recognise that a peerage was conferred on our family probably entirely because my grandfather was Postmaster-General, although I was later elected here. It is strange that you should have an affection for things that your ancestors have done. Before this debate, rather than going to the Library again and reading all the regular documentation, I read through the 365 entries in Hansard where my grandfather, as the longest serving Postmaster-General in history, had to deal with things. I looked first and foremost at Postmasters-General. They all had a charter. What it said was:
In my grandfather's case, I do not think that it was ever rescinded, so I have to feel that I may have some legal obligation to take the powers offered by this Bill. I will probably look at that with an international lawyer. However, today I shall be supporting not the Government-because, quite frankly, of this strange coalition agreement; I have considered forming a Select Committee to scrutinise the coalition agreement-but my noble friend Lady Wilcox, for whom I have great admiration. She is without doubt the best person to be in charge in this event.
As my noble friend will know, the greatest number of questions asked of my grandfather related to post offices in Cornwall: why there were not three deliveries a day, why there should not be more post offices, why a letter posted in Padstow should not arrive in Tre-something beginning with T-within so many hours. So I had a look and thought, what is the change now that we are introducing a Bill? First, however, I should say that this has been the best debate that I have listened to for a long time. I wish that all the other stuff that has happened over the past few days had been put down at the bottom of the pile. I was the one who also supported the Isle of Wight, which also should have more post offices.
I have had dealings in the communications world-and do not forget that the Postmaster-General was in charge of absolutely every form of communication, including the telephones, the cables under the Atlantic and so on. I think that we should bring back the role of Postmaster-General. Perhaps I would apply. Perhaps the Minister can tell me who the current Postmaster-General is. Is he part of BIS? All the names get changed. All these mnemonics that I cannot understand should go out of the window. The thing about modern technology is that Cornwall, Wylye or anywhere else, even Egypt, is only a button-press away. Distances no longer apply if you are using the latest technology. You therefore have to say on the one hand, is it not wonderful that Royal Mail still has a good image for security, trust and confidence? Is it not wonderful that each post office sub-postmaster also has an image and a reputation? All they are lacking is turnover and facilities. You have to look at what could be done.
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The Post Office and everything that goes with it is a public service, no matter who owns it. It is an essential part of any institution. Without it, you can have revolution; communication is everything. I was trying to think of how we could change it around another way. I thought: let us look at what starts new businesses. We used to call them enterprise zones. Perhaps every post operation should be an enterprise zone. Perhaps the tax allowance system should apply in every regional area. That could provide benefits. Perhaps those who invest in it could do so tax-free with pension money.
I had all sorts of thoughts about communication. I am secretary to the Parliamentary Space Committee, and I rang up a few of my friends and said, "I want two satellites that will provide instant communication for all the sub-post offices and post offices around the country". The reply was: "No problem, my dear friend. It's easy". They could have a little station in each of their operations, where old Mrs So and So who wants to be able to talk to her grandchildren can go in, press a button and there it is, without having to sub-contract or to try to learn some of the modern communication systems that we have here.
Your Lordships are pretty advanced in a way; perhaps 50 per cent of you know how to use the internet properly. The Government make an automatic assumption. You press a button and you have sent out a document showing the Prime Minister shaking hands in a coloured environment, but you find that the time to download it is not there. "Am I meant to vote?". You do not understand. You then watch people trying to use their new system without knowing whether it is proper or correct. It is somehow an educational problem.
For me, the post office structure is a simple matter. It has an unknown value; you cannot put a capital value on it. If you privatise it, you move very quickly around the historical route. You find that various investment banks suggest to foreign investors that here is a reliable cash flow that can be used to hypothecate certain debt so that they can come in and buy the business out of the country's own money, probably disposing of it at some sort of profit at a later date. These are what you often call financial instruments, but most of the privatisations in this country have ended up in foreign ownership. That might not matter, but most foreign ownership, with the exception of the United States, is not English-language anyway.
We have the great advantage that the English language is spoken by 3 billion people around the world. We should look at our postal system's ability to communicate directly. Historically, it was part of the empire. We should not forget that the Postmaster-General was also responsible for laying the cables that went off across the Atlantic and to Australia. We had that
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I commend the Bill but not its details. I commend the Minister because I know that she is one of those people who will fight her way through any of the obstacles that come up. If noble Lords have nothing better to do one day, I will arrange for them to have direct internet access to all the great speeches made by Postmasters-General over time.
We have too much direct mail and undesired communication. I have calculated how many tonnes and the cost of what we have to throw away. We worry, too, about our identity. We are buying more and more shredders to put our names and addresses into so that no one can send us things. All I would say is that this is a worrying aspect, because security is critical and Royal Mail probably has an image that could stand that security.
"Under existing legislation I am not in a position to stop such circulars in the post. A Bill for amending the law so as to prohibit the sending of unsolicited circulars of the kind has been before the House".-[Official Report, Commons, 16/12/1925; col. 1455W.]
Baroness Kramer: My Lords, it is intimidating to follow a Lord who has the postal services in his DNA, but I am delighted today to be able to welcome this Bill. Like, I suspect, many in this House who hugely value the whole range of services provided by Royal Mail and the post offices, I have watched with dismay over the last decade as the Post Office and the Royal Mail seemed to go into a slow death spiral, watched over by a Government unable or unwilling to intervene. I commend the Government and Ed Davey, the Minister in the other House, for their courage in tackling what was always regarded as a step too far. Matters have been left to the point that the Royal Mail and the Post Office have been left in an utterly precarious financial situation such that action is vital and urgent.
So many remarks have been made on the Floor of this House-it has been a comprehensive debate-that I will confine myself to commenting on three particular areas. First, on the post office network, I understand that the Government have committed themselves not to have a new closure programme. I want to ask whether they agree that it is necessary to reopen or re-establish post offices in some areas-I am not talking wholesale-given that 7,000 post offices have been closed over the past decade.
In the early years of the closure programme, very little attention was paid to the impact on coverage, on need or on the service provided in the community because of where other post offices were located. In effect, as we know, sub-postmasters who were willing to close were offered a bounty-of about £40,000 on average, I think-which was taken by people who were close to retirement or who had a buyer for the premises. The consequence was random closures across the country.
For example, in my old constituency of Richmond Park, the most deprived ward of all-the Ham ward-lost all its sub-post offices in that period, so there is now not a single post office in the entire ward. I remember very clearly a meeting with senior officials from Post Office Counters who proudly produced a map and pointed to a post office in nearby Teddington, which they explained people in Ham could go to. However, they failed to recognise that the blue line separating Ham and Teddington was the River Thames. While I greatly admire the citizens of Ham, their ability to walk on water is extremely limited. That kind of nonsense was repeated, and elderly and vulnerable communities now have no post office service as a consequence.
There have frequently been discussions around the needs of rural communities, as we have heard again today, but I remind the House and the Government that these issues can apply just as much to urban and suburban communities. If a post office cannot be reopened, the kind of project that is being discussed-of integrating post office services into, say, shops or other kinds of enterprises-should be just as available in urban and suburban areas as is beginning to be the case in rural areas. I put down a marker on that issue.
The second issue I would like to address very quickly-this is now switching over to the Royal Mail side-is that of regulation. On this, I can be very brief because the noble Lord, Lord Low of Dalston, who left just before I got to my feet but who is respected by all for his wisdom, clearly raised some of these issues. Many of us are concerned that, historically, the regulator has in effect required Royal Mail to subsidise its competitors in the bulk sorting business in the way that it has set the headroom price for delivering letters over the last mile, which of course is done only by Royal Mail. That is one example of where regulation has had the effect of undermining the financial viability of the universal service provider. All of us, I believe, see that as a situation that cannot continue.
I am very positive about the shift of regulatory responsibility to Ofcom, which has a much broader commercial experience, but it will be novel for Ofcom to regulate a business in which the underlying activity is in decline. Therefore, there are some real questions around that.
I very much recognise that one task of the regulator is to protect the consumer and to keep prices as low as possible, but the financial viability of the universal service provider has got to be a significant and major consideration. While that is mentioned in the Bill, there is some scope to discuss how we might strengthen the regulator's role in the Bill. That might be particularly urgent given the importance of engaging new investors as early as possible and given that uncertainty is the enemy of new investment. To be able to engage with new investors to make sure that money can be brought to Royal Mail as early as possible to achieve the modernisation that we all want, we have to make sure that regulatory uncertainty is constrained as much as possible. Again, that was an issue that I wanted to underscore and bring to the attention of the House.
My last set of issues is around what I think is a lost opportunity. A number of people have spoken of their regret that nothing in the Bill brings forward a Post
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Ed Davey, the Minister, has talked about the importance of using the Post Office to link much more with credit unions. ABCUL, which is in effect a trade group for the credit unions, has been positive about that. If that moves forward, individuals will be able to join a credit union through their post office and perhaps have a small line of credit with a credit union that they could then access through the post office, and there would be some services. That would be beneficial. However, the credit union world in the UK is highly fragmented, with extensive services in one area and none in another. In each neck of the woods, credit unions are different in how they are constructed, in what they offer and in their remit. Therefore, what has been suggested is hardly a comprehensive solution.
A post bank could offer a much more comprehensive solution. Consumer Focus has done some good work-I commend it to the House-in both consulting and reporting on that option. I understand the difficulties because of the relationship with the Bank of Ireland, but we should pursue this. Consumer Focus comes to the conclusion that at least 1 million people who are financially excluded could be included through a Post Office bank. The Post Office is an institution that people trust, and that trust is worth a great deal. Also, a post bank could have the kinds of accounts that no major bank would ever consider, such as adapted versions of accounts that allow people on low incomes to do direct debits. That would let people access the best rates for electricity, gas or other services, from which they are currently excluded because, as noble Lords will know, basic bank accounts offer no direct debit capability.
There is a whole range of options that the Post Office could offer because of its trust, its customer base and its reach, if we wanted to bring new financial services into it. Financial inclusion was an important issue for the last Government-I assume that it is still for the Labour Party-and it is certainly important for my party and, I understand, for the coalition. Here is an opportunity to pursue that goal, so I hope that the Government will consider it seriously. During this period of change, I hope that this opportunity will not be lost.
Lord Brooke of Alverthorpe: My Lords, I congratulate the noble Lords, Lord Empey and Lord Dobbs, on their excellent maiden speeches and look forward to listening to them again in the not-too-distant future.
I was one of those who spoke strongly in favour of the Labour Government's 2009 Bill, notwithstanding my trade union background. I did so principally because of my experience in working with the NATS public/private partnership-to which I shall return in a moment-but also because the Hooper report demanded that action needed to be taken if all the things that we treasured about the Royal Mail and the post office network were not to be gravely put at risk in the future.
I supported that Bill for several reasons. First, it would have provided much needed private capital investment. Secondly, it proposed to change the regulatory regime. Thirdly, it would have safeguarded the universal service obligation, which is potentially under threat. Fourthly, it would have safeguarded the staff's pension fund and other entitlements. Fifthly, it would have speeded up modernisation-with capital coming in, as well as new management, which would have injected new approaches. Additionally, there was the opportunity for providing what I felt was a potentially greater chance for more employee involvement and participation than had previously been the case. I bow here to the noble Lord, Lord Hunt, and acknowledge that he was at the forefront of pressing for changes in that regard-indeed, our proposals were modest by comparison with what is before us now.
Those were the overall issues that I looked to be addressed in the 2009 Bill. When I try to make an assessment of the new Bill before us, I see that much of that is being delivered in one way or another. There are concerns in a number of areas where people want further reassurances, on safeguards for the universal service obligation and so on, but I anticipate that, as we take the Bill through its stages in this House, we will move a lot closer to a good deal of agreement on those outstanding issues.
However, one topic which still disturbs me and on which I will pose a number of questions is the difference between what we were seeking in 2009 and what is now on offer before us. In 2009, a part-privatisation, or PPP, was proposed; now we have what I understand will be a straightforward, 100 per cent privatisation. I have not as yet heard the case made for going 100 per cent rather than having a partial privatisation. I looked at the Liberal Democrats' manifesto when they went to the country. They were elected on the basis that they would go for a mutual and would look for a 49 per cent stake remaining with the state. I looked at the Conservatives' manifesto when they went to the country. They said nothing on this-quite wisely, since the nasty party, as it is alleged to be by some people, does not go around offering possible privatisations when general elections are coming up. In the Labour Party, we have heard some different views expressed today. As I see it, my Front Bench are broadly as open-minded and as willing to embrace change as they were in 2009. I am not sure, however, that we are convinced that we should go all the way with 100 per cent privatisation.
In 2009, we would have kept the Royal Mail and the Post Office structure as a British business. It was interesting to hear the noble Baroness, Lady Wheatcroft, who I am sorry is not in her place but who made a very radical speech for the Benches from which she comes,
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I do not think that it is being a little Englander to take this perspective, so I take issue with the noble Lord, Lord Mandelson, on this. I am a European at heart-probably not as much as he is-but I am also interested in what other Europeans do and how they look after themselves, their communities and their businesses. We find that very few of them run at the front with the liberalisation as we do in this country and offer themselves openly for anybody to come and take them over. Among the population at large, there is an increasing resentment at the way in which the political classes sort things out and ignore their views in a given area. We have to be cautious about this.
I return to the subject of NATS, a PPP for which full privatisation is contemplated. NATS has had all the freedom it needed to raise all the capital it wanted; it has brought in people from the private sector to run the show and has been run entirely without the Government interfering in its operations. NATS even has an element of overseas money invested in it. CAA has 4 or 5 per cent of the shares but, as that is now a Spanish company, NATS is not wholly British owned. If NATS, a strategic part of safeguarding this country, was fully privatised, it could possibly end up in the hands of people overseas. If we go that way, I would bet any money that the German air traffic service will take over the British air traffic service. What an irony that would be. I say no more than that.
On Royal Mail, I want to ask my friend the Minister-we are very friendly, and we have exchanges on a number of issues-this question. What will be the difference between going for a public/private partnership, in which the majority of shares go into the private sector and the Government hold 25 per cent-a golden share-and going all the way with a 100 per cent privatisation? The papers are almost encouraging foreign money to come in and take over Royal Mail. That is seen as inward investment and something to be encouraged. What is the difference? I listened to my noble friend Lord Hunt and to my noble friend Lord Mandelson, who described what had changed in his mind between 2009 and now, but I did not hear the total case of why we had been unable to bring in money on the kind of scale that was needed to keep Royal Mail going. He did not say that, because he did not get far enough down the road.
The British public need to be persuaded because a policy is being pursued on which no one has legitimate backing from the public at large. No party went to the country with a manifesto proposing what is now before us. We should recognise the ill feeling that people in certain quarters have towards what is happening with some companies and utilities which, bit by bit, have now been taken over by foreign companies.
CAA is a typical example. Having bought as much as it could of this country's airports, CAA has over-reached itself and now has to meet phenomenal interest payments and cut corners wherever it can to ensure that its profits are sustained. We saw the results of this before Christmas when Heathrow did not have
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If there is privatisation, will subsidies continue to be paid to Royal Mail plc in the future in the way in which we continue to subsidise many utilities which have been privatised? Again, many people feel very unhappy about what is going into these privatised utilities, especially when they see the profits that are being made by them.
On the sale of shares, I shall try to be as helpful and as constructive as possible. I give the Government support for their effort to try to get greater staff involvement, perhaps by selling shares to them at a discounted rate. Whichever way they decide to tackle this issue, I await with interest to see the approach they adopt to the share ownership scheme. A number of options are open but, as yet, their approach is unclear. However, in general terms, I welcome it.
There may be some merit in the Government contemplating serious discussions in an area where, on occasions, there has been great difficulty in moving forward, to see whether they can persuade the CWU to have a stake in the new company. If so, the question is whether they could fund that entirely on their own or whether the Government might make an offer to go in partnership with it into this private limited company, or even offer shares at a discounted rate as with employees. We need a new initiative on that front. Simply bringing in new management with new money may not necessarily resolve some of the problems of the past, even though many people believe it will change it overnight. We need to have a change of attitude within the union too, if we can persuade it, to get it more involved and playing a bigger part, which would lead to growth rather than the continuing diminishment of the operation.
Lord Sawyer: My Lords, I also begin by congratulating the noble Lords, Lord Empey and Lord Dobbs, on their very good maiden speeches. They were delightful to listen to and I look forward to hearing much more from them in the future.
There was an inevitability about some kind of privatisation of the Royal Mail because, given that the previous Labour Government were intent on that, it was not unexpected that this Government would follow suit. I remember when Patricia Hewitt was the Secretary of State at the DTI, she got very close to a deal with TNT for privatisation, but a small number of factors-including, sadly, the then not very satisfactory industrial relations-prevented TNT from taking it forward. Some kind of privatisation was always going to be on the cards and I guess this Bill in some form will go through.
My noble friend Lord Mandelson then took on the next Bill for the Labour Government. He was thwarted by the votes in the House of Commons and certainly laid some of the blame-if that is the right word-on the CWU and its lobbying. However, the CWU had an absolute right to lobby and members of the Parliamentary Labour Party would claim their independent judgment when making their own political decisions. I am sorry that the noble Lord, Lord Mandelson, is not in his place to hear me say that.
I am slightly disappointed about the Government's decision simply to dust down the Hooper report with some added modifications. I was hoping, based on the Liberal manifesto, that we might see a wider look at how we might own-or who might own-the Royal Mail. I was also, to be honest, quite interested in the things that David Cameron has said about ownership and different forms of ownership and about the involvement of charities and not-for-profit organisations. Perhaps between the synchronisation of those two points of view we might have had a slightly different approach, which Members have spoken of this afternoon-for example the not-for-profit approach of the kind that was suggested by the noble Baroness, Lady Kennedy, in her speech. Nevertheless, time is very important and the business has to modernise and go forward. Maybe there has not been time for that longer consideration.
One of the things that disturbs me most of all is this idea that the Royal Mail should be separated from the Post Office completely, and that the Royal Mail should be sold to a private buyer and the Post Office should perhaps be some kind of a mutual. In the medium to long term, this could have very serious consequences because they would become very different kinds of organisation. Although there is an intention in the Bill to make sure that they co-operate for a period of time, if you think several years ahead, the Royal Mail could be owned by a very aggressive private company, which might or might not be British-we do not know-but the Post Office could be a very British mutual with mutual values. The standards that would be held very dearly inside both those businesses would be very different.
There is a little bit of a problem on the government Benches in that they have little or no experience of what it means to run a mutual. I was for many years, although I am no longer, the director of a big mutual, and I can tell you that your job is to guard the mutual ethos. You are looking for trading partners who are going to think, act and behave in the same way as you do. If you are faced with a multinational company that has very different standards and approaches-as may well be the case-towards investment, to where it invests its pension funds, to how it treats its staff and to who it trades with, you could be in some difficulty trying to get those two organisations to work together in five or 10 years' time. You need to think not just about what is happening today but what it might be like with a fully privatised Royal Mail and a fully mutualised Post Office. That is something that we need to think about.
I have listened to both Moya Greene and Paula Vennells, the respective chief executives of both businesses, on platforms saying that they support the idea of
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On the privatisation of Royal Mail, I accept that we need to keep modernising and going forward. I do not know whether that is possible with the present ownership, but I would like to think that it is. I have read extensively about Moya Greene's contribution. I have never had the pleasure of meeting her, but she has a tremendous reputation and she seems to have done a really good job. Of course, her board of directors is almost totally out of the private sector and has massive private sector business experience. I do not know what you would expect the board to look like in a privatised company, but it might not look very different from the one that we have now.
My view on where to go with the privatisation of Royal Mail remains open. I would like to see Royal Mail remain in the public sector. I am impressed by the modernisation agreement that the unions and management have been able to agree. They are going forward, and some of the processing that they are doing now is some of the best in the world. Industrial relations have improved, with people working together. There is not as yet a satisfactory answer to how to access capital. Noble Lords have said that that may be possible under different forms of ownership, but I would need to be convinced that any model that was not in the private sector to some extent had the ability to access the capital that it needs to go forward. I certainly hope to think and learn more about that as the Bill makes its way through Parliament.
My final point is on culture change, which is something I have always been interested in with regard to the Royal Mail. I had an opportunity to work with both sides on that for some time. Regardless of whether Royal Mail or the Post Office are public or private, the good industrial relations are to be welcomed, but the real question is whether the control and command management that dominated the industry has really changed. Has Moya Greene got hold of that and made significant progress? I do not know the answer-nobody does-but I hope that that is happening. It is fundamentally important, wherever the business ends up, that we continue to build trust between the people who work in the industry and those who manage it and that the two sides work together on problems. That is something that has not happened in the past, which has often frustrated the management. Ways need to be found in which people can work together and sort out problems jointly. If we do that, we will make the right progress.
Lots of noble Lords have talked about the share ownership issue. The noble Lord, Lord Brooke of Alverthorpe, has greater knowledge and experience of it than I have. His point about engaging with the union and seeing whether we can get the unions on board with some kind of scheme is a very good one and well worth taking on board. We must not write off the union or think of it as a backward-looking organisation. I tried to persuade the union, as did others, that it
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I have listened to noble Lords with business experience in this Chamber and the politicians who have spent a lot of time trying to remedy the wrongs, and a lot of emphasis is placed on capital and modernisation. However, the postal service is about engaging with people; it is massively a people business. We must not lose sight of the fact that, no matter what we say about things, it is people who really matter. Capital, the commercial aspect and discipline are all very important, but at the end of the day it is a people business and we must ensure that we never lose sight of that.
Viscount Tenby: My Lords, we have been blessed with two excellent maiden speeches today-I say that even though I am breaking the unwritten rule by mentioning them. There is safety in numbers, probably.
Considering the amount of discussion there has been about our postal services over past years, it is perhaps surprising how this Bill was almost unchanged during its passage through the other place. I suggest that this, in part, reflects the fact that all sides accept the need for fundamental change to present arrangements and because of the parlous state of Royal Mail finances. With all these historic institutions, ranging from the Post Office to the railways, I am often struck by the disparity between the people at the sharp end-postman, ticket clerks and the like-and the executives further up the chain. I firmly believe that the front-line staff which these organisations have are a priceless asset and I pay tribute to them today.
Time is short, so I will confine myself to one aspect of the Bill today. That is the effect that these proposals might well have on what is by far the largest group in the Post Office retail chain, namely: the 6,000 or so sub-post offices, which form such an important part in the life of rural communities. Indeed, if there has been one central vein throughout this excellent debate, it has been the emphasis on the social importance of such an organisation. These franchises-for that is in effect what they are-cater for an often elderly population which relies on them for a whole host of postal, financial and administrative services ranging from insurance to the purchase of car tax. Those facilities are there, on the doorstep, for the many unable to get into neighbouring towns regularly and, it should be added, for the many unable to access these necessities via the internet. Incredible as it may seem, there are some like that.
The Government have already stated-and I applaud them for it-that they will not engage in any compulsory closures within the network. I especially welcome that
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For the year 2011-12, the Government have promised a grant of £180 million but I wonder whether the Minister can tell me what percentage of that figure is swallowed up by the flagship or Crown offices where, as I am sure she will agree, the social benefit is considerably less than that generated by the sub-post office network. She will not have the answer to that and I apologise for bowling it at her tonight but, since I am in the mood, perhaps I might ask the Minister a further question. A considerable sum has been earmarked to reform the current network. Can she confirm that this reform includes the conversion of as much as two-thirds of the network into Post Office Local and basic and outreach facilities?
It is all very well to promise an end to the closure programme but, on reduced incomes-some have calculated the reduction to be as much as 75 per cent-many sub-post office franchisees will regretfully decide that they are unable to carry on. The possibility of future mutualisation, perhaps based in some way on the John Lewis profile, has received a cautious welcome across the board. Yet whatever the final solution, what surely cannot be denied is that the 6,000 Post Office local outlets should be adequately represented-I stress, adequately, not by a token representative-on any Post Office board. I would welcome the Minister's assurance that the Government fully accept this vital requirement. After all, many franchise holders have considerable entrepreneurial skills that are not always replicated in the higher echelons of the Post Office itself, even though I am sure that other attributes are present in abundance. It would be folly not to take advantage of that readily available asset.
There are many important matters to discuss and settle in this Bill. I am aware of that but I make no apology for concentrating on this one point. In times past the Conservative Party has emphasised its pride in and devotion to the rural economy and the countryside. This emphasis on the community is a worthy feature of Liberal traditions as well. I can think of no better way of affirming these values than by helping to ensure that small communities throughout the length and breadth of this country retain their village shops and services. I ask the Government, through this Bill, to be sensitive and imaginative in dealing with these needs.
Lord Cope of Berkeley: My Lords, I will not begin by congratulating the two maiden speakers. It is a written rule in the Companion that that should be done only by the speakers following the maiden speakers and by the Front Bench. It was extremely effectively done by the noble Lords, Lord Low and Lord Hunt, respectively, so I shall reserve my congratulations to the maiden speakers for outside the Chamber.
I support this Bill and the changes that are proposed for Royal Mail, the pension fund and so on. My concern, like that of the noble Viscount, Lord Tenby, is about the post office aspects of the Bill, particularly for the sub-postmasters-the archetypal small business people in our country. We need them to flourish for all the reasons that the noble Viscount touched on and which others spoke about earlier in the debate. It is not obvious from the report and accounts of the Royal Mail holding company but sub-post offices-not the Crown offices that we often think about-are, by different measures, the largest part of the Post Office. The two types of business are, in some respects, in direct competition.
I live in the beautiful city of Bath. Not long ago, the Post Office drew a circle that centred on the Crown office in the middle of the city and compulsorily closed all the sub-post offices within that circle. The result is that now we all have to queue at the Crown office. I am glad to say that the Crown office has installed a sophisticated electronic queueing system, which is a great help. I am very thankful for that but the wrong decision was made earlier. Fortunately, the Minister repeated the coalition Government's pledge to maintain the network. It is a most important pledge, to which I am certain they will be held by many people, not only me.
One important point is that a Crown office can lose money and still keep going, whereas a sub-postmaster who cannot make money will see his business collapse and close. He loses not only his job but his own money and investment, and his staff also lose their jobs. Sub-postmasters cannot keep going if they are not flourishing. Sub-post offices are not the poor relations of the Crown offices; they are the real engine of the Post Office itself. They are the part that works financially and, incidentally, the part that is popular with the public.
I said that the annual report and accounts do not distinguish between the contributions of the two types of post office, but I understand that about 80 per cent or 85 per cent of the Post Office's turnover comes from the sub-post offices, of which there are around 11,000. The rest comes from the 373 Crown offices. It is clear that the Crown offices collectively make the loss that the Post Office has suffered in the past year or two-or longer than that-and the sub-post offices make a profit over and above what is retained by the sub-postmasters as their income.
We all know, as has been said several times this afternoon in various forms, that the way forward for both Crown offices and sub-post offices lies in new types of business, particularly government business-the government front door, as it were-and financial and banking business, which my noble friend Lady Wheatcroft and others have spoken about. This should in my view be available to all types of post office. More flexible franchising arrangements are desirable. Some pilots are being run of what I understand is called the Post Office Local model. That is a fairly ridiculous name as all sub-post offices are local, but I let that pass. The terms of the new franchises are said to be very restrictive. Post offices should in my view-they are not, apparently-be allowed to have more flexible opening
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All this is the background, as it were, to the post office aspects of the Bill. The Bill provides in Clause 4 and the related clauses a framework for the mutualisation of the Post Office. I support employee involvement in general, including share ownership. However, as the noble Lord, Lord Christopher, indicated, the sub-postmasters and their staff are not in a comparable position to the employees of the Post Office in the Crown offices and in the headquarters and the regional offices, and the same arrangements will not be applicable to both groups of people. I believe that the Post Office has some 5,000 staff in total. There are twice as many sub-postmasters and sub-postmistresses and each employs their own staff. They may employ four or five members of staff, depending on the size of the office. They are not employees of the Post Office and it would not be right to provide for employee participation without providing for the participation of the franchisees comprising sub-postmasters and their staff who far outnumber the Post Office employees and who actually generate the profits.
I find it difficult to see how you can mutualise through a share scheme on the lines of the BT scheme-that was mentioned earlier, particularly in connection with the Royal Mail, where different considerations apply-in respect of the Post Office. How can you equate someone who has a job in the Post Office with someone who has their own business, is responsible for the staff they employ, has invested their own money and money they have borrowed, and for whom, in most cases, post office business is only part-admittedly, a vital part in many cases-of the service that they provide to the public? How do you measure what value of shares to give to one compared with the other? What about the staff of the sub-post offices? They are doing the same job as the Crown office staff; they are serving behind a post office counter. Will they get the same treatment under the mutual arrangements whether they are standing behind a Crown office counter or a sub-post office counter? It is difficult to see how you can work out a share scheme which will be fair in all these circumstances. That, of course, has led to the idea of a Post Office trust above the Post Office board, owning the shares of the Post Office itself, if that is the way it is arranged, with the duty of ensuring that the whole enterprise flourishes and that the interests of Post Office customers, staff, franchisees and the sub-postmasters and their staff are properly balanced.
The Bill does not settle these matters and I am by no means suggesting that it should. I have been a legislator for more than 35 years so I understand the limits of legislation and how much harm can be done
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I welcome the Bill and urge the Minister to do her best, as I am sure she will, to ensure that sub-post offices and their staff are treated well in all this. They are, in a wider sense, part of the decentralisation of power and services that is part of our much wider aims for this country.
Baroness Turner of Camden: My Lords, I welcome the opportunity to participate in the Second Reading of the Bill. I am a former trade union official and therefore have some sympathy with the views of the CWU, the Communication Workers Union.
At the time the previous Bill was debated, it was reported that labour relations were at a low level. However, that does not now appear to be the case. The business transformation agreement between the union and Royal Mail means that agreed modernisation is proceeding. The pensions deficit issue has also apparently been resolved. All this is contrary to the claim of my noble friend Lord Mandelson this afternoon that the union is not giving effective leadership to its members.
The Hooper report, which was under discussion at the time of the previous Bill, has been updated. The union informs me that what now remains is the need for Royal Mail to access capital for investment. It is said that this is needed to maintain and sustain the universal postal service. The Government believe that this can be done only if Royal Mail is privatised-hence the provision in the Bill for Royal Mail shares to be sold off, apparently without any remaining shares left to the Government. The union disputes the Government's view. It believes that the problem of capital could be addressed if the Royal Mail remained in the public sector, whether through commercial loans from the Government or through Royal Mail having access to borrowing from the financial markets. I understand that one organisation, not a union, has suggested that Royal Mail could be turned into a not-for-profit company like the BBC or Network Rail, as was suggested by my noble friend Lord Kennedy.
The union disputes the Government's claim that the universal service operation, which everyone is anxious to maintain, is secured by the formulation in the Bill. The union cites a number of examples in which the USO is being undermined and weakened, including the introduction of criteria that base the USO on commercial, rather than service, provision. The union says that the need for stability and coherence is key. It cites the need for a five-year guarantee before the Ofcom review and a 10-year guarantee for Royal Mail as a single universal service provider. It is possible to examine these issues further in Committee.
A number of issues arise concerning accountability and transparency. The Bill makes it clear that the Secretary of State will make arrangements for the sale
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The Bill separates Royal Mail and Post Office Ltd, which stays within the public sector. The disposal of assets is therefore important and of concern to Parliament generally. There are no restrictions on the time within which the sale takes place. The Government want that to happen in 2012. What happens if the market conditions are not then favourable? There should be provision for the Government to relegislate if a suitable sale cannot be made within a prescribed period. These should be matters for Parliament.
Another important issue is the continuing relationship between Royal Mail and Post Office Ltd. How will the Government ensure that Royal Mail products, currently worth 37 per cent of POL income, will continue to be offered through Post Office Ltd? Apparently there has been debate about the inter-business agreement, but so far the Government have refused any amendment to the Bill that would guarantee a continued relationship between a privatised Royal Mail and a publicly owned POL. As I said, these are some issues that we will explore further in Committee.
The situation is changing. More people use e-mail. I do myself. I do not like my computer much, but I use e-mail rather than typing a letter and posting it in the way that I used to. Nevertheless, the mail service is highly regarded and it is still a requirement that we should continue with it. Many of us have doubts-I do myself-about whether privatisation is the right way forward. Is it always true that privatisation is more efficient? I sometimes doubt it, and I speak as a consumer who is elderly and disabled and who has a lot of complaints about the service I receive from some of our privatised services.
Issues relating to the Bill had been raised with me by people who know the service and understand the people who work in it. Therefore, I hope that we will have the opportunity to raise these matters in Committee, because the people who have made these points to me know what they are talking about.
Lord Whitty: My Lords, I start by declaring a past interest. When the last Bill was before us-indeed, until last December-I was chair of Consumer Focus, the statutory representative of domestic and small business consumers of postal services. Its role is threatened by another piece of legislation before this House, namely the Public Bodies Bill. However, I am now free to speak without that encumbrance.
I fear that, as the debate has shown, the Bill raises more questions than it fully answers. I constructed my speech in the form of questions. I realise that, as I am the last speaker, this is a little unfair on the Minister. Nevertheless, I will proceed and assume that she will reply in writing to things that she cannot pick up immediately.
First, I will make it clear where I stand on the main points. I welcome the strong determination to defend the USO through the process, although I am slightly
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On the issue of privatisation, I will be honest with the House, as ever. My former organisation retains a neutral stance. I was always intellectually sceptical and emotionally opposed. However, it is probably going to happen. I have some questions about ownership. What will be the impact and what kind of privatisation are we engaging in? What kind of owner do we envisage for the Royal Mail in a few years' time?
I will start with the Post Office network, which is dear to many of our communities, rural and suburban. It is vital that the Post Office continues to exist. Individuals see it as part of the universal service provision and we need to continue to guarantee a postal service on the Royal Mail side that is the same in the further reaches of County Fermanagh or the remotest bay of the Western Isles as it is in the centre of London or Birmingham. However, the Post Office network also needs to fulfil a role for all sorts of communities.
Disentangling the Post Office and the Royal Mail may give greater clarity to their roles, but we need some indication from the Government of what they intend to do with the network. There are 11,500 branches at present. As the noble Lord, Lord Cope, has just said, the intention to reduce some of those branches to Post Office Local, together with the severe restrictions, makes the commitment to maintaining the network at roughly its present size not quite what it seems. In any case, that commitment is for the short term, and we need to know what the Government intend for the Post Office network in the longer term.
A number of questions arise in addition to that. Is the Crown network to be treated differently from the sub-post office network? What happens after the £1.4 million subsidy over the next few years disappears from the network? Do the Government envisage a continuation of any subsidy for the Post Office network or are they going to leave it entirely to the market? What moves are afoot-others have made this point-to redirect or encourage other government departments to provide their services via the Post Office network? Many of them, from the DWP to the Inland Revenue and the DVLA, have been withdrawn over the past few decades. If the commitment of the Minister's colleague, Ed Davey, to make the Post Office network the front office of government is to be fulfilled, then all government departments, as well as local government, need to be encouraged to put more of their business through that front office.
I ask the Minister, as others have done, why the Government have apparently abandoned the proposals, which were some way down the line under the previous Government, to develop some sort of post office-based banking system. As the noble Baroness, Lady Kramer, underlined, it would do much to help the problem of financial exclusion in this country-a cause of very
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In terms of representation of consumers, will Consumer Focus, or its successor in the citizens advice bureaux, and the Consumer Council for Northern Ireland remain spokespeople for the network as well as for consumer interests in Royal Mail?
I am not against mutualisation of the Post Office network, although it is very complicated. For employees and the franchisees-the sub-postmasters-it may hold an attraction but the Government are also talking about wider interests being represented in a mutual set-up. I think that it will be some time down the line before we can translate the whole of the Post Office network into a viable mutual organisation. Nevertheless, I think that we should provide for it and I agree that those provisions should be in the Bill.
The key questions regarding the network are: what is its relationship with Royal Mail as we go down the line and what is the future of the interbusiness agreement? More than a third of the Post Office network's business is tied up with Royal Mail. If that were to be withdrawn or substantially modified, the economic pressures would mean that the network at its present size, and probably at significantly less than its present size, would no longer be viable. Therefore, we need greater clarification on the future of the interbusiness agreement and on the Government's claim that they can sustain the principles of that agreement only for a short period because of the legal situation. I have never seen that legal situation completely spelled out; nor have I seen an explanation of why the interbank agreement or some modification of it cannot be committed to for some considerable time. If that were guaranteed and if the Post Office network were able to provide more government services and develop new services itself, then a Post Office network with a thriving business in every corner of the land would be a possibility.
I move on to the regulatory framework. I support the transfer to Ofcom, partly because the old system was daft, as my noble friend Lord Mandelson effectively said. A single technology regulator was always a bit of an oddity. The minutiae of the regulatory approach by Postcomm made it the wrong approach, and it is certainly the wrong approach in the world into which we are now moving. Ofcom has a number of advantages. It has experience as a regulator in multiple industries and, in particular, it has experience of the communications industry, which is a far bigger competitor to the Post Office than are the other postal services.
One of my concerns is that much of the present regulation of Royal Mail is, in effect, delivered via the conditions of the licensing system. If the licensing system is removed, as it will be, more traditional forms of regulation will have to cover this. The Bill says only that Ofcom may do many of these things, whereas, under the licensing condition, the Royal Mail had to do these things. There are arguments about whether it should be only the Royal Mail or whether there are
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We also need to recognise the role of Consumer Focus-or, eventually, of citizens advice and the Consumer Council for Northern Ireland-as the voice of consumers. That role will require some financing. Standards of mail integrity and reliability are also important. Many of the complaints and problems relate to lost or tampered-with parcels. By and large, Royal Mail has a good, positive reputation in this area. However, that needs to be retained, and we need to require the Royal Mail to provide information to the regulator and consumer interests.
Other aspects of regulation need to be considered, including the claim by the Royal Mail and the union that subsidies to their competitors effectively amount to £160 million a year. Do the Government intend that those requirements should disappear? As for the USO in total, perhaps the Minister can explain why the designation of the Royal Mail as the USO provider appears to last for only a very short time, particularly given that the Government presumably intend that, within that time, the ownership should change. The uncertainty about the future requirements of the USO will undoubtedly have an effect on the enthusiasm of any potential buyer to pick it up. The USO is clearly important. I am not saying that the terms of the USO are absolutely set in stone and should never change, but I agree with my noble friend Lady Drake that if there is to be a significant change in the terms of the USO, either in the products covered or the level of service required, then that should come back in some form to Parliament before it is agreed, simply as a regulatory matter. Those are the kinds of questions that I would like the Minister to answer, if not tonight then at a future date.
I have a couple of things to say on the ownership issue. The modernisation programme needs both money and more effective management than we have seen. We are in a more benign era in the sense that the business transformation agreement has been reached between the union and the management and the modernisation programme seems to be more under way now than it appeared to be a couple of years ago. On the money side, however, it is not entirely clear why we are looking for substantial sums from the private sector; or, more accurately, it is not clear whether we are looking for substantial sums or for an improvement in the management side. It was clearer in the previous Bill, and clear in the Hooper report, that the main aim of bringing private capital into the Royal Mail was to improve the management and to bring in people with logistical expertise. That is why it went for a strategic partnership as the preferred option.
It is not so clear here. When we move from 80-odd per cent to 100 per cent, we change the nature of the ownership in any case. It is not clear whether the Government envisage a sovereign fund, a hedge fund or an international competitor, as has been suggested, taking over the lot; whether we will have a range of people investing in Royal Mail; or whether we are primarily concerned with a strategic partnership with someone who knows something about the business and its competitor businesses, which the logic of the previous Government's approach demanded.
Royal Mail will have some more money available, but it still needs substantially more money from the market. I accept that. Is the motivation for privatisation to maximise the money, or is it to maximise the expertise and management improvement? I am not clear on that, and I do not think that the British public are clear. Their attitude to the privatisation process will vary if, in a few years' time, Royal Mail is owned by the Sheikh of Abu Dhabi, some hedge fund-or has gone to a share option on the Stock Exchange, in the light of previous privatisations, such as that of British Gas, which was quite popular-or whether it will be run by TNT or DHL. There will be a difference of attitude among the workers, the consumers and competitor businesses to Royal Mail once we know the answer to that.
Those may be my prejudices on privatisation, but I counsel the Government that they need a clear answer to that. When the Bill gets through the House and they engage in the process of seeking buyers, they need to be clear what they are doing; and they need to communicate it to the British people.
Lord Young of Norwood Green: My Lords, first, I thank the Minister for her contribution in introducing the Bill. As my noble friend Lord Whitty said, it may raise more questions than it answers; it certainly raises several questions, which I shall endeavour to go through.
Before I commence on that, I congratulate the noble Lords, Lord Dobbs and Lord Empey, on their maiden speeches. I shall make some comments on the content later. I declare a lifelong interest as someone who was initially employed in 1958 by the GPO, as it was known in those days, and went on eventually to become the joint general-secretary of what is now the Communication Workers Union, with an esteemed colleague of mine in the other place-to whit, one Alan Johnson-and my noble friend Lady Drake, who spent many a happy hour with me negotiating with British Telecom and the Government of the day on privatisation.
We probably experienced every aspect of privatisation in all its phases, in all its successes and failures. It did not always go as well as the noble Lord, Lord Jenkin, tells us. I cannot resist saying that BT was a company that went from being totally self-financing to, in less than 10 years, attracting a debt of £30 billion. That is quite an achievement. Perhaps if the company had listened to the union in 1989, it might have invested its money more wisely. Why do I say that? Because we recommended that it fibre-up every household in the country in a programme which we called Network of the Future. It told us that that was overly ambitious
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I want to focus on what is fundamentally important in the Bill. Several noble Lords have referred to the huge history of Royal Mail, so I do not need to go into that. Everybody in this House recognises that Royal Mail and the Post Office face a huge challenge in today's technological environment. That challenge will not go away, so we need to look at ways of ensuring that we can preserve the essential nature of these organisations. Clearly, that lies in, first, the universal service obligation, which everybody seems to value, and the post office network. Along with challenge, there are some growth areas, such as fulfilment mail and internet shopping deliveries. We recognise that Royal Mail as a business needs fundamental modernisation if we are to keep the universal service obligation and the six-days-a-week delivery service that lies at the foundation of our postal system.
There are some areas with which we can agree. The Minister attempted to say that the Bill is much the same as the one proposed by the previous Government, but in one specific area it clearly is not because it contrasts with Labour's Bill in 2009, which would have kept a majority stake in public ownership. Clause 3 of our Bill explicitly stated that:
Labour envisaged that any private partner would be looking at ownership of something like a third, and on no account would more than 49 per cent go into private ownership. I refute the idea that this is just a small change in legislation. A lot of the concerns and questions that have arisen during this fascinating debate are because we are talking about a privatised environment which starts to throw up uncertainties about the continuation of the universal service obligation as we know it and the relationship between the Post Office business and Royal Mail.
I could not help smiling when I listened to the noble Lord, Lord Razzall, because an opinion poll from YouGov showed that 56 per cent of Lib Dems were opposed to privatisation, 50 per cent think the service will deteriorate and 74 per cent think that prices will go up. That does not seem an overwhelming mandate. That was reflected at the last Lib Dem conference, where there was a lot of questioning about privatisation. Dr Pugh, the Lib Dem MP for Southport, said that there was a distinct danger that what they were presenting could look a bit like privatising the profits and nationalising the losses, which would be even more acute if the end result failed to be a Royal Mail system that the country was comfortable with for the next 20 to 30 years. There does not seem to be an overwhelming endorsement by the public at large, and the figures for Conservative voters show that they do not show any great enthusiasm for privatisation per se.
There are definitely some areas that we have in common and that we support in the Bill, such as the Government taking on the historic pension deficit.
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There are areas of agreement, and I will comment on the employee share ownership scheme. We proposed something similar, so it would be surprising if we suddenly performed a volte face on this. It contains a provision, which we welcome, to hold at least 10 per cent of equity in Royal Mail in the future. That is, we have to acknowledge, one of the largest holdings, but we will probe a lot more how the shares will be distributed, what employees will be able to do with them, and what real benefits share ownership in the scheme will bring. There have been plenty of other comments on share ownership throughout this debate.
I will focus a bit on the threat to the link between Royal Mail and Post Office Ltd, which has exercised so many noble Lords throughout this debate. Currently, Royal Mail and Post Office Ltd are linked to part of the same state-owned business, and as a result of the internal business agreement Royal Mail is required to take all its post office services from Post Office Ltd. The Government imply that a privatised Royal Mail would still use Post Office Ltd to provide its counter services, and it has been suggested that the post offices might be protected by the terms of the internal business agreement until 2014-15. However, as it is not a commercially binding agreement, this is not necessarily the case, and in selling off Royal Mail the Minister's priority understandably will be the sale price.
Potential purchasers will want to reduce the number of outlets that they are required to use so that they can reduce costs. They will be looking for terms that might require as few post offices as possible. Once the internal business agreement ceases to apply to Royal Mail, Royal Mail will be free to use any partner to supply post offices. A third of Post Office Limited revenue comes from Royal Mail. Without this revenue, Post Office Limited will be unable to keep many post offices open.
Again, not only opposition Front-Benchers are expressing this concern. This concern has been echoed in all parties in this House, and I hope that the Minister will address it. I think it was the noble Baroness, Lady Wheatcroft, who interestingly said that despite the Minister's assurances the chairman of
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An obligation to provide fewer access points for counter services would make Royal Mail more attractive for prospective purchasers. Some might say that more post office closures might make a better sale price for Royal Mail. A number of noble Lords have commented on mutualisation and on the need to have more detail and clarity about whether mutualisation would be a successful formula. I congratulate my noble friend Lord Tunnicliffe on raising a number of key issues-for instance, what happens to the proceeds of the sale or the Ofcom review of the universal service obligation after only 18 months. I do not need to repeat those.
I pay tribute to the contribution of the noble Lord, Lord Empey. He made the point about the public not distinguishing between Royal Mail and the Post Office, saying that he saw this as important as broadband. That was an important and interesting assessment. He also referred to the 18 month review of the universal service obligation and- I hope I am not paraphrasing-the undercurrent of uncertainty and cherry-picking by competition.
I also pay tribute to the noble Lord, Lord Low, who always gives us something to think about in his contributions. He talked about the current impact of competition on Royal Mail; the subsidy of 2.5 pence per item and the £160 million loss. He, again, referred to the review of the universal service obligation. I hope that the Minister is going to address his comments on the use of the post offices by the disabled community and the 9 million items for the Articles for the Blind Scheme. If she cannot pick up all these questions in her contribution, I hope that she will certainly return to them.
I am limited by time so I will not be able to pick up all the comments that were made by noble Lords. I have a slight disagreement with my noble friend Lord Mandelson, my previous boss when he was Secretary of State. I think this is a fundamentally different Bill to the one that we introduced, for the arguments that I have previously put forward.
I know that my union has not always been the most co-operative. My attitude towards the union-which has got me into a significant amount of trouble over the years-is not necessarily to agree with everything that it says, but to try to give it honest, candid advice about what I feel is in the best interests of the industry and, eventually, the long-term interests of the members. Since we came through that long and difficult strike and the transformation agreement was reached with Royal Mail, there has been a change. The modernisation programme is now going ahead. I remind people, including the noble Lord, Lord Hunt of Wirral, who
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The union's co-operation with modernisation is something we should acknowledge. It has enabled that programme to go forward. And, in relation to my noble friend Lord Sawyer, the best example I have seen of Royal Mail management is its World Class Mail which you can see if you go to Gatwick. It is an interesting example of management and the work force working together very well.
I am conscious of time, so I am going to bring my contribution to a close. I must compliment my noble friend Lady Drake, who gave in her usual manner a very penetrating and forensic analysis of the impact of regulation and some of the questions that need answering-instead of just expecting that Ofcom will necessarily do the right thing-and pointing out the impact of not getting regulation right.
Privatisation of itself will not necessarily be the magic cure-all or answer to this. The organisation is complex and needs to carry out a huge amount of further modernisation. I think that it was my noble friend Lord Sawyer who pointed out the importance of cultural change and ensuring trust between management and the workforce. When things go wrong in privatisation, usually the people at the top seem to escape quite well financially provided for; it is the workers-to use the phrase that emanated from the First World War, the poor bloody infantry-who suffer. I hope that we can look forward to continuing a probing and penetrating analysis in Committee of what we see as the shortcomings of the Bill, and I look forward to the response from the Minister.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, we have had an excellent and informative debate and I thank all noble Lords for their contributions. It is my pleasure and privilege from the Front Bench to congratulate the two maiden speakers on their speeches; I will refer to some of the questions that they asked later. The debate has been worthy of this House's reputation as the revising House and I look forward to the rigorous scrutiny that the Bill will receive over the coming weeks.
When I made my opening remarks I reminded your Lordships of the context for action. It is sometimes easy to let that slip our minds as we focus on the detail of specific policies or clauses, but I stress that the Royal Mail is facing an enormous challenge. The letters market is in structural decline, with volumes falling ever faster. Royal Mail urgently needs to modernise and increase efficiency. The company is weighed down by a huge and unsustainable pension deficit, and the regulatory framework is no longer fit for purpose. Action is urgently needed to address those issues. First, Royal Mail needs access to private sector capital and commercial disciplines. Secondly, it needs to be
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"If all these policies are implemented without further delay, and Royal Mail modernises to best in class with management, workforce and unions working together, then despite the very real market difficulties the company has a healthy future".
Let me begin with the Post Office, which has played a key part in today's debate. I am sure that your Lordships need no reminding that Royal Mail and the Post Office are very different businesses facing different challenges. However, as many noble Lords have emphasised, they are both cornerstones of our society, and the Bill will benefit them both. We have heard concerns over the future of the post office network. Noble Lords are worried that post offices will lose business from Royal Mail or from the Government. I would like to provide reassurance on that point. The Government are absolutely committed to the post office network. It provides an enormously good service, as I have said many times before. The post office network is a unique national asset.
The noble Lord, Lord Dobbs, raised the important issue of rural post offices and the outreach services that have replaced them in a few areas. Outreach services were introduced following the last Government's closure programme, to mitigate the impact of large closures. They offer more than simply access to mail-access to cash, pensions, benefits and many other services. Many communities highly value their outreach services and in some cases their introduction has brought in services that were not available at the post office that they replaced.
Both the noble Baroness, Lady Kennedy of The Shaws, and the noble Lord, Lord Kennedy of Southwark, spoke of the importance of getting new business into the post office. I agree wholeheartedly. As the Government set out in our policy statement on the post office published last November, we want it to be the front office for government. That would make it the natural place for citizens to access face-to-face government services, with an important role in supporting the delivery of online services-for example, through identity verification and check-and-send services.
The noble Baronesses, Lady Wheatcroft, Lady Kennedy and Lady Kramer, raised the issue of the Post Office bank. I can inform the House that we have looked at the case for a Post Office bank, but, in this financial climate, it is just not a viable option. The Post Office has an important role to play in making financial services accessible. It already provides a wide range of financial services, including savings, credit cards and mortgages. On top of this, thanks to the Royal Bank of Scotland's recent commitment, almost 80 per cent of current accounts are now accessible at post offices.
The noble Viscount, Lord Tenby, asked about the extent of the rollout of the Post Office Local model. As we set out in our policy statement published last November, we envisage that, over the next four years, around 2,000 small sub-post offices out of a total of nearly 12,000 will transfer to the local model, with the major implementation starting in 2014.
The noble Lord, Lord Cope, and the noble Viscount, Lord Tenby, raised the issue of losses in the Crown post office network. The Crown network is losing £55 million a year. This is not acceptable. Post Office Ltd is committed to eradicating these losses over the next four years. This will be facilitated by the Government's investment of £1.34 billion in the post office network announced last year.
The noble Lord, Lord Whitty, raised a number of questions about the future long-term viability of the post office network. A number of the clarifications that he sought can be found in the Government's November 2010 policy paper, Securing the Post Office Network in the Digital Age. He asked in particular about subsidy beyond 2015. I confirm that, while we believe that these measures will help to reduce the subsidy substantially over time, there will almost certainly remain a need for a residual level of subsidy to maintain those branches which could never be profitable, such as those in remote rural areas, but which serve a valuable social purpose.
The noble Lord, Lord Young, asked about the relationship between the Royal Mail and the Post Office and the inter-business agreement. I can make it clear that the inter-business agreement between Royal Mail and the Post Office is a legally binding contract. The Royal Mail and the Post Office will of course continue to work closely together. The post office network of more than 11,500 branches dwarfs any other retail network in the country and offers unrivalled access to communities the length and breadth of the UK. I echo my noble friend Lord Razzall in saying that it is inconceivable that Royal Mail would not want to take advantage of the post office network. The chairman of Royal Mail has given a commitment to Parliament that, before any sale involving Royal Mail, the companies will put in place between them a new commercial contract that will run for as long as legally possible. That is a strong commitment, but the Government have gone further. We said in another place, and I repeat it today, that we shall ensure that the companies are held to the commitment that has been made by the chairman of the Royal Mail.
The noble Baroness, Lady Howe, and the noble Lord, Lord Sawyer, raised interesting points regarding the potential for a mutually owned Post Office. I reassure noble Lords that a mutualised Post Office is not a step towards a privatised Post Office. The Bill is quite clear that Post Office Ltd may be owned only by the Government or by a mutual organisation that acts for the public benefit. The design of a Post Office mutual must put the views of sub-postmasters, employees, business partners and customers first. That is why we have asked Co-operative UK to look at this proposal in detail and propose options for how a mutualised Post Office might work. It is due to report to Ministers in the spring of this year. I reassure noble Lords that, before any changes to the network are made, there would be a full public consultation.
We heard from several noble Lords the case for the privatisation of the Royal Mail. Here, the noble Lord, Lord Mandelson, spoke from his own experience and of Royal Mail's need for a settled existence. I wholeheartedly agree with that.
The noble Lord, Lord Selsdon, asked what has become of the Postmaster-General. I am very sorry to inform him that the position was abolished some years ago under the Post Office Act 1969. The last post-holder was John Stonehouse. The responsibilities of the Postmaster-General have been divided between the Secretary of State for Culture, Media and Sport, who is responsible for telecoms, and the Secretary of State for Business, Innovation and Skills, who is responsible for postal affairs.
Why private capital? Royal Mail urgently needs access to fast, flexible capital, and this must come from the private sector. The reasons for this are threefold. First, government is simply not a fast and flexible provider of capital; there are so many competing priorities for public funds and any government funding must, of course, be subject to European Union state aid approval from Brussels, which can be lengthy. Secondly, private sector capital will bring with it commercial disciplines that will benefit the company. Finally, the spectre of government interference in commercial decisions must be removed.
On privatisation, the noble Lord, Lord Tunnicliffe, said that the case has not been made for full privatisation, as did the noble Lord, Lord Brooke. The noble Lord, Lord Christopher, was concerned about how and when we would sell Royal Mail. I hope that the noble Lord will be reassured by Clause 2, which requires the Secretary of State to report to Parliament when he has decided to undertake a sale. This report must include details of the type of transaction and the timescale for undertaking it.
As we have heard, the extent of private sector investment is one of the key areas of difference between this Bill and the Bill put forward to this House by the previous Government. The Opposition prefer partial privatisation, which was the approach that they took in their Bill, but a partial privatisation model did not and will not solve the problems that Royal Mail faces. It places too many restrictions on the deal and takes away the flexibility to get the best outcome for the company and the taxpayer. We see no reason why the Government should retain a stake in Royal Mail in the long term, but we will retain the flexibility to ensure that we can negotiate the best deal for Royal Mail and for the taxpayer. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the six-day, one-price-goes-anywhere, universal postal service.
The noble Lord, Lord Tunnicliffe, asked about privatisation and raised concerns that Royal Mail should remain in public ownership on the basis that this is the only way to guarantee the provision of the universal postal service. I fear that some noble Lords may be confusing effective regulation with government intervention. The universal postal service is protected by Parliament through legislation; it is not protected
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As I have mentioned, employee shares are a new innovation. I am delighted to say that they are supported by my noble friend Lord Hunt, who knows all about Post Office Bills, and by my noble friend Lord Cotter. A commitment to employee shares was not a feature of the previous Postal Services Bill but it is an important addition to this legislation. I am pleased that it has support from all sides of the House. The noble Lord, Lord Sawyer, joined the noble Lord, Lord Brooke, in ideas that he will no doubt develop in Committee. The noble Lord, Lord Brooke, used to chair the employee share trust for NATS. He has valuable experience to bring and I look forward to hearing him in Committee.
It is not only the commitment to an employee share scheme that will benefit members of the Royal Mail workforce. Members of the Royal Mail pension plan are rightly concerned about whether their pensions are safe. The pension deficit is a huge and unsustainable burden on the company and is dragging Royal Mail down. I repeat: the proposals in Part 2 of the Bill represent a positive outcome for members of the plan, who can take comfort that their hard-earned benefits will be protected and that Royal Mail, going forward, will be better able to deliver the USO once relieved of this burden.
The noble Baroness, Lady Turner, said the pensions deficit has already been solved. Unfortunately, it remains very real-the scheme deficit stands at more than £8 billion today. As Hooper made clear, the deficit must be addressed in order to facilitate an injection of private capital. The noble Lord, Lord Rowe-Beddoe, asked what would happen to the assets of the pension scheme. The cash transferred to Government will be transferred to the Consolidated Fund, gilts to the Debt Management Office and the remaining assets-stocks, property, et cetera-will be transferred to a newly created government fund. They will then be sold in a measured fashion, with cash proceeds from disposals going to the Consolidated Fund. Alongside these assets, the Government will also of course be taking on the corresponding debt and much, much larger liabilities. We will be entirely transparent about the effect of these transfers throughout the government accounts.
Finally, let me turn to regulation and the universal postal services. This is a key part of the Bill; I want to address the universal postal service because noble Lords have expressed concern that it is at risk or will be downgraded. I am afraid that Richard Hooper has made it clear that we cannot do nothing-the universal service is already under threat and that is why we must take urgent action. The purpose of the Bill is to secure the future of the universal service. The Government are committed to the existing service-six days a week collection and delivery of letters, at uniform and affordable prices, for all the United Kingdom's 28 million addresses. This is at the heart of our legislation. We have no intention of downgrading the minimum requirements of the universal service. This Bill puts in place new protections to safeguard the level of the universal service-protections not in the current regime or in the previous Government's Bill. Crucially, this Bill
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The noble Lords, Lord Tunnicliffe and Lord Low, were worried that this Bill will allow the universal service to be reviewed and downgraded in 18 months' time. I am happy to reassure them that this is completely untrue. There is no small print allowing this. What I believe they were referring to is the requirement that within 18 months of Part 3 of the Bill coming into force, Ofcom must have conducted a market review to ensure that the services offered as part of the universal service reflect user needs. These are set out in statute and the review cannot recommend a downgrade of the minimum requirements after 18 months.
Some noble Lords questioned whether the Royal Mail will be left facing too much regulation under the Bill. As Government, it is our role to strike the right balance between protecting the universal postal service and promoting competition in the sector. Our position is clear: competition is beneficial but not where it undermines the universal postal service. Ofcom, the new regulator, will have the regulatory tools it needs to ensure that this balance is protected. The noble Lord, Lord Jenkin, was concerned on the other hand that the Government were easing competition on the Royal Mail in order to increase its value. I assure my noble friend that this is not the case. We have two objectives: first, to secure the future of the universal service; and secondly, to secure the future of Royal Mail as the only company capable of providing that service.
The noble Lord, Lord Low, raised concerns that the needs of disabled and blind or partially sighted people would be neglected under the Bill. I will try to reassure the noble Lord. Clause 30 includes services to blind or partially sighted people as a minimum requirement, ensuring that they will be part of the universal service. This was not the case in the 2009 Bill. Furthermore, the Communications Act 2003 gives Ofcom a general duty under Section 3 ensuring that it must take account of the needs of persons with disabilities when carrying out their functions. The noble Lord, Lord Empey, and the noble Baroness, Lady Drake, were concerned that competitors would cherry-pick profitable areas of the market. I hope that I can reassure them that the Bill gives Ofcom the ability to put conditions on other operators to ensure that there is fair and effective competition in the market.
The noble Lord, Lord Whitty, argued that the Bill should not leave it to Ofcom's discretion to impose certain conditions and should mandate that it does so. The Government believe that we should impose regulation only when it is necessary, and that it must be flexible enough to respond to the changing needs of the market. We believe that the Bill strikes the right balance between ensuring that proper protections and safeguards are in place while freeing the sector from unnecessary and burdensome regulation. The Bill allows Ofcom the discretion to utilise regulation in the way that it considers most appropriate to meet its statutory duties, which include having regard to the needs of consumers. Placing on Ofcom statutory requirements to use its regulatory tools in any and every circumstance is inappropriate and at odds with the thrust of the new regulatory framework that we seek to establish.
In conclusion, I thank noble Lords again for today's debate. It is clear that these issues need urgent action. The fact was emphasised by my colleague Edward Davey, the Minister for Postal Affairs, when he sent this Bill to us from the other place, and it has been emphasised by Richard Hooper, the independent expert commissioned by both the previous Government and the present one to review the sector. We have covered many issues today and I have no doubt that we will cover many more over the coming weeks. I am heartened that there is much on which we can agree, and I am looking forward to scrutinising, and no doubt improving, this Bill with your Lordships' help. I am confident that we will work together to ensure that this Bill is the best that it possibly can be for Royal Mail, its employees and for all users of the universal postal service. I commend it to the House.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, this body-and my body-is not built for marathons, yet here we find ourselves still debating and scrutinising this Bill. Those veterans of the Bill will know that, like a great relay race, this is the hour of the night when the baton is passed to me. It has been a remarkable journey. From November when we set out until now, four months on, we have certainly put in an immense amount of time on this legislation: a marathon 17 days with over 110 hours of Committee and, overall, nearly 100 hours more than the other place to consider this Bill. It is obvious how passionately many noble Lords genuinely feel about the matters before us-issues which go to the very heart of our constitution.
However, I believe it is time to take a step back and to look carefully at the situation before us. This is a constitutional question in more than one way. The final amendment at issue between the two Houses of Parliament is about the voting system used to elect Members of the other place, which is fundamental to our democracy. It has also been about how constituencies have been drawn, but we have now concluded that debate. However, there is another constitutional dimension to our debates: about the role of this House and the other place, our respective responsibilities and the different roles that we play within our constitutional settlement.
There are important arguments of principle both for and against thresholds. We heard them powerfully articulated earlier today, on both sides, and articulated with sincerity. Yet at its simplest, the Government's contention is this: we have consistently and clearly said that the people of this country should have their say, knowing that their vote in the referendum will count-no ifs, no buts and no artificial hurdles. At best, a turnout threshold rewards apathy; at worst, it encourages it.
This is about the people casting their vote, fair and square and with no conditions attached. This is not about Parliament setting a condition for the validity of the people's vote. There were no thresholds in the 1997 referendums on devolution to Scotland and Wales, despite the fact that they also would have had the effect of introducing new voting systems without that even being explicit in the question. At that time, neither the Government nor indeed this House considered that a threshold was necessary, as we do not consider one to be necessary now.
However, as I said in beginning my remarks, there is another constitutional issue before the House tonight. I have been clear, at every stage of this debate on the Bill, that I fully accept and understand the points made earlier by noble Lords, that this House should have its say on the issues before us. Not only do I understand it, I passionately believe it. This House exists to scrutinise and amend legislation, and to ask the other place to think again. However, a time must come when this House should respect the will of the elected Chamber.
Lord Strathclyde: My Lords, I am glad noble Lords opposite listened so carefully to what the noble and learned Lord said. This is about how representatives are elected to the House of Commons. The elected House has spoken three times on this issue: once on the question of a threshold and twice on whether to incorporate the specific amendment moved by the noble Lord, Lord Rooker. In each case the other place has spoken clearly. It has heard the arguments made in this House and it has given its response. I respectfully submit that we have asked the other place to think again not just once but twice, and we have heard its emphatic answer. After due consideration, further debate and an increased majority in another place, we have
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"(5) The estimate of the turnout in England, Wales, Scotland and Northern Ireland published under sub-paragraph (3)(a) shall be made available before any order is made under section 8 implementing the result of the referendum; and if the total turnout in the four parts of the United Kingdom is less than 40% of the total electorate of the United Kingdom, the result of the referendum shall not be binding."
Lord Rooker: My Lords, in short I am proposing to add to the government amendment a sub-paragraph (5). When I saw the Government's amendment a few hours ago I thought, because I am weak, that I saw some movement. Sadly, that is not the case. I said earlier today that the issue of substance is not the figure, although I have used the same one. The issue of substance is that this will be a binding referendum for the first time in the UK. The Government are still refusing to address that issue; it is being glossed over. In the talk about previous referendums, not once has anybody addressed the issue of this being the first binding referendum. That is still the case, which is why I do not apologise for continuing to raise the issue.
I had thought of adding to the government amendment-because I thought I saw a bit of movement-some words to the effect that the Electoral Commission report should be done properly, which I do not think it will be. By properly I mean that it should meet the issues that government Ministers have spoken about at the Box-that is, take off the electoral register the dead, the foreigners, the students, the hundreds of thousands with two addresses and all those with two homes. That would mean the commission had to go to every electoral register-not every constituency but every register-and double-check to get an accurate measure. That is what I would expect the Electoral Commission to do as a result of the Government's amendment but I fear that it will not be the case. However, I would like that report to be put to Parliament and properly debated before a Clause 8 order, assuming that there is a yes vote.
I have seen no evidence. I sat in the Commons Gallery during the debate earlier this evening. The real issue was not addressed in the Commons, and the government Minister hardly spoke to the amendment that he was moving. He did not explain it. I thought, "He hasn't got that much to say about it. It can't be worth a great deal". When Sir Gerald Kaufman and others indicated that from their experience, before the coalition, it was possible to get agreement on various aspects of Bills going through the House, they were shouted down.
In the years that I was a Minister in your Lordships' House, I was in four departments and responsible for many Bills, including Bills that started here. I cannot
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The Government have refused to listen from day one of this Bill. They have rammed it through both Houses under a guillotine-that happened again tonight-and people who wanted to speak did not have the opportunity to do so. Reputations have been damaged all round save for that of the noble and learned Lord, Lord Wallace of Tankerness. I do not wish to embarrass him. I am just giving my view; I do not speak for anybody else. I therefore offer the House and the Government a last chance, if you like, according to what the Leader said, to break the precedent that they are creating. They can waffle all they like about previous referendums and thresholds but this threshold does not damage the introduction of AV, as I have said repeatedly. They refuse to accept that this is the first time that the people of this country have been given a referendum where the result-whatever the turnout and the majority-will be the order of the day. That has never happened before. It is no good praying in aid the euro referendum or the Scottish referendum as they were not binding referendums. Legislation followed but they were not binding, so it is no good praying those in aid. There is no precedent for what the Government are about to do. Sadly, no Minister has addressed that central issue of substance.
In some ways, I do not look forward to the morning after the count as I do not want to be proved right. I hope that there will be a successful referendum with a huge turnout and a clear vote one way or the other. That is my desire and that is what I will encourage. I do not have a problem with that. However, if that is not the case, we will be bound by the result. It will be impossible to get out of the mess and the people will find out what Parliament was doing. They will ask, "Why did you not think about this and give yourself a lifeboat? Why did you not think about what might happen? You have done it in the past with all the other referendums, so why did you not do it with this one?". As I say, I do not look forward to the morning after the count for that reason; but many others will, because they might be proved right. I beg to move.
Lord Beecham: My Lords, I have been a Member of this House for only seven months and I have therefore listened with very great attention to the debates that
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Lord Beecham: Not only that, my Lords, but he was a teller. The noble and learned Lord this morning quoted my noble and learned friend Lord Falconer and I should like to repay the compliment by quoting what the noble and learned Lord, Lord Lloyd, said on that occasion. He said:
Clearly, he would have been quite willing to do so again, had your Lordships' House on that occasion not ultimately acceded to the views of the other place. The Leader of the House perhaps ought to rely on rather stronger support than that inadvertently offered by the noble and learned Lord.
I am utterly persuaded by the views of my noble friend Lord Rooker. There are many in this House on all sides who have been persuaded by the force of his logic. I certainly hope that your Lordships will, if necessary-and it seems to be necessary-again approve my noble friend's amendment and again invite the other place to think seriously about the direction in which it is taking this country and its constitution.
Lord Hodgson of Astley Abbotts: My Lords, I shall make a brief intervention. I did not participate in the debate this morning, although I did so at Report, 10 days ago, in a way that I am afraid my noble friend found slightly disobliging. I also voted in a disobliging way then and again earlier today.
I found the amendment of the noble Lord, Lord Rooker, persuasive on four grounds. First, as he has said when he moved it, we should avoid setting or reinforcing the precedent that referenda should not have thresholds. I do not like referenda. We elect Members to go to the other place to take difficult decisions and I think that referenda that decide important issues of public policy with small turnouts are doubly undesirable. The second reason for supporting the noble Lord's amendment is that it sets the binding, mandatory threshold at a level that would command public confidence. It is the stickability and credibility argument. A 40 per cent turnout, at which 21 per cent,
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The amendment is being put forward once again by the noble Lord, Lord Rooker, in his normal robust and combative way-and it is none the worse for that. The noble and learned Lord, Lord Falconer of Thoroton, in his more silky and persuasive form, sought to raise the debate to a higher level and has made remarks such as that the amendment is in line with our parliamentary democracy and high principles. I hope that he will forgive me if I say that, when I see how his party has changed its voting position in the other place, there may be high principle, but there must be at least a whiff of political opportunism around the other Chamber.
We have now asked the other place to think about this issue twice and we have had a clear answer twice-by 70 votes last night and by 79 this evening, if my mathematics are right. We have heard a powerful speech from the noble and learned Lord, Lord Lloyd of Berwick. Whatever the rights and wrongs of the amendment, he was right to tell us that we are discussing an issue that focuses narrowly on a matter that affects the other place alone. Therefore, while I continue to have considerable and very grave doubts about the course on which my Government are embarking, I am afraid that I have now concluded, after two disobliging votes, that the time has come for the Members of the elected Chamber to make a final decision, because they alone will have to live with the consequences of their deliberations.
Lord Falconer of Thoroton: My Lords, it is for your Lordships to imagine what happened to the noble Lord, Lord Hodgson of Astley Abbots, between approximately 1 pm this afternoon and that rather unimpressive speech.
There are two issues for your Lordships to consider. First, are your Lordships satisfied that the issue is important enough to be referred back? Secondly, has
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The second issue, which is the one most relied on by the Leader of the House and the noble Lord, Lord Hodgson of Astley Abbots, is: "Well, we've asked twice; now is the time to subside". The amendment was first passed in your Lordships' House last Wednesday. It went to the Commons this afternoon. It was debated for another hour. I have not been able to access Hansard to read the debate. I have had a report from my noble friend Lord Rooker, which the House has also had, on what was said in the other place in the debate. This is an important constitutional Bill. It seems wrong that we should make our decision on this important issue on the basis of a debate that we cannot even read in Hansard, eight days after it was raised for the first time last Wednesday.
Noble Lords opposite shake their heads and say, "Let's just ram this through now at this 11th hour". It is for your Lordships to decide whether this is the right course for the House, whose role is not to overrule the other place but to make it think again, to say that debating it twice in one day, eight days after the amendment was tabled, is consideration enough of whether 13 per cent of the electorate voting for a fundamental change in our voting system that all noble Lords in this Chamber know would not be-
Lord Falconer of Thoroton: I am not taking interventions. Thirteen per cent of the electorate could pass a change in our voting system that would not be passed in the other place. Is that an appropriate basis on which to make a fundamental change? Is there a country in Europe or a developed democracy that would allow its constitution to be changed on that basis? Therefore, this is an important matter.
We do not know what the Commons said, although I am sure that we have a very accurate report from my noble friend Lord Rooker. Should the Commons think again or should we rely on that eight-day period as being sufficient? In my respectful submission to this House, if we are serious guardians of the constitution, then eight days is not enough. A debate that we cannot read is not enough, and the issue is sufficiently important for us to ask the Commons respectfully to think again. Therefore, I shall support my noble friend Lord Rooker, whose judgment throughout this whole debate has proved impeccable.
Lord Strathclyde: My Lords, the noble Lord, Lord Rooker, in what I thought was an uncharacteristically spiky speech, admonished me and, through me, the Government for not offering any change or making any concessions. As he was speaking, I thought that I would write down a few. There was the substantial concession on the Isle of Wight-
Lord Strathclyde: There was the substantial concession on the Isle of Wight at the request of noble Lords opposite, the substantial concession on public hearings at the request of noble Lords opposite, and-most cheekily and unusually from the noble Lord, Lord Rooker-his amendment on delaying the referendum and providing an opportunity for it to take place at any stage between 5 May and 31 October this year was accepted. Indeed, we helped the noble Lord to rewrite his amendment so that it would work. Let us hear no more talk about this Government not making concessions.
We have had nine referendums in the past 40 years. Only the 1979 referendums had thresholds, and those were imposed by Back-Benchers in another place in order to thwart the possibility of devolution being implemented. They were successful in their intention and, as I have noted before, that has been a source of much resentment. There were no thresholds in the 1997 referendums on devolution, as I said earlier; nor have there been any other thresholds in any of the other referendums that have taken place in the past 13 years.
Lord Forsyth of Drumlean: Will my noble friend please address the point made by the noble Lord, Lord Rooker, that this referendum is quite different from any other because it is binding? The effect of his amendment will simply be to give the referendum the same status as every previous referendum in so far as the Commons is able to consider it and reach a conclusion. Will he address that argument, because it has not been addressed in either House so far?
Lord Strathclyde: My Lords, the referendum taking place in Wales on 3 March, on which there is no threshold and for which no threshold was requested, is for a poll which is binding on this Parliament. I know that noble Lords will say, as my noble friend and others have, that this is a binding referendum, so let me be entirely clear about my answer. Referendums are a constitutional device; they are rarely used but they are used occasionally to ask the people their view on a specific issue. I believe that it would not be right to offer the people a referendum where Parliament has explicitly laid out what the effects of that referendum would be and yet say that we might not give them what they vote for. A threshold, even in the more nuanced form proposed by the noble Lord, Lord Rooker, is unnecessary and, we believe, wrong.
Lord Rooker: My Lords, I shall not detain the House. I shall certainly not comment on that excuse about the concessions. That was not in the context of the two offers from that Dispatch Box about the defeats that the Government have suffered. It was not said in that context. It was about wholly different subjects, none of which has materialised. I think we
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The Lord Speaker:My Lords, before I put the Question on Motion A, I have to inform the House of a minor drafting error on the Marshalled List. The Motion should refer to Commons Amendment 1C, not 8C, in lieu.
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