Maurice Mark Glasman Esquire, having been created Baron Glasman, of Stoke Newington and Stamford Hill in the London Borough of Hackney, was introduced and took the oath, supported by Lord Falconer of Thoroton and Baroness Healy of Primrose Hill, and signed an undertaking to abide by the Code of Conduct.
William Nigel, Lord Bishop of St Edmundsbury and Ipswich, was introduced and took the oath, supported by the Bishop of Chester and the Bishop of Leicester, and signed an undertaking to abide by the Code of Conduct.
Baroness Warsi: My Lords, it is a pleasure to answer this Question on the day of the centenary celebrations of International Women's Day. I am sure that the House will join me in paying tribute to the millions of women around the world who continue to struggle and campaign for equality, dignity and respect. The big society is about a volunteering, social action, philanthropic approach to life, but it is also about the opening up of public services to local control and the devolution of power from Whitehall to local communities. This offers women's groups and organisations an excellent opportunity to get more involved in their local communities and to have a say.
Baroness Gould of Potternewton: My Lords, I thank the Minister for that reply, but it seems a little contradictory that, at the same time as the Government are setting up this rather costly structure of community organisers, experienced and committed women's organisations such as Refuge and outreach organisations are being closed down through lack of funding. Would it not be much more sensible to use what we already have, train them up and get them to be part of the big society?
Baroness Warsi: My Lords, I have said on many occasions that it is a shame that we are having to deliver the big society against the backdrop of the financial circumstances that we find ourselves in. In relation to commitment to women's organisations, I know that the noble Baroness has given a huge amount of her life to chairing the Women's National Commission, which has done much to be proud of, including tackling violence against women, increasing involvement in public life and promoting gender equality both in Britain and internationally. The consultation published yesterday by my colleague in another place, Lynne Featherstone, is specifically geared towards engaging women in a way that is reliant not only on umbrella bodies but also across a range of organisations and expertise. I am sure that the noble Baroness will agree that that is a step forward.
Baroness Trumpington: My Lords, is the Minister aware, as I am, that women have great difficulty in taking their proper place in society? Is she also aware that I consider this Chamber a funny old place? Last Thursday I stood in here surrounded by 45 women and began my speech with, "My Lords".
Baroness Warsi: The noble Baroness makes an interesting point. I always revert to her for her experience and I am sure that she will be able to teach me much about the constitutional background to the term, "My Lords".
Baroness Afshar: My Lords, I declare an interest both as an outgoing member of the Women's National Commission and as the honorary president of the Muslim Women's Network. In the context of current Islamophobia, who is going to help networks such as the Muslim Women's Network that were supported by the commission and need resources in order to campaign against daily experiences of harassment and hardship?
Baroness Warsi: My Lords, the noble Baroness will be aware that I have recently raised the issue of anti-Muslim hatred and Islamophobia. This is a growing issue and it is right that women's organisations such as the Muslim Women's Network should play a key role in taking forward the concerns that I have raised. The Government are looking at the issue of Islamophobia in much detail and we will bring forward a paper to look at concerns that have been raised. I assure the noble Baroness that we will be consulting many groups, including the Muslim Women's Network.
Baroness Barker: My Lords, in the light of the abolition of the Audit Commission and comprehensive area assessments, what mechanisms will be available to assess the impact of funding cuts on women's voluntary organisations at local level?
Baroness Warsi: My Lords, as I said, the consultation that was announced yesterday by my honourable friend Lynne Featherstone in the other place is all about seeing how we can engage with women's organisations on the ground that have to deal with the issues that affect women in local communities. There are a number of questions in the consultation document, which, among other things, looks at the equality assessment impact of funding decisions.
The Lord Bishop of Leicester: My Lords, can the Minister explain to the House how the dramatic reductions in the staffing of national charities such as the Children's Society assists the cause of women within the big society, in the light of the deficit reduction programme?
Baroness Warsi: My Lords, this is a recurring concern. When we are having to make difficult funding decisions -I say again that this is because of the economic circumstances that this Government inherited from the last one-it is important that local authorities make those decisions in a way that preserves those much needed front-line services. I can also say that the transition fund, which was brought in specifically to support voluntary and charitable organisations in these difficult times, has already made grants, of which two are specifically to women's groups: the Domestic Violence Integrated Response Project in Leicester, which received £103,000, and the Incest and Sexual Abuse Survivors network in Newark in Nottinghamshire, which received £26,800. I hope that noble Lords will see that the Government, even in these very difficult times, are prioritising the needs of women.
Baroness Pitkeathley: My Lords, the Minister will know that the transition fund that she has just mentioned was already oversubscribed almost before it was announced. Is there any possibility that the Cabinet Office will make more money available to women's groups and others in the voluntary sector that do such important work on the themes that she has described?
Baroness Warsi: My Lords, we are in discussions at all times with local authorities to ask them to prioritise the areas that the noble Baroness has mentioned. However, she will also be aware that the big society bank, which among other things will be able to fund the projects to which she referred, will be on stream soon.
Baroness Farrington of Ribbleton: Would the Minister care to comment on the fact that local authorities of all political persuasions are getting increasingly irritated by Ministers washing their hands of responsibility for cuts that the local authorities are being forced to make? Before the noble Baroness refers to the economic climate, let me say that the Government had two opportunities: first, to ensure that local authorities did not suffer more savage cuts than central government departments; and, secondly, to ensure the phasing that has been advised by local authorities of all political persuasions.
Baroness Warsi: My Lords, this Government firmly believe that the devolution of power to local authorities, including the responsibility to make decisions on funding-more so because of the taking away of ring-fencing, which this Government have implemented-is the right way forward. However, I think that it is right for us to accept that, when councils such as Labour-run Manchester City Council feel that, in these difficult economic circumstances, they can still advertise to recruit a "Twitter tsar", that is money not well spent.
The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, the Government are bringing forward legislative reforms to help modernise the way in which credit unions do business and to remove barriers to their development and growth. We have recently announced funding of up to £73 million for the expansion of credit union services. The Government also intend to bring Northern Ireland credit unions under FSA regulation to give their members access to the Financial Services Compensation Scheme and the Financial Ombudsman Service.
Lord Kennedy of Southwark: I thank the Minister for his response. Does he agree with me that, today of all days, the Government must pledge themselves to urgent action to deal with illegal loan sharks, who in some cases revert to physical and sexual violence against women as they bully and threaten families to pay interest rates of hundreds of thousands of per cent? Will he agree to meet a delegation from the Association of British Credit Unions to discuss a link-up between credit unions and the Post Office, as a way of providing cheap, affordable credit to all?
Lord Sassoon: My Lords, I am certainly happy to confirm that credit unions play an important part in the Government's priority to see diversity and choice in financial services and to support financial inclusion, given that in areas of the highest economic and social deprivation credit unions are able to achieve the most impact. The credit union movement is growing significantly, with government support and following the support of the previous Government. We will certainly work to do whatever is reasonable to continue with that growth of the credit union movement.
Lord Newby: My Lords, does the Minister agree that a key role of credit unions is to provide basic bank accounts for people who are currently unbanked? Could he therefore confirm whether the £73 million that the Government are making available to credit
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Lord Sassoon: My Lords, I am happy to confirm to my noble friend that Ministers expect the post office network to play a central role in enabling credit unions to reach more families. Part of the funding, which I have already mentioned, is going towards projects related to that end-projects that are in the capable hands of my noble friend Lord Freud. He is running with that project; it is in safe hands and the Post Office is central to it.
The Lord Bishop of Liverpool: My Lords, is the Minister aware of the commission into personal debt that was chaired by the noble Lord, Lord Griffiths of Fforestfach? I declare an interest as a member of that commission. Will the Minister consider the proposals and recommendations of the commission, in particular, the proposal to set up a community finance trust that would assist community finance projects such as credit unions?
Lord Sassoon: My Lords, I am happy to look at any suggestions for furthering the development of credit unions and similar savings channels. I am grateful to the right reverend Prelate for drawing my attention to those recommendations.
Lord Elystan-Morgan: My Lords, while I welcome most warmly the initiative announced on behalf of the Government, does the Minister agree that a great deal of suffering and injustice could be alleviated and avoided by giving judges in our civil courts the right to strike down claims that arise from loan contracts with unconscionably harsh conditions, particularly extortionate interest rates?
Lord Sassoon: My Lords, it is very much at the forefront of the Government's thinking in this area to make sure that all appropriate steps and options are available so that those at the more deprived end of the economic and social spectrum are not ripped off by loan sharks or whoever. The credit unions that we are talking about have a central role to play in that.
Lord Touhig: My Lords, when the Government end the social fund maternity grant for the birth of the second child in April, many poorer families will be tempted to turn to loan sharks to borrow money. Will the Government help these families by promoting credit unions as a better way to save and borrow? In asking that question I declare an interest as a member and president of the Islwyn Community Credit Union.
Lord Sassoon: My Lords, that is exactly what we are doing by bringing forward the various reforms that I have described, which will help to modernise and drive forward the credit union movement-a movement that now numbers some 760,000 members in Great Britain. In Northern Ireland, where the movement has a different history, it has some 400,000 members. We
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Lord Phillips of Sudbury: My Lords, is it not the case that the Governor of the Bank of England, Mervyn King, less than a week ago drew attention to the exploitation by the clearing banks of what he called unsuspecting and unsophisticated depositors through their wholly unethical manipulation of interest rates? Should the strictures that the noble Minister has placed on loan sharks not be somewhat directed at the clearing banks as well?
Lord Sassoon: My Lords, we are talking about credit unions this afternoon. I have explained what an important and growing role they have to play in the diversity and choice of our financial services sector in the UK. That is what we should work to promote.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, addressing the deficit presents difficult choices. We are focusing resources on those in greatest need. Pregnant women on low incomes will benefit from the increases to the child element of child tax credit above indexation by £180 in 2011-12 and £110 in 2012-13. All eligible women will still receive Healthy Start vouchers and will still qualify for a £500 maternity grant for their first child. We are also extending budgeting loans to include maternity needs.
Baroness Gale: I thank the Minister for his reply. What help will be given to women having a second child given that the grant will end in April and the new Social Fund amendments to allow them to claim for maternity items will not come into force until eight to 12 months' time, so there will be a gap? What are those women supposed to do? The link has now been broken with the health in pregnancy grant, which ended in January, under which midwives and doctors gave advice to pregnant women on healthy pregnancy. How will the Minister ensure that those mothers receive good advice to make sure that they have a healthy pregnancy?
Lord Freud: There are two areas of financial help. The first is the budgeting loans. As I said yesterday, we are encouraging people to look at budgeting loans in the widest possible way. The second area is community care grants. Again, we expect that many people in the most difficult circumstances will be able to take advantage of those. The noble Baroness's second question concerned
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The Earl of Listowel: My Lords, is the Minister aware that young women in care are two and a half times more likely to become pregnant than their peers and that a quarter of young women leaving care are either pregnant or have a child already? Will he consider asking his colleagues who talk with local authorities whether all best practice in the area of support for such young women is collated and being shared as it should be?
Lord Freud: My Lords, I share the noble Earl's great concern for children in care and take his point about the relatively much higher rate of pregnancy. I shall look closely at what we can do in that area.
Lord German: My Lords, there will be a moment of time between the outgoing regulations and the incoming regulations in respect of budgeting loans to which the Minister has just referred. Given that most people will be looking for low-cost, low-interest loans to buy such things as a buggy, a pram or a cot, what advice is the Minister giving to his department on exercising flexibility in this regard to ensure that the current regulations may be as widely accessible as possible so that people are not disadvantaged during the short period between the old and the new regulations?
Lord Freud: I thank my noble friend for reinforcing this important point. There will be a gap, probably of around nine months, before we can formally change the budgeting loans. We are making the very firm point-I made that firm point formally in the Chamber yesterday-that we are encouraging people to use the scheme to the utmost extent that they can and to apply it to slightly wider items than those around budgeting for the baby.
Lord McKenzie of Luton: My Lords, the Minister has confirmed again, as he did in the debate yesterday, that families will eventually be able to access budgeting loans. However, is he aware that just last week the Minister for Pensions announced a further tightening of the screw on the availability of crisis loans from the Social Fund on the basis that this would enable the trickle of budgeting loans to continue? Is this not making the very poor pay for the poor?
Lord Freud: My Lords, the trouble was that the crisis loans were being used in a non-crisis context to buy ordinary items of household expenditure, so we were in danger of running out of funding for the whole system because of the way it was being used. Our concern with controlling the crisis loan situation was to make sure that funding was left available for budgeting loans for exactly this kind of thing.
Lord Northbourne: Is the noble Lord aware that there is a large and growing body of research which shows that the quality of parenting and parental care during the weeks before birth and the months after birth is absolutely crucial to the way in which the child's brain develops? Surely any kind of penny-pinching at that stage of the child's development is a false economy.
Lord Freud: My Lords, we have to look at a holistic system of support for people who are the most disadvantaged in this country. Having bits and pieces of things that do not work is the wrong way to go. This was an example of support that was directed at the wrong point in maternity. If you want to really help in terms of what women eat, it is better to do it in the first trimester, not in the last. The structure of what we are doing with the universal credit involves a system that puts in coherent support for the most disadvantaged right the way through and, by definition, will catch people at the beginning of pregnancy, not at the end.
Lord McAvoy: My Lords, the Minister has admitted rushing through these regulations, totally against time conventions, in order to deprive new mothers of claiming after 11 April. Does he realise that this conjures up a picture of Tory and Liberal hard-faced men sitting around a table in Westminster plotting to deprive the poorest people of some financial aid? Is he proud of that?
Lord Freud: My Lords, I am not proud of a previous Government who threw bits and pieces of money around like an out-of-control farmyard muckspreader. We are making coherent provision for the most disadvantaged in a way that you could not.
Baroness Verma: My Lords, the UK Government, along with a number of other member states, the European Council and the Commission made oral and written representations to the European Court of Justice during legal proceedings. The representations argued that, rather than preventing true equality, the article in question ensured that different cases could be treated differently, thereby ensuring true equality. However, the court has ruled that the practice of using gender as a factor in the calculation of premiums and benefits must cease, with effect from 21 December 2012.
Lord Gordon of Strathblane: I thank the Minister for that reply, and I sense that she was as unhappy with it as I and, I suspect, most of the House will be. The problem is that article 5.2 of the gender directive, as the Minister indicated, allowed an opt-out where there was clear, up-to-date statistical evidence that gender was a major risk factor in insurance. That evidence still exists. It is a fact that women tend to live longer than men, yet an insurer is required by the court to ignore that in computing either insurance premiums or annuity rates. Does the Minister agree that it is likely that all of us will be worse off, because a sensible and prudent insurer must provide for the worst-case scenario and cannot predict whether the uptake will be mainly male or female? What steps are the Government taking to remedy this situation, bearing in mind, as she said, that we are not alone? Indeed, the European Commission itself intervened in the case.
Baroness Verma: My Lords, the noble Lord has referred to a number of very difficult decisions that had to be taken. We are disappointed by the ruling. The previous Government made written representations and we made oral representations, but the judges unfortunately decided that by 21 December 2012 it will be illegal to discriminate on the basis of gender. It is clearly undesirable to treat people unfairly because of their sex. However, financial services providers will be allowed a period in which to make the changes. We are encouraged that people have supported our drive for equality. Unfortunately, things such as this make our task much more difficult. I am pleased to say that the insurance industry has adopted a can-do attitude to this ruling, and I am sure that we will do our very best as a Government to assist it.
Lord Thomas of Gresford: My Lords, what steps have the Government taken to discuss this judgment with the insurance industry in order to prevent profiteering? Why has my stepdaughter's motor premium gone up now, when there will be no difference until December 2012?
Baroness Verma: My noble friend raises another very important issue. We cannot dictate to insurance companies how they should make judgments on how their premiums should be costed. However, we are working closely with insurance companies and the financial services sector to ensure that they do not roll out unfair premiums on the back of this ruling.
Lord Davies of Stamford: My Lords, it is a pretty remarkable day when an insurance market is instructed to operate contrary to actuarial principles. Are there not two things that could flow from this? Either everybody will be forced to buy their insurance within the EU by some means or other, which would surely be contrary to both the spirit and the letter of our WTO commitments; or those categories of people disadvantaged under the new ruling will simply buy their annuities or motor cover offshore, outside the EU, in the United States, Canada, Bermuda, the Channel Islands or wherever. In those circumstances, a substantial
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Baroness Verma: My Lords, the noble Lord raises a question that I posed to civil servants. The response I received was that any insurance sold in the EU, whether or not it is from outside the EU, will be applicable under these rules.
Baroness Howe of Idlicote: My Lords, I have some sympathy with the predicament of the noble Baroness, but perhaps she would tell the House whether the Government, if they had the choice, would support the payment of equal annuities to men and women who have earned an equal financial entitlement to them, rather than continuing with the existing system in which a woman gets considerably less just because her average life expectancy is a few months more.
Lord Peston: It is about time a Labour speaker was allowed to join in, unless they have changed the rules of the House. First, I will break a lifetime's habit and congratulate the Minister on the excellence of her answers. Is she absolutely certain that there is nothing Her Majesty's Government can do to move back on this matter? It is immensely damaging to the workings of the insurance market, which will be immensely damaging for our country in particular. Can nothing be done to get this reversed?
That Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Wednesday 9 March to allow the Consolidated Fund (Appropriation) (No. 2) Bill to be taken through its remaining stages that day.
That it is expedient that a joint committee of Lords and Commons be appointed to consider and report on the draft Detention of Terrorist Suspects (Temporary Extension) Bills presented to both Houses on 11 February (Cm 8018) and that the committee should report on the draft Bills by 9 June.
Lord Young of Norwood Green: My Lords, the Government propose to sell off 100 per cent of Royal Mail, which may be regarded as one of our oldest
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We and fellow Peers of several and no party affiliations have submitted amendments which seek to ensure that, if the sale of Royal Mail goes ahead, it meets four main objectives: first, that it is done in a timely fashion that does not present the prospect of an endless cloud of doubt hanging over the future of the company; secondly, that proper measures are taken to ensure that value for money is gained for the taxpayer and that the company is not sold at too low a price; thirdly, that there is greater clarity and greater accountability than the Bill currently provides; and, fourthly, that a privatised Royal Mail is put on a secure footing and is not subject to the ravages of asset-stripping and disintegration or doomed to failure because of the circumstances that the Bill creates.
The amendment to make provision for a sunset clause aims to meet the first of those objectives, ensuring that any sale takes place in a timely fashion without a long-lasting aura of uncertainty besetting the company. Sunset clauses are well recognised. Indeed, Members, regardless of party affiliation, have argued for them in the past in various pieces of legislation, as I well remember. In fact, the Minister for Culture, Communications and Creative Industries, Ed Vaizey, stated in another place in June 2009:
"I also welcome the fact that there is a sunset clause. As other hon. Members have pointed out, sunset clauses are, in principle, a very good thing to include in any legislation".-[Official Report, Commons, Holocaust (Stolen Art) Restitution Public Bill Committee, 10/06/09; col. 13.]
If the Government had provided for a sunset clause in the Bill, there would be no need to debate this amendment. As they have not, perhaps a few examples of sunset clauses and their use would help the Committee. In 2009, interestingly, the Conservatives in Scotland argued that sunset clauses should be added to all Scottish legislation. I am sure that Conservative Members of this House will support that position, given that it was stated in their party's manifesto in 2007. The debt relief Act 2010 has a sunset clause which expires on 7 June 2011, which neither of the coalition parties voted against. In the Budget of June last year, regulatory sunset clauses were announced-a well tried and recognised tool for Parliament and, indeed, the Government to use.
How would the amendment assist in the progress of this Bill? The answer is fairly straightforward: it would add clarity. The Labour Party's position on 100 per cent privatisation of Royal Mail has been made clear. However, if the Government's proposals to privatise Royal Mail completely were approved by this House and the other place, the amendment would put a time limit on the Government's ability to sell off Royal Mail. Setting a relevant date would add certainty for the business and, indeed, for the workforce-certainty that is currently lacking in the Bill.
As it stands, the Bill empowers not only this Government but future Governments to sell off Royal Mail. That process could go on and on. The Minister in the other place has made it clear that he would not intend to sell Royal Mail however low the price. That is a sound position and one with which we would agree. The Bill permits a period of uncertainty to continue not just into next year but possibly into the year after and even longer. That would be an intolerable position for Royal Mail, its management and its workforce. It would place the chief executive of the company in a perilous and uncertain position, which perhaps could be compared with that of a modern-day Premier League football manager at certain clubs, where team continuity has little value. It would damage the morale among the workforce too.
If the amendment were passed, it would not, of course, rule out a future disposal of some or all of the company; but it would require the Government to return to the House if they failed to dispose of Royal Mail by 31 December 2012. We deliberately selected a date which we felt is achievable and viable, rather than a date that could lead to this being characterised as a wrecking amendment.
As we proceed we shall put to the Minister other proposals that outline other areas where we would want them to come back to the House in order to do certain things. This amendment would not prevent the Government selling Royal Mail at another point in the future provided that the sunset clause is repealed. However, the Government have given no indication of a timetable for the sell-off. These amendments-one of which I hope the Government will accept-would enable this Government or a future Government to sell off Royal Mail and also ensure that the matter is not drawn out over many years. Without a sunset clause, the business, the employees, the partners in the Post Office, not to mention its business customers and the public, would be left in a strange limbo-land with no conclusion in sight. That would create massive uncertainty for the business. That could not be seen as an attraction to potential employees and customers, who could be driven away from the business by such massive uncertainty.
An unrestricted time limit could also act as a mechanism to drive down the price of the business. We are told that letter volumes will continue to fall and that the business can modernise only with private investment-so how would a long delay be helpful? The Minister needs to address that issue. Market conditions would likely get worse, and a period of uncertainty would surely make it very difficult to succeed in modernisation or to make proper investment decisions. Can the Minister tell us what impact an extended period of uncertainty would have on the value of the business, and therefore on the value for taxpayers? What will be the impact on employees of the falling value of the share participation scheme, if the legislation is approved?
As for the counterargument that a sunset clause would lead the Government to go for a fire sale of Royal Mail to get ahead of the time limit, the Government have already said that they will not sell Royal Mail at "any price". As I said, that is a sound position. It
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This amendment is reasonable and necessary. It is called holding the Government to account. The legislation timetable is in the Government's control. If the Government have the will, we will encourage and support the Minister-as we expect her to support our amendments. We will support her in bringing matters to the House and dealing with them as quickly as possible.
The Bill currently provides for the creation of a situation which is similar to the perpetual "sales" at retail outlets. As we all know, there is no rush to get to Currys, Dixons or wherever to buy new electrical goods because the "sale" does not really exist-it is perpetual. A perpetual sale drives down the price. Nothing in the Bill seems to prevent Royal Mail being sold off piecemeal over an extended period, as I said. Even the Minister must agree that that cannot be an acceptable solution. If the Government cannot complete a sale by one of the dates stipulated in the amendments, my honourable friends and I think it right and proper for the sunset clause to be enacted.
The amendments would impose on the Government a requirement to focus on their ambitions-which, as I said, are contrary to mine and those of my honourable friends. The alternative of death by a thousand cuts would wreck the Royal Mail and the improvements made recently, which even Richard Hooper could not envisage happening in 2008, at the time of his first report. The second Hooper report showed that good progress can be made with public ownership of the Royal Mail. It is vital that that is not unpicked and allowed to fall into disarray. The Bill, however, creates the opportunity for that kind of uncertainty. If the Minister and the Government are so sure that selling it off is a good thing, they should tell the Committee about the dangers of an extended period of sale. Indeed, it could be said that an extended sale period for Royal Mail might lead to a Dutch auction of sorts, which may suit some potential buyers more than others.
Through these and other amendments, the Committee will see that the Opposition have the best interests of Royal Mail and the post office network in this country at heart. We would not want anything done to them that puts in jeopardy the very things that they stand for-through the universal service obligation, the inter-business agreement, access points and the social benefit provided to us by post offices.
I bring the House's attention to another analogy. I am sure that many Members of this House have been involved in selling a house, and we can apply the logic of that scenario to the sale of Royal Mail. Anything that is up for sale for a long time and does not sell attracts a buyer only when the price is reduced. Is that what the Minister wants? If not, she should support the amendment; otherwise, that will damage the business. If the Government cannot bring Royal Mail to market and secure a deal by the stipulated date in the amendment, a stable future for it must be delivered by removing their ability to sell off the business.
The Government will be able to provide proof to those who may doubt the Minister's ability to secure a good, strong and long-lasting future for Royal Mail in the private sector by striking while the iron is hot and driving up the interest by putting a closing date on the sale.
It is interesting that, during her evidence to the Committee in another place, Ms Moya Greene, the chief executive of Royal Mail, in response to a question asked by the honourable Member for Telford, was bullish about the possibility of a sale. She said:
"Should we wait? I think we should sell the company and get it the capital that it needs as soon as we can. I hope that that will be some time in 2012.-[Official Report, Commons, Postal Services Public Bill Committee, 9/11/10; c. 12.]
We are therefore asking the Government to show their support for the aims and aspirations of Ms Greene, the chief executive of Royal Mail. She believes that a sale can take place during 2012. Inserting an end date into the legislation would focus the minds of all involved to either bring forward the conclusion or admit failure. The Government can show their support for Ms Greene by inserting a date of no later than 31 December 2012.
Mr Brydon, the chairman of Royal Mail Group, told the Committee in another place that he believed it would be easier to attract investment after the sale to carry on future modernisation. Indeed, it could be taken from his evidence that a 2012 sale was imperative to the future of the business, because he felt that the negotiation period to get us to the current modernisation programme was too extensive. He said:
"You have to be flexible and quick. A system that takes a year and a half to agree to get capital to do things just does not work".-[Official Report, Commons, Postal Services Public Bill Committee, 9/11/10; c. 15.]
It is not only the Minister's best intentions that the amendment has at heart, but those of Ms Greene and Mr Brydon. I am asking the Government, through the amendment, whether they actually support the aspirations of Royal Mail's management and, in particular, whether they agree with Mr Brydon that we need to be quick and flexible. The Minister may claim that there is flexibility in the Bill, but the clause's omission of a date jeopardises the quickness advocated by Mr Brydon.
What will the Minister's position be on continued investment if no sale occurs before the end of the current modernisation period? Will the Government commit to further investment of capital or not? In their evidence to which I referred, Mr Brydon and Ms Greene recognised the need for continued investment to modernise the business. Ms Greene commented that a further £2 billion will be needed. If a further investment of £2 billion is required for the business and the sale has not been concluded on time, will the Minister commit to providing that funding stream? I somehow doubt it. Will the Minister comment on what difficulties could be encountered in a future sale process if Royal Mail has been starved of cash for a period after the end of the current modernisation programme?
Do the Government believe that the insertion of a date in the legislation would also have an impact on our post office network? If, as the Minister pointed out, the Government see the post office network as the natural partner for a privatised Royal Mail, does she see any difficulty from the network's point of view as a result of a completion date for the sale of Royal Mail? Can she confirm that the current inter-business agreement will expire over the next couple of years?
Where will delay leave the sub-postmasters and sub-postmistresses of this country, many of whom are already in a perilous state? If there are such difficulties for the Post Office, how will they be eradicated by legislation without a clear and firm date? I ask the Government to accept the insertion of an appropriate date by which the sale should be completed, because to do anything else would be damaging to Royal Mail. Royal Mail management seems to believe that a 2012 date is acceptable. Why does the Minister not believe that? I am sure that she will reflect on the strength of the presentation I have put before her. I await her response with significant interest. I urge the House to support the amendment. I beg to move.
Lord Hunt of Wirral: My Lords, what a remarkable performance. I enjoyed the 14-minute speech by the noble Lord, Lord Young of Norwood Green, for a number of reasons, but first, I join him in paying tribute to Richard Hooper and say what a remarkable job he has done for Royal Mail. We were all thrilled when he was present at the Oscar ceremony when his son Tom won the best director award, one of the many awards for "The King's Speech".
The noble Lord made a remarkable presentation arguing in favour of a sunset clause when, thanks to the noble Lord when he was in Government, we are still awaiting sunrise. The great period of massive uncertainty that he described is wholly as a result of the previous Government's inability to take the previous Bill through the other place after we had spent many hours improving it. I also heard him say that we must not have the Royal Mail engaging in some strange limbo-land. All I will say is that that is exactly what we had. The great thing now is that we have a Government determined to realise the ambitions of all those of us who care deeply about the Royal Mail and make it a great success. I share the noble Lord's four principles, but I say to him that when he makes the first principle "timely", I wish that he might have expressed some regret about the fact that the previous Bill did not proceed any further when it should have done. Of course he is right to say that we have to look for value for money, clarity and a secure footing. The great thing I have learnt from that remarkable lady, Moya Greene, is that she is determined to make Royal Mail the most respected institution in the UK. That is something she achieved with Canada Post, and I am a great admirer. Please, whatever the arguments for or against sunset clauses, let us have sunrise, let us get on with it.
Lord Hoyle: I was not going to rise, but I am going to rise and there may be other occasions when I rise when we hear the eloquence of the noble Lord opposite. I notice that he did not reply to the argument being put forward here about the uncertainty that would rest
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Baroness Kramer: My Lords, I should, I suppose, confess to something of a wicked past. Back when I was a banker in the United States, part of my work was advising companies that were making purchases and selling off subsidiaries. If I was advising a potential buyer of Royal Mail, I would be hoping very much that this amendment would pass, because, frankly, nothing would give more leverage to a potential purchaser than what in effect is being described here as a drop-dead date.
We have seen government in the past sell assets at far below their appropriate value. I was very involved from the other side when I was on the board of Transport for London and the Government insisted on the Tube public/private partnership. TfL set itself internal deadlines. I do not believe that they were externally set, although I would have to check that. The ability to negotiate in effect collapsed in the final days as those deadlines approached and were very much exploited by the private partners and the banks on the other side, so I beg this House not to fall back into that trap.
The noble Lord discussed uncertainty, but what greater uncertainty could there be than the knowledge that the Government might find themselves coming back to this House at the time of a sunset clause for leave to continue with a sales programme. That maximises uncertainty for Royal Mail and for the other parts of the group that will, we hope, go on to their new future.
Lord Jones of Birmingham: My Lords, I concur with the noble Baroness. If this amendment was passed, there would be no activity whatever until about November 2012. As noble Lords will know, I spend a lot of my
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Lord Skelmersdale: My Lords, I must be the only person in this Committee, certainly in the House, who regrets not having spoken on this Bill at Second Reading. I did not do so because I was pursuing my day job as a director of a mail-order company. There is a temptation on these occasions to give a Second Reading speech, but I have no intention whatever of doing that. On this amendment, however, I agree with both my noble friend and the noble Lord, Lord Jones, that putting a final date into this legislation would make things even more difficult for the Post Office management. I have been advised that the point that I really want to make about Clause 1, and would have made on Clause 1 stand part, is deprecated by Standing Orders. Therefore, I am sorry to disappoint the noble Lord, Lord Hoyle, but I will speak no more about my reactions to this amendment.
I bring to the House's attention Clause 1(2), which is gratuitous. The nuts and bolts of this Bill are contained in Clauses 1 and 4. Clause 1(1) removes from the statute book Sections 65 and 67 of the Postal Services Act 2000, and Clause 4 replaces them with a new formulation. My contention is that it would be far better drafting of this legislation if those two clauses were combined and we therefore left out Clause 1(2).
Over many years, I have been interested in the size and length of the statute book. Anything we can do to reduce the number of words or even the number of pages we should certainly do. I do not expect an answer on this conundrum that I have set myself from the Minister today. She has already instructed officials to give me some sort of answer, which I do not find particularly convincing. I would be happy to have discussions with her and them between now and the next stage of the Bill.
Lord Borrie: Like the noble Lord, Lord Skelmersdale, I have been interested to read Clause 1(2). It seems to be inelegantly worded, confusing and surplus to requirements. Why is it inelegant? Does one normally have the words "But see" another clause? It seems more like a text message or an e-mail rather than a provision in a Bill. Why is it confusing? Its position is confusing because essentially the first three clauses deal with Royal Mail. Clause 4 deals with the Post Office network. The Government properly have a different attitude from one to the other and so, I am sure, does my own Front Bench. Subsequent clauses deal with the network and there is no need for this cross-reference inelegantly expressed in Clause 1(2). I share the noble Lord's view about that.
Viscount Eccles: My Lords, I, too, apologise for not having been present at Second Reading, but I support my noble friend Lady Kramer and the noble Lord, Lord Jones, on the Cross Benches. This amendment may be based on a misunderstanding. If there is to be
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Lord Christopher: I was not going to speak on this amendment, but I have been provoked. I hope that the Minister will answer directly the question just asked from behind her on whether the Government will have some say on the sale or whether it will be left exclusively to the board of Royal Mail. I do not think that it should. One issue has not been mentioned in this discussion. While there may be much anxiety about the hope that by Christmas 2012 we can all go back to where we were, underlying this is another issue-on this matter I hope that the noble Baroness will have something to say. As I said at Second Reading, it is easier to say to whom you would not wish to sell Royal Mail than it is to say to whom you would. There is such a lack of clarity on this that the Government need to give reassurance. Would we, for example, be prepared to see it sold to a hedge fund? Would we be prepared to see it sold to a private equity fund? Would we be prepared to see it sold to a sovereign wealth fund? If so, would that be to all, to none or to some?
I have one final point on this issue. Would we sell it to any buyer with a reputation for asset stripping? I hope to come to this point on a later amendment, but I believe that unless we get the price right, there are assets in Royal Mail which could easily be sold at a very significant profit.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, I wonder whether it would be okay with your Lordships if I deal with the question put by my noble friend Lord Skelmersdale and supported by the noble Lord, Lord Borrie, before moving on to the amendment. Clause 1(2) ensures that the two major issues under Part 1, the ownership of Royal Mail and the ownership of Post Office Ltd, are addressed in the very first clause. We believe that, given their importance, this is appropriate. The purpose of subsection (2) is to assist the reader in understanding the full implications of the Bill. It is intended to highlight the relevant provisions that appear further on in the Bill and of which the reader might not yet be aware. Without subsection (2), the clause may read as lifting the restrictions on ownership of Post Office Ltd with no indication that new restrictions have been put in place further on in the Bill.
While the majority of readers will look at the full Bill and draw up relevant connections, we believe it is important to consider how to make the Bill accessible to those who may be unfamiliar with legislative text or to those with an interest in one particular aspect of the policy. It is these readers who may look at what they believe are the relevant provisions and then fail to see the other relevant provisions further on. Provisions
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Lord Lea of Crondall: As someone who is not directly involved in this, perhaps I may make an observation. It is plain common sense for the noble Baroness to say, in the light of the remarks made by the noble Lord, Lord Skelmersdale, and my noble friend Lord Borrie, that it is no big deal, but this is not language appropriate to an Act of Parliament. Quite simply, will she agree to think about some answers on the back of a postcard before we move on to the next stage of the Bill?
Lord Skelmersdale: My Lords, I would not put it quite as rudely or as crudely as the noble Lord opposite has just done. However, I did suggest in my few words that the draftsmen ought to look at combining Clause 1(1) with Clause 4 and then putting that at the very beginning of the Bill. I noted that my noble friend did not respond to the suggestion, but as I said, I do not expect her to do so now. I am sure she has many more important things to do, such as responding to the amendment moved by the noble Lord, Lord Young of Norwood Green, which I am sure she will do in her usual adequate fashion. All I am asking for is future discussions, and from what my noble friend has just said, I am sure that she would find that acceptable.
Baroness Wilcox: I thank my noble friend and of course I will be happy to speak to him afterwards, at any time that is convenient to him. I should now turn to the amendment tabled by the noble Lord, Lord Young, otherwise we may be here for much longer than we anticipated.
I believe that Clause 1 exposes the real difference between the previous Government's approach as set out in their 2009 Bill to the fundamental problems facing Royal Mail, and the approach that this Government are taking to secure the company's future. Setting aside the ownership issue for a moment, I think it is clear to everyone that the powers in the Bill to tackle the pension deficit and regulation are either the same as or very similar to those provided in the 2009 Bill. This is perhaps not surprising as we have based our Bill on the same evidence, that of the Hooper report, as the previous Government. However, we have not simply produced a cut-and-paste Bill. As we will discuss during this Committee stage, we have included new regulatory measures to safeguard the universal postal service and introduced fresh ideas on employee ownership and the potential of a mutual ownership structure for the post office network.
All sides of the House agreed with the analysis contained in Richard Hooper's 2008 report. We all agreed that the current framework was untenable and
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Richard Hooper's recent update showed that the situation is now much worse than it was in 2008. In fact, he described the Royal Mail's current position as being "even more precarious". The noble Lord, Lord Young, asked about the effect on the value of Royal Mail of prolonged uncertainty. I would say to him that it was the failure of the previous Government's Bill that has caused prolonged uncertainty for Royal Mail and all other postal operators. That is what is putting the universal postal service at risk.
The Bill addresses those problems and creates a framework that will help to secure the future of Royal Mail and maintain the universal postal service. Part 1 sets out provisions relating to the restructuring of the Royal Mail group of companies. The Government committed in the coalition agreement to injecting private sector capital into Royal Mail, including opportunities for employee ownership. We also said that we would retain Post Office Ltd in public ownership, on which the noble Lord, Lord Young, raised a number of points. We will have plenty of opportunity to discuss the Post Office when we debate those clauses dealing specifically with it.
I turn to Amendment 1. The disposal of shares in Royal Mail will be a commercial transaction. The Government's objective is to ensure that the transaction represents value for money for the taxpayer and secures the future of Royal Mail. In doing so, our overriding objective is to secure the future of the universal postal service. I cannot understand, therefore, why the noble Lords have brought forward this amendment, the substance of which was fully debated in the other place.
By setting a deadline for a disposal, all the commercial advantage would be given to the buyer if we were selling the business by auction. The buyer would know that the Government were up against a deadline, giving him the whip hand in any negotiation, and all sorts of demands could be made as the deadline approached. The amendment would not therefore allow the Government to ensure that they could get value for money from a sale and secure the best future owners for Royal Mail; in our view, it would do the opposite. When I was on the opposition Benches, I was very keen on sunset clauses in legislation and I am not opposed to them now-in fact, in most cases I encourage them-but the proposal set out in this amendment is simply not appropriate to the circumstances.
A failing of the previous Government's policy on Royal Mail was that it tried to do too much at the same time by running the legislative and the sale processes in parallel. We have decided to take a staged approach; our first priority is passing the Postal Services Bill to allow the framework for action. The Government will then bring into force the new regulatory regime. Only then will we start the process to introduce private sector investment, including the employee share scheme and the pension solution.
The noble Lord, Lord Young, asked what the Government would do if they could not sell Royal Mail before the end of the current modernisation
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An integral aspect of the Bill is that it allows flexibility, because that is what any sensible commercial shareholder would retain for themselves. Such flexibility enables the Government to decide when to conduct a disposal of shares and how to do it, either through a trade sale or a flotation. I agree with my noble friend Lord Hunt, who said, as did the noble Lord, Lord Jones, that we want no artificial deadlines. Although I do not agree with everything that the noble Lord, Lord Hoyle, said, I do agree that we want the right price and the right company, and for that we must wait our time until the right moment. I thank my noble friends Lady Kramer and Lord Eccles for their support.
I say to the noble Lord, Lord Christopher, that I hope we will be flexible, get a really good deal for the taxpayer and make sure, as always, that we support the universal service. The proposal in the amendment is, I fear, impractical and would risk the future of the very universal postal service that we are all trying to save. I therefore ask the noble Lord, Lord Young, to withdraw his amendment.
Lord Young of Norwood Green: My Lords, I have obviously reflected on the range of answers and it is no surprise that I do not agree with all the analyses. What is past is past but perhaps there will be a new dawn, to paraphrase the noble Lord, Lord Hunt.
I agree with my noble friend Lord Hoyle that the amendment is justified. I was confused by the contribution of the noble Baroness, Lady Kramer. I was not sure whether or not she was supporting the amendment but, at the end, I gathered not because she tended to concur with the noble Lord, Lord Jones, that, apparently, no one is going to do anything at all and they are going to wait until 20 December, or whenever it is. I find that unlikely.
As regards the contributions of the noble Lord, Lord Skelmersdale, and my noble friend Lord Borrie, I quite like the idea of the Bill being drafted by committee. It would take a long time and I doubt whether it would be any more elegant or inelegant than it is currently. From my experience of dealing with parliamentary draftsmen, it is a painful and tortuous process to sort out what is required or what they tell you is required. I wish the Minister the best of luck in sorting out that particular problem.
I agree with my noble friend Lord Christopher; I am sure the Government will be involved in the sale. The Minister pointed out the possibilities and I cannot conceive of a situation where the Government will hand this over lock, stock and barrel to Royal Mail. She did not answer the question posed by my noble friend Lord Christopher about whether it could be sold to a hedge fund or a sovereign wealth fund and the dangers of asset-strippers.
I made clear at the outset that this is not intended to be a wrecking amendment; that is why it refers to 31 December 2012. As to whether the situation is much worse, it is challenging but, in one respect, it is better because we have an agreement on Royal Mail transformation with the union and modernisation is going ahead, which is a profound step forward. I will not say that mistakes were not made but there is now a good foundation and a good relationship between management and the union, which is fundamentally important to long-term success.
We will obviously reflect on what has been said by the Minister. However, we would ask her to reflect on whether or not there should be any timescale at all in relation to the projected sale. Nevertheless, in the light of the debate, I will withdraw the amendment.
(a) any issue or transfer of shares in a company will have no effect if it would cause a Royal Mail company to cease to be publicly owned, and
(b) any issue or transfer of share rights to a person will have no effect if the acquisition by the person of the shares to which the share rights relate would cause a Royal Mail company to cease to be publicly owned."
Lord Young of Norwood Green: Under Clause 1, the Government have made it clear that they propose to sell off 100 per cent, albeit with 10 per cent employee shares, of Royal Mail-which may, as I have already said, be regarded as one our of oldest public services. It is the sale of a great public institution; it has a noble history in the development of the culture, social cohesion and economic strength of the nation and still provides a vital public service.
For 350 years, Royal Mail has been, to all intents and purposes, a public service and is seen as a huge and valuable asset run in the national interest. One should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country's development as the railway or the electricity grid.
Turning to the modern day, I also pay tribute to Richard Hooper, who described the Royal Mail and the service it provides as part of the UK's "economic and social glue", binding communities together. That
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The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard, as I am sure all noble Lords appreciate, whether or not they support this move. We on these Benches will ensure that the Bill receives the line-by-line scrutiny at which this House excels in order to gain greater clarity and provide greater assurance for the future.
It is a pity that the noble Lord, Lord Hunt of Wirral, has disappeared from his vantage point because at Second Reading he remarked that the debate seemed to him a little like Groundhog Day. My noble friend behind me has explored the relative merits and demerits of Groundhog Day and I am not going to go through that again. He said the debate had,
Yet perhaps his mind was wandering back to an earlier era because the history of attempts to privatise the Post Office goes back much further than just two years. The noble Lord was a serving member of the previous Conservative Government as Secretary of State for Wales from 1990 to 1993 and then in a number of positions. He earned a great deal of respect across the political spectrum for the way in which he conducted himself during that time but I must remind the noble Lord and the House that, for a good deal of that period, the privatisation of the Post Office was a burning issue of debate, especially between 1992 and 1995.
On 19 May 1994, a Green Paper on postal reform was at long last published. It proposed 100 per cent privatisation of the Royal Mail with a Stock Exchange
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There was a further twist in the tale. The Cabinet considered the privatisation plan and decided against it. Some members of that Cabinet at the time are Members of this House today. I feel sure that the noble Lord, Lord Hunt, will remember why they concluded that privatising the Royal Mail was a privatisation too far. Maybe these thoughts were in the noble Lord's mind when he was experiencing his bout of déjà vu and teasing the Opposition Front Bench today.
I make these remarks not only as a mild riposte to the comments of the noble Lord, Lord Hunt, about the 2009 Bill but to illustrate that the future of Royal Mail and the Post Office network is an important issue that has prompted heated debate for many years. What a shame we cannot rewind-but Hansard will reveal all.
The noble Lord reminded us that all the Front Benches were in favour of the Postal Services Bill 2009. Indeed they were, but I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned; that is, they must be in overall public ownership. The previous Bill of 2000, still in force today, permits joint ventures between Royal Mail and private companies. That has been a good thing-for example, in relation to GLS. The 2009 Bill permitted a minority partnership. What neither Bill permitted was 100 per cent privatisation, which the Bill before us proposes. That is the nub of the difference and, I suppose, of this amendment.
Amendment 2 is intended to reinsert the provision of the 2009 Bill that each Royal Mail company must be in overall-I stress "overall"-public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time and indeed the Liberal Democrats supported that proposition.
Perhaps there was a change of heart at the general election. One might find a clue in the manifestos of the two parties that came together to form the Government. If you search for the privatisation proposals contained in the Postal Services Bill in the Conservative or Liberal Democrat manifestos of 2010, though, I am afraid that you will search in vain. The Liberal Democrat manifesto clearly rejected 100 per cent privatisation of Royal Mail. It pledged to:
"Give both Royal Mail and post offices a long-term future, by separating Post Office Ltd from the Royal Mail and retaining Post Office Ltd in full public ownership. 49 per cent of Royal Mail will
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No doubt Liberal Democrat Members will tell us that things have changed fundamentally since they wrote that manifesto, as they have done on a whole range of other issues that I will not refer to today.
Perhaps the Conservative manifesto will be more enlightening. It was enticingly entitled Invitation to Join the Government of Britain. Did we miss something? Was it really an exclusive appeal to Liberal Democrat MPs and Peers? One can scour the contents of the Conservative manifesto from start to finish but there is no mention at all of Post Office privatisation.
During debates in 2009, the noble Lord, Lord Hunt, criticised the previous Secretary of State for introducing a Bill with insufficient consultation, but by comparison this Bill is being pressed through with breathtaking speed. The Government carried out no public consultation on their proposal to privatise 100 per cent of Royal Mail. There was no Green Paper or White Paper. Questioned in another place, the Minister for Postal Affairs did not deny this but seemed unapologetic in the extreme. He said,
We are not suggesting that the Government should keep consulting but some consultation might have been of value, given the number of times that I remember receiving criticism when we were in government if there was not enough pre-legislative scrutiny or consultation. Our debates on Royal Mail have been usefully informed by Richard Hooper's panel producing two reports in May and December 2008, and being asked by the current Government, sitting alone this time, to review his work in 2010.
We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year Royal Mail experienced a drop of 7 per cent in letter volumes. Other operators are taking advantage of liberalisation and what are now regarded as generous terms for access to Royal Mail networks. If I am pleased about nothing else about my ministerial contribution, our prominent pledge that we were going to get regulation right is something that I hope will be achieved.
Having taken over upstream business faster than expected, Royal Mail's competitors have already won more than 60 per cent of the upstream pre-sorted bulk mail market by, ironically, delivering their customers' mail into the Royal Mail system for final delivery. The rate of technological change continues apace, through e-mail, web-based advertising, text messaging, mobile phones and all the other means that we have of communicating with each other. Other developed countries are facing the same issues: the worldwide postal market is expected to decline by 25 per cent to 40 per cent over the next five years. When the problems with the Royal Mail's pension fund-which had their origin in the 13-year pension holiday to 2001-mounted, there was a consensus that action needed to be taken.
Just over two years ago, in December 2008, Richard Hooper's report Modernise or Decline ran through the challenging market conditions facing Royal Mail. His team recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in Royal Mail's structure: the injection of private capital and, closely related to that, the involvement of private sector management. However, at that time, he rejected full privatisation, which he said,
Royal Mail certainly has that corporate experience now, in the shape of Moya Greene. I give my support and approbation not only to her experience but to the way in which she has gone about the task. Hooper's 2008 report continued:
"Moreover, the company's poor financial performance and the market uncertainty driven by e-substitution and liberalisation would make it difficult to raise the required capital, if the company were to be listed now. This option would only be appropriate and feasible if modernisation had been completed. Royal Mail's pension deficit would need to be more manageable, the business would need to have restructured, the company would have plans to expand in the mail market and be capable of paying a dividend".
At that time, there was a wide degree of consensus in this House about the nature of the action that needed to be taken. Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations-I think that those two factors have already been achieved. There was agreement that regulatory oversight should be by Ofcom, which deals with the wider world of communications, rather than by a regulatory body that is restricted to the postal sector-I am pleased that the Government have also gone in that direction. There was also consensus that access pricing needed to be addressed. Although the Government have not acted on that, we would like to hear much more about access pricing as we proceed to discuss the practicalities of regulation in detail.
Hooper's 2010 report also identified a need for private sector capital, but it was markedly more confident about the quality of existing management and the capacity for change, given the changes that have already taken place. The 2010 report states:
and it praises the progress made by Royal Mail management and the CWU in adopting a groundbreaking modernisation agreement. When the Royal Mail CEO, Moya Greene, gave evidence to the Bill committee in another place on 9 November, she said:
"I look at what Royal Mail has been able to do in just two short years, when they finally got access to capital, and it has been amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs"-
She said that Royal Mail had been able to introduce 10 new world-class mail sites, which she invited people to come and visit. Indeed, I recommend that noble Lords go and have a look at the centre at Gatwick, which is well worth seeing.
"The important point I want to make is that private sector capital is needed in this business-it is needed urgently, it was needed two years ago and it is needed now. Whether it is a minority or majority shareholding, I would prefer to leave that to the political process".-[Official Report, Commons, Postal Services Bill, 11/11/10; col. 108.]
Our amendment is fundamentally different, for the reasons that I have already outlined. We believe that 100 per cent privatisation of Royal Mail is a step too far and unnecessary in the current circumstances. I ask the House to support the amendment.
Lord Cotter: This amendment is a direct attack on the fundamental principles of the Bill and, indeed, on the necessity of addressing the serious situation of declining turnover and decline in the use of the mail service. The Bill needs to be effective to attract fresh capital and, as has frequently been said, to achieve the spin-off of securing the post office network at the same time. Surely no one can forget-the public certainly cannot-the continuing programme of closures in the post office network over the past few years. That is what the Bill is needed to address. The important part is for the Bill to bring in capital to address not only the issue of the mail service but the matter of the post offices. The input of private-sector capital is essential and the Bill, as it stands, is vital to secure this for the country.
The noble Lord, Lord Young, said that the Bill is being pushed through with breathtaking speed. He also described the attempts over many years to address the concerns about the mail service. Surely he can see that this is not breathtaking speed. Surely he will agree that we cannot afford to lose any more time. We must proceed to get a solution to our need for a universal mail service in this country.
Baroness Turner of Camden: I support my noble friend who introduced this amendment. He is quite right: we are talking about a major public institution which-despite what some noble Lords have said-has a great deal of public respect and support. It is always assumed by the present Government that if there is anything wrong you have to privatise. Privatisation is supposed to produce greater efficiency and more investment. That is not always true. I speak as a consumer of several recently privatised services. The first thing that a privatised company does is usually to economise in order to increase the share price for
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We are talking, as I said, about an organisation that has a lot of public support. I very much hope that the full statement which my noble friend made from the Front Bench will receive intense investigation from the Government, because it is worth considering. This is an important issue and a major one for this Bill.
Lord Hoyle: Does my noble friend not press all the right buttons when she addresses the House? I cannot understand why the Government are going down this road. My noble friend Lord Young remarked on the ability of the new chief executive. She comes with a highly successful track record. Why do we not give her an opportunity to develop the Royal Mail, rather than going down the avenue of selling it off to any Tom, Dick or Harry?
The Government have said that they will try to get an adequate price for Royal Mail. That does not seem to me to be a good reason for what they are doing. Agreement has been reached between the unions and the management on the way forward, and they are willing to co-operate. We do not need to go over the past, as the noble Lord who spoke from the Cross Benches has suggested. We know where we are going. The capital is there. The important difference is that the Government have undertaken to underwrite the pension liability which will lift a great burden from the back of the Post Office.
I come back to the point that we have achieved an awful lot. The capital is available and the unions and management are co-operating. Everybody on both sides admits that we have a new chief executive who is very forward looking and will do all that she can to make the Royal Mail a success, so why are the Government kicking away the ground again? They do not appear to have much idea who will make a bid for Royal Mail. We certainly know that, given the recession, they will not get a good price for it. It seems to me that we are going down the wrong avenue. We on this side certainly support the amendment. My noble friend who spoke from the Front Bench made a very intelligent speech in which he outlined why we want the measure to go ahead. I hope that the Government are listening to what we are saying. I would like them to give the new management of Royal Mail the opportunity to carry out the modernisation. If they do so, I see no reason at all why the privatisation should go ahead.
Lord Lea of Crondall: My Lords, following on the same theme as my noble friend Lord Hoyle, it is pertinent to point out that the Minister did not accept the importance of the question posed by my noble friend Lord Christopher on the previous amendment. We have had a broad sweep of what a marvellous idea private capital is. However, we have no idea about guarantees relating to asset-stripping or about country
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Baroness Wilcox: Amendment 2 seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government's Postal Services Bill, which this House considered in 2009, although it never completed its passage through the other place and on to the statute book.
I reassure the noble Baroness, Lady Turner, that I have great respect for the noble Lord, Lord Young. I take what he says most seriously. I always listen to him and will be doing so throughout the Bill. I say to the noble Lord, Lord Hoyle, that we are listening and will continue to do so.
I should say first that I am pleased that the amendment indicates that the Opposition continue to accept that the sale of shares in Royal Mail is the right way to secure the future of the universal service and that, as Richard Hooper recommended, an injection of private capital into the company is necessary. My noble friend Lord Cotter supported that also.
The noble Lord, Lord Young, suggested that the Government had not consulted appropriately. The Bill actually draws heavily of the year-long independent review of the universal postal service chaired by Richard Hooper, as did the previous Government's Bill in 2009. The Bill also draws on the subsequent update by Richard Hooper published in September last year, which was commissioned by the Secretary of State. The original review and the update took evidence from hundreds of organisations and individuals with an interest in the future of the postal sector. For the original report, there were some 200 meetings and 70 written submissions. All major stakeholders in the sector made an input into the review. We feel that that constitutes consultation.
However, the difference between the positions of this Government and the previous Government is that we do not believe that it is necessary for government to retain overall ownership of Royal Mail. The noble Lord, Lord Young, argued that there is no public mandate for this privatisation. The Liberal Democrat manifesto was explicit about the need for private-sector investment and employee shares. The coalition agreement also was explicit. It stated:
Indeed, we believe that the Government are the wrong shareholders for Royal Mail, especially at a time when the postal market is undergoing significant change and Royal Mail has to respond to that change. We are not alone in thinking this. Moya Greene, the chief executive officer of Royal Mail, who has been complimented from all sides of the House today, made this clear to the Public Bill Committee in the other place. As I said during the Second Reading of the Bill, public ownership has failed Royal Mail and has not helped it to move with the times and make the changes which it needs to succeed. That is why we need a different approach if we are to safeguard the universal postal service.
Government cannot provide capital fast enough and, as the House knows, every investment that we make has to be cleared by the European Union under state aid rules. With so many competing calls on the public finances, we cannot guarantee that Royal Mail will always have access to the capital that it needs. In addition, we believe that limiting a sale to only a minority of Royal Mail's shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. For example, private investors are likely to find it more attractive to invest in Royal Mail if there are no barriers to owning a majority of shares and they can therefore have real control to ensure the future success of the company. I suspect that this was one of the reasons why a buyer could not be found in 2009.
The noble Lord, Lord Lea of Crondall, asked what specific protections against asset-stripping are in the Bill. A number of protections are in place if asset-stripping or other shareholders' actions become a concern. The protections are contained in the Bill and in other legislation. Ofcom has the power in Clause 35 to imposed designated USP conditions, akin to condition 16 in Royal Mail's existing licence, that do not allow it to do anything such as asset disposal or make a dividend payment that,
Baroness Wilcox: I think that it was someone's hearing aid that they have now switched off. I will return to the specific protections in the Bill against asset-stripping that could affect the universal service. A number of protections are in place in case asset-stripping or other shareholder actions become a concern. These protections are contained both in the Bill and in other legislation. Ofcom has the power to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. If Royal Mail is found to be in breach of its regulatory obligations, Ofcom could fine it up to 10 per cent of the annual turnover of its postal business. On current turnover, this would be more than £650 million.
Directors of a company must act in the way that they consider most likely to promote the success of the company for the benefit of its members as a whole. If an asset disposal or dividend payment did not meet that test, they would be in breach of that obligation. Royal Mail's debt is secured on its assets, so it is simply not possible to transfer assets away from the business and its debts. The Pensions Regulator may also not allow such behaviour, as it would weaken Royal Mail's covenant to its pensioners. I hope that the noble Lord, Lord Lea of Crondall, will find that helpful.
Lord Christopher: I hear what the noble Baroness says, and I will certainly have another look at the Bill. However, it does not seem that the sale of a particular asset would necessarily interfere one way or the other with the service. For example, if I provide a much cheaper-sited sorting office and sell one that is very valuable for another use, that may not alter the delivery service at all.
Lord Lea of Crondall: Perhaps it would be convenient if I asked for confirmation from the noble Baroness at the same time as she answers the noble Lord, Lord Christopher. We all have the Bill in front of us. If I heard correctly, Clause 35 was drawn to our attention. That does not provide all the requirements that the noble Baroness referred to.
Baroness Wilcox: I am sorry. Ofcom has the power under Clause 35 to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. Is the noble Lord saying that his point is not there?
Lord Christopher: I will put it in simple terms. If I owned a big sorting office in Oxford, I could sell the site at a good price to the university and build a sorting office outside Oxford. I would not have interfered with the universal service, but I would have made a nice profit.
Baroness Wilcox: I am much supported by my noble friends on this side. They have given every answer that I could give at this stage and I am very grateful to them. I return to Amendment 2 and ask the noble Lord to withdraw it. I am sorry that it is such a long time since I made my argument. I hope that he has kindly remembered it.
Lord Young of Norwood Green: My Lords, I shall address a few of the points that were made. The noble Lord, Lord Cotter, and I do not normally find ourselves so diametrically opposed. We do not see this as a fundamental attack; we see it as a different approach and one that we believe is well worth opposing, given the importance of the decision to privatise Royal Mail 100 per cent. We do not think that putting to the Committee an alternative solution, which was almost unanimously approved by this House, is a fundamental attack.
The noble Lord, Lord Skelmersdale, said that I contradicted myself with Amendments 1 and 2. I do not believe that that is the case. We have to take into account a number of eventualities, depending on how the Bill progresses.
My noble friend Lady Turner reminded us that privatisation is not necessarily always beneficial or effective. My noble friend Lord Lea made an interesting point about undervaluations in previous privatisations, and that should be a warning to the Minister about the importance of getting the sale right.
The sale of shares draws heavily on the Hooper report, and I would not disagree with that. We are not proposing that there should not be any external investment, but there is a fundamental difference between that and a 100 per cent sale. As we go through the Bill, I think that it will pose some difficult problems, one of which-the inter-business agreement and the ability to get satisfactory assurances in that area-we will explore in greater detail.
"( ) Before making a decision referred to in subsection (1), the Secretary of State shall cause to be laid before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, including an independent overall valuation placed on the business."
Lord Stevenson of Balmacara: My Lords, I was sorry to hear the Minister say a few moments ago that she was looking forward to debating with my noble friend Lord Young and to listening to what he had to say, because I am going to interpose in that relationship. I hope that that is not to her discomfort or concern. However, we want to give my noble friend a rest and to allow him to come back even more vigorously.
This amendment places a duty on the Secretary of State such that, before making a relevant disposal, the Secretary of State must lay before Parliament a report setting out how the value of shares in the Royal Mail Group has been assessed and, with this, she or he must provide an independent report of the value being placed on the business.
This is a straightforward amendment and it has, perhaps uniquely, the support of such diverse groups as the TaxPayers' Alliance and the Communication Workers Union. If I may say so, its beauty is in its simplicity, but its logic is derived from the experience of privatisations long past.
Several noble Lords have mentioned the sell-offs of British Gas and British Telecom. The British Gas share issue totalled £9 billion in 1986-at that time, the highest-ever equity sale on the UK stock market. However, within a year the value of those shares, initially at £1.35, had risen significantly. A few years before that, in 1982 in the first of the big privatisations, the share price of British Telecom rose 40p on the day after the shares were sold, making an immediate and tidy profit for investors.
Of course, those were different times, and a privatised Royal Mail is neither British Gas nor British Telecom, but what links these original privatisations to the present day is a worry that, in the rush to get this show on the road, the Government appear to be glossing over the fundamental question which would surely occur to anyone selling anything, whether it is a watch on eBay, a second-hand car or a company the size of Royal Mail. What is it worth?
Valuation is an art. Some of the value can of course be derived from the assets, the stocks and the history of trading. Removing the pension liabilities is a huge start in this case, but it is also worth pointing out that a long-run inter-business agreement with the Post Office and a firm commitment to use the Royal Mail by government departments will be material facts in any calculation of value. Valuation is a two-way process. It is often conceived as a willing-buyer/willing-seller situation, and we hope that that will be the case in this sale. How different would it be if there were a forced sale or no ready buyer and we had to think of other ways to try to get rid of the assets? That would change the way in which the valuation was approached.
There is a real prospect that Royal Mail can be under- or even over-valued by the Government. We have searched through the documentation with which
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Of course, many internal factors will impact on the value of the business-the regulatory regime, the industrial relations climate, the nature of the obligations being placed on the Royal Mail and the arrangements for the Post Office. All those factors and others will determine the value of the business and its share price on flotation. Taxpayers and the employees of Royal Mail, who stand to gain 10 per cent or more of the business, deserve not to be kept in the dark about its value. After all, 10 per cent of £700 million is far less than 10 per cent of £7 billion.
This amendment calls on the Minister to lay before Parliament an accurate value for the Royal Mail and the rationale for the setting-out of its price prior to its sale. The work will have to be done in any case; the City will expect a rigorous and detailed valuation so that it can make a judgment on the share price issue. The underwriters who facilitate the sale will have to do likewise. We feel very strongly that Parliament should be kept fully informed as well, and we would like to see all aspects of the sale disclosed to Parliament before it goes forward. I beg to move.
Lord Lea of Crondall: My Lords, it is often said that it is a fallacy that the price is much lower than the value soon after privatisation. It is a matter of the scale of the difference. I have some data on the big privatisations that took place under the Conservative Government. In one year, the average share issue premium on major shares issued was 7 per cent. On privatisation issues the average premium on the first day of trading was 77 per cent. That is 10 times more. Is that not prima facie evidence that the public tend not to get a good deal on these big privatisation issues?
Viscount Eccles: My Lords, we are dealing with a very different situation here. Unless and until the Bill becomes an Act and the pension issue is resolved for the time being, it would be a very bold person who said that you could put any value on Royal Mail. In the context of a willing-buyer willing-seller market, I do not think that you will find a willing buyer. Even if the buyer thought that the business was residually worth something, he would not want to enter into the deal. This amendment goes to the same point. In a willing-buyer willing-seller deal, neither the seller nor the buyer wants to know exactly how the sums have been worked out and if they thought that the sums had to be submitted to a third party and debated in this Chamber as a matter of parliamentary interest, I think you would scupper almost any deal.
Lord Christopher:My Lords, I do not understand what has just been said. However it is done, someone somewhere in Government has to decide whether the
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To take a trite example, there are some valuable stamp collections in this country: Her Majesty has one, the Board of Inland Revenue has another and, I understand, the Post Office has one. The Revenue's collection used to be displayed in cases as you walked into Somerset House. A representative of Stanley Gibbons walked in to ask the chairman, "Do you know what you have in those glass cases?"-there were three big ones. The answer was that it was worth well over £1 million. I think that the Post Office has a stamp collection, but I am pretty sure that no one there knows what it is worth. The outfit could well be sold lock, stock and barrel and then someone opens a safe one day and finds all those stamps.
There should be a proper valuation of all the assets of Royal Mail and the Post Office, because it will be divided up. Until that is done, we cannot satisfy the British people that we are asking a fair price. I do not complain about a modest discount, but we should have a clear idea of what assets we have. I will use my mythical Oxford sorting office as an example. What is it worth? An acre of land in most parts of the country is worth £5,000. With planning permission, it is worth nearly £1 million. Unless we explore the assets and ensure that we have an objective valuation of what is there, we will never feel that we have sold the Royal Mail properly.
Others have mentioned previous experiences. There have been two relatively recent ones, one by us of a company whose name I can never get my tongue around- QinetiQ-where people have walked away with millions. I have talked to many Members opposite who would never have privatised our railways in the way they did. Over the first two or three years, people walked away with very large sums of money. We have to avoid that. We cannot value the company in the way that companies are generally valued. Price/earnings ratios and so on have no relevance in that context. We must be sure that when we say to the British company, "We are trying to sell this for X", that X is a reasonable, accurate figure.
Baroness Kramer: My Lords, I fully understand the concern of the noble Lord, Lord Christopher, that Royal Mail fully assesses the value of what it is, what it owns and what it has to offer, so that it understands its full value in the marketplace. That is an important process. I agree that that has not always been done when public entities have been sold. Indeed, there has often been an anxiety to achieve a sale quickly. I think that Governments have sometimes been seduced by investment bankers who would like a cheap, easy deal rather than trying to ensure that they get the maximum for the seller-in this case, the public. I hope that those lessons can be learnt. I agree that internal due diligence is critical.
However, I must say to the noble Lord that, although I care a great deal about transparency and openness, the day that this House or the Government put a value-£700 million or £800 million-on the asset, no bidder will offer a penny more. The art in a negotiation
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All of that disappears the day that the Government come out and publicly say, "This is what it is worth. You will not get X plus a penny, you will only ever get X". I think that that is unadvisable for the taxpayer.
Baroness Kramer: Internally, due diligence is critical. The specifications and the instructions to the investment bankers, accountants and others engaged in the valuation have to be tough and in the monitoring and examination rigour should be applied to the response that they come back with. However, it still has to be in an internal setting, not a public setting. People will have many opinions across this House, but this will be a highly complex process with a great deal of detail. While this House has the ability to understand all that, there may be a subset of people who might be interested in being part of the consultation process by taking a look at that on behalf of the House. However, to me, it certainly would not be possible to do it in a public setting without giving the buyer the most impossible leverage.
Lord Hoyle: The noble Baroness said that if we value it, we will not get a penny more. In past privatisations, it was not that we got the value for the business, but that we sold it at a loss, at a low price. That is what we are asking her to deal with.
Baroness Kramer:I fully understand what the noble Lord is saying. In the past, privatisations have been naive. We have to use pressure to make sure that the Government do not go through that naive process once again. I suggest that the remedy being proposed here-that the value is discussed in detail out in the public arena-does not achieve the purpose. It simply has the effect of making sure that in the end there is a cap on the sale price and creates another set of problems without necessarily disposing of the first set. We need to be pressing to make sure that the internal work is up to standard, but to my mind-and that is one person's opinion-bringing it into the public arena does not achieve that.
Lord Brookman: My Lords, I had no intention of making a contribution in this debate but as someone who was involved in going from public to private in the steel industry I shall make one point. Who owns things is quite important. When the British Steel Corporation was formed when I was a young man, it had 267,000 employees. Tata Steel, formerly Corus, now employs between 15,000 and 20,000 people. Put that aside. We are a country that used to take pride in what we had and what we owned. I want to be reassured
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Lord Brooke of Alverthorpe: My Lords, if the Royal Mail had gone bankrupt as so many people predicted it would, a value would ultimately be placed on it. Administration would see to that, and we would all know what it was worth at the end of the day. I believe that the government shareholder executive, which holds the shares for Royal Mail, will broadly have some idea of what Royal Mail is worth at the moment and of what it would be likely to fetch if it went, for example, to another mail company, such as TNT. If it went to private equity, it could be a different basis entirely because its approach to running the business would be quite different. It is not easy. I freely concede to the noble Baroness, Lady Kramer, that having this out in the public domain is not simple and straightforward. We all speak with one voice when we say that we want to ensure that the British public are not taken for the usual ride that arises on privatisation but get value for money.
I believe that the Liberal Democrat party had the solution to the problem, and so did we. We wanted to retain a stake in Royal Mail so that, regardless of the final valuation when the deal was done, the British public would know what it was, would continue to have a stake in it and would be able to redeem that, if they so chose, at the appropriate time. The Liberal Democrat party went for 49 per cent in its manifesto, which it has now abandoned for reasons that have not been explained, although it recognises that there is a problem, and no easy solution on the way forward is forthcoming from that part of the Government. We presented an amendment today that I freely recognise has some difficulties with it, but I believe that, for reasons that I just described, there are ways in which valuations in a broad sense can be made of government assets. I also believe, in the light of our previous experience, that an attempt should be made this time around, notwithstanding the obstacles to be overcome, and that that should be reported to Parliament.
Baroness Wilcox: My Lords, I thank the noble Lord, Lord Stevenson, for being as succinct as he was in proposing Amendment 3. It seems a long time ago now, but he presented his amendment in three minutes flat, which was very kind of him.
Before I go on, I will put the mind of the noble Lord, Lord Christopher, at rest on at least point today. He was concerned about what will happen to Royal Mail's valuable collection of stamps, including iconic and historic stamps such as the penny blacks. Collections of such stamps are classified as public records. These are deposited with the British Postal Museum and Archive, and under the Bill they will remain public records. The ownership of Royal Mail's museum collection, which contains artefacts that are not classified as public records, has been transferred to the BPMA, and as a charitable trust the BPMA cannot sell off this collection-so at least there is a little good news there.
The proposal in Amendment 3, like the one in Amendment 1, does not seem to reflect the fact that the disposal of shares in Royal Mail is a commercial transaction. In particular, if the Government decided to conduct an auction and invite bids from trade buyers, it would make no commercial sense to advertise to bidders our own view of the value of Royal Mail. As my noble friend Lady Kramer has pointed out, that is not exactly the art of negotiation, because all anyone would do would be to bid to that price. We really feel that we will not do that. No trade buyer would bid above the value, and it would therefore reduce the Government's ability to get the best result for the company and for the taxpayer, because that is what we are about. The Government will, of course, work with their advisers to consider the potential value of Royal Mail so that we can properly assess bids from buyers. However, as my noble friend Lord Eccles clearly said, there is little logic in revealing what we consider the value of the company to be before any sale.
As I have said previously, the Government have not decided how they will dispose of the shares. We wish to retain flexibility, and in this way get the best result for the company and for the taxpayers, but we expect that both the National Audit Office and the Public Accounts Committee in the other place might wish to review the sale process after a sale had been completed. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer.
I have of course listened to what has been said, and it will of course go on the record. I know that there are Members of your Lordships' House who would rather that Royal Mail was not sold at all, and I understand people who have been associated with Royal Mail for many years finding all discussions of this sort very difficult, especially having gone through all this a year ago with the previous Government-a Government of their own. Yet that Government, too, could not successfully find a way out. We need to find the right buyer for Royal Mail who will keep it alive and well. These are very difficult times. No one is writing letters. We have exercised these arguments over and over again, which I am sure everyone in the House knows. We think that this is the best way forward and that flexibility until the very last minute will be needed so that we can get the best price. I therefore ask the noble Lord if he will kindly withdraw his amendment at this stage.
Lord Stevenson of Balmacara: Dash it, I thought that the noble Baroness had forgotten that. I was going to enjoy wondering what to do if she had not asked me to withdraw-clearly, she was supportive. The point that we are trying to get across in this useful and interesting debate is that if there is no valuation process we will have two problems. The public will not necessarily know that we are getting value for money, which they should, and we would lose transparency, which is an important part of any transaction involving public assets. These are important principles to hold in our mind.
I fully accept what has been said, particularly by the noble Baroness, Lady Kramer, that public bodies are not in the normal business of valuing themselves. That
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However, if the Government are selling off the family silver, we should have a full inventory of all the aspects of that before it happens. The Minister is saying that that will happen and I hope that we will have a record. A compromise would not necessarily want to go all down this route, but we would get a much better Domesday Book of what the Royal Mail consists of and, thus, a better sense of what it might be valued at. We would therefore be in a better position to assess whether the bids received subsequently would be appropriate. Therefore, if the pound signs are removed, we would know about what we are talking a bit more at the time of the sale.
My noble friend Lord Christopher is eloquent in his ability to run the market in Oxfordshire-I am not sure why it is Oxfordshire-in terms of the sale he has clearly eyed up for the Post Office service stations there. I think that we would want to help him in ensuring his long retirement on the proceeds. I jest of course.
The second strand that comes through is that the valuation, or at least the lining up, of the assets that we are selling is not the same as disclosing to all and sundry what we want for them. But we can be a bit too coy about that. Clearly, we want to be in a position where we force someone to bid higher than we would have ever dreamed of receiving for the assets that we are putting up for sale. That is what we do all the time in our domestic lives.
I have always been perplexed by why the English do not adopt the Scottish system of selling houses, for example. In that situation, the seller seems to have all the cards. You say that your flat or house is for sale. What it consists of is advertised publicly and you say that you will accept offers in excess of £X where £X is the largest figure that you could possibly think of. Then you sit back and hope. It may have changed since I last sold a house up there, but the three times when I have done it I have been astonished by the braveness of those who have bid for the house and, disclosing no secrets, I have achieved many times more than I thought that I would get every time I have sold. I recommend that to all ye English and perhaps even to the Government in respect of the Royal Mail.
Yes, we want someone to bid more than we are prepared to disclose that we are prepared to accept. But there is a chap called Rupert Murdoch out there who is publicly engaged in bidding for part of his empire, which he only partly holds; yet I read every day about what price people are prepared to accept and what price they think it will be worth. The share prices down to even the last penny are mentioned. I do not think that we should be too worried about where we are going on this. It would not be wrong to say-privately if we want-what we will not accept. In other words, we would expect better bids.
The last thing we want to be part of is a post-hoc analysis of what went wrong in this case. Surely, we have got beyond that. The noble Lord, Lord Lea, made the point absolutely clear. If there is a 7 per cent premium on average sales of new or existing companies and it is 77 per cent on privatisations, there is clearly an issue to be addressed. I am jolly glad to hear that the stamps are being saved for the future, although it is a bit odd that they are going in the archive and not a museum where one would want them to be, but that is how it is.
Whenever one hears of public assets being sold, one has to think of the experience of other countries. It may be to the benefit of English football that this worked well in countries in the East, but we do not want that to be said of here. We want a good and sensible sale that is done in as open and transparent a way as possible. We want to be able to comment on the commerciality of what we are about and to do it so that no one feels that we have in any sense lost out. Those are conditions which I suggest should be taken into consideration of the Bill. We will reflect on what has been said, but at this stage I beg leave to withdraw the amendment.
"( ) A disposal of the Crown's interest in a Royal Mail company will not be authorised until the Secretary of State has secured a written contract from the proposed purchaser that at least one representative from those directly employed by Royal Mail or its successors will sit on the board of the new body."
Lord Young of Norwood Green: My Lords, postal workers already have a major stake in the company, and their livelihoods are dependent on its viability. This is more than just an issue of immediate employment, of course. It is the final guarantee of rent or mortgage repayments. Working for Royal Mail is the means whereby their children will be educated and cared for. I make the point because it is sometimes suggested that postal workers lack motivation because they do not identify with Royal Mail. Postal workers may not always see eye to eye with management, but they are acutely aware that a viable and successful Royal Mail is in their own interests.
Through their own organising efforts, postal workers have achieved a high level of unionisation in Royal Mail. They have also, over many years, secured comprehensive negotiating rights on matters of national and local significance. This has meant that members of the workforce have some elements of control in their own working lives. Management, for its part, has learnt to accept and live with the fact that the workforce does have a say in workplace relations. Sometimes there are conflicts, but 99 per cent of those cases are resolved by the usual patterns of industrial relations which have been established in the industry. This is important because those endeavours have been made by postal workers themselves, and they have made the
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Recently there has been a much-trailed comparison on rights of representation or share ownership with John Lewis workers, although we believe that that is misunderstood. In comparison, postal workers have many more rights than John Lewis workers, who are not even unionised. That said, if there is to be an employee share scheme, it is only right that it should be introduced with employee involvement and voice, and placing at least one member on the board would be of benefit both to the workforce and the employer. Members of the workforce would see that it had someone who could reflect their experiences and concerns in the most powerful part of management, and the employer would have an immediate expression of the wider concerns of the workforce in the deliberations of the central management team.
In the past, there has been some experience of trade union involvement on the board. Although not a postal worker, my noble friend Lady Prosser, who unfortunately is not in her place, was until recently a widely respected and influential trade union leader before she became a member of the Royal Mail board. Certainly, management believes that it has benefited from her experience in the working of the Royal Mail board. Failure to introduce representation of postal workers on the board would, in my view, risk missing a real opportunity to create trust and confidence. It is widely known that employee representation exists on management boards in other European countries, and surely it is time that this became more general in Britain. I welcome the coalition Government's espousal of mutualisation in another part of the Bill, and the requirement that we are suggesting here would strike a chord with that principle and approach. I therefore commend the amendment to the Committee. I beg to move.
Lord Lea of Crondall: My Lords, perhaps I may make a point for clarity. The discussion we have just had about the wider public interest and stakeholders around the country suggests to me that what we are looking at is a sort of supervisory board. Does that not frighten the horses so far as the Minister is concerned? Does she acknowledge that the maximum number of different stakeholders should be somehow involved in this exercise since that would help to put our worries at rest on a number of other aspects that we have just been taking on board, such as asset-stripping and all the rest of it, and where ambiguities still remain in the Bill?
Baroness Turner of Camden: I support the amendment and have put my name to it. When the Bill was discussed previously, concern was expressed about the
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The Government have already committed to an employee interest as Clause 3 makes provision for an employee share scheme. The proposal for staff representation at the highest level is in tune with that kind of thinking and helps to confirm employee interest in the well-being of the company and, most importantly, in its service to the public. As I indicated previously, I believe that the public still hold in high esteem the Royal Mail and the staff who work for it. I therefore hope that the Government will be prepared to accept the amendment or that, if they do not like the wording-as has sometimes happened-they will accept the notion and perhaps come back with different wording that incorporates the same idea. We think that it is a very good idea, because it involves the participation of staff in, and their commitment to, the well-being of the company.
Lord Cotter: My Lords, I thank the noble Baroness, Lady Turner, and others for raising an issue whose importance I am aware of from my own experience. I was managing director of a small plastics manufacturing company. It had only 30 employees, but it was important to me to bring those employees with me. Our discussion today is an important part of that approach. That employees will have shareholdings in Royal Mail is to be welcomed. It is disappointing that many other companies, of all sizes, do not recognise the importance of involving their workforce. As the noble Baroness and others said, a welcome improvement in labour relations has been seen within Royal Mail. I know that the Minister will take this issue very seriously and I am sure that she will give adequate answers to the points that have been raised. It is crucial that employees have not only shares but a real voice in one way or the other. Without that, so many companies fail. We want the new conglomerate to succeed, to go forward and to bring its employees with it, as opposed to management and employees being at each other's throats as has sometimes been the case in the past.
Lord Brooke of Alverthorpe: I, too, support the amendment and agree with the line taken by the noble Lord, Lord Cotter. As the Minister knows I was a partnership director of NATS, where, when the PPP was created, 5 per cent of the shares were allocated to the employees. I acted as the director responsible for that element of the share distribution and had conversations with the staff about it. However, it was not entirely satisfactory; I was still at a distance from
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I have been to a number of meetings recently at which coalition government Ministers have spoken about employee ownership and share involvement and extending it over a wider front. Many have spoken about providing greater opportunities for the workforce to be more directly involved with management of companies, particularly where they have a stake in the shares.
The amendment presents a modest proposal-I would have preferred it to suggest that two places should be allocated-but I am reasonably content today to go along with opening the door through one seat being made available for the employees. I hope there will now be an opportunity for the Minister to display, not only to her noble friend Lord Cotter but to a variety of Ministers who have spoken recently on this at meetings, that extending employee ownership will be put into practice when the opportunity is immediately before the Government.
There are two issues involved here. First, in a conventional private sector situation where another company or body of investors has a large shareholding, it is quite customary for it to seek board representation, recognising that when it sits on the board it shares the responsibilities of other directors to the company as a unitary board. I note the presence of the noble Lord, Lord St John of Fawsley, in his place on the government Benches and it immediately reminds me that News International, as a particularly large shareholder, has always had its interests represented on the board of BSkyB. It is entirely logical and consistent with good private sector practice for the workers in the Post Office to have such representation on the board of directors until such time as they cease to be significant shareholders.
However, on my second point, I have regard to the fact that the Minister not only brings considerable business experience to her position but also speaks on issues of corporate governance. There is a bigger issue at heart here: the shareholders in a privatised Post Office-whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors-will nevertheless individually have a very modest interest in the company. If it is bought by a Dutch company and that company is floated, the ultimate shareholders will be institutions spread across the world, few of whom will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money
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Lord Hoyle: I agree with those who have spoken in support of the amendment, and particularly with the comments of my noble friend Lord Myners. Although some people can walk away from a company if it is not successful, those who are employed there cannot; it is their-and their family's-livelihood. I know that the Minister will take into account all that we have said when making her reply, and I hope that it will be a positive and constructive reply. I agree with my noble friend Lord Brooke that one representative is a modest request. I would have asked for at least two-but here we are, with a suggestion that everyone who has spoken agrees is both modest and important.
I am glad that it is recognised that employees matter. Speaking of his own, small company, the noble Lord, Lord Cotter, said that he tried wherever possible to take his staff with him. If staff feel that the company they work for is being sold from underneath them, they can have no loyalty to the new group that comes in. Staff have to be won over, and is there a better way of doing that than by making them part of the decision-making? As employees of the company, they will be able to reflect back. Rather than having somebody external-who could do a job for the employers, as my noble friend Lord Brooke said-would it not be better to have these staff representing the company so that they could take the views at the highest level on why certain decisions are being made to achieve what one hopes will be their future prosperity? I totally agree, and repeat again, that this is a modest suggestion.
Viscount Eccles: Employee participation is indeed a big subject, and I have no quarrel or difficulty with many of the views that have been expressed. However, as I read this amendment, it would be satisfied if the successor company asked Moya Greene to sit on the board. She is directly employed by Royal Mail and it is likely that the successor company would want her on the board. After all, she is extremely well qualified to be on the board of any mail company. If noble Lords opposite really wish to pursue this, they might need to do so in a rather different way.
Baroness Wilcox: The Government recognise the important role that employees will play in the modernisation of Royal Mail. The implementation of the business transformation agreement reached in March
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This agreement sets out a new relationship between the management and the union in Royal Mail which seeks to improve industrial relations, which have been so poor in recent years. Progress on the implementation of the agreement has been encouraging, and we encourage both sides of the agreement to build on this promising start. Nobody inside or outside the House wants to see a return to the national strikes that so damaged Royal Mail and the postal market in 2007 and 2009.
The current position is that there is no employee representation on the board of the Royal Mail. My understanding is that there has been no pressure or suggestion that there should be an employee representative on the board. In public ownership the Royal Mail is being run on a commercial basis, so I fail to see that a change in ownership should automatically require that there should be an employer representative on the board, a requirement that the amendment proposes should be written into primary legislation. I have listened to the noble Lord, Lord Lea, and the noble Baroness, Lady Turner of Camden, with her terrific record within the union movement. The noble Lord, Lord Cotter, talked about bringing staff with you; I have done that myself. In a small company, especially, you are all working together very closely and you can really involve the workforce in a way that large companies sometimes cannot.
The noble Lord, Lord Brooke of Alverthorpe, talked about shares and NATS. I know how well he did there. On the point made by the noble Lord, Lord Myners, with his corporate governance, and the noble Lord, Lord Hoyle, on employee participation, a seat on the board is not the only way to actively encourage employee participation. For example, the concept of world-class mail at Gatwick and elsewhere has shown what increased engagement can achieve. We hope that there will be increased engagement. That is one of the reasons for making sure that shares are passed in such a large number to employees of the company.
I am not at all clear how such an arrangement as proposed in the amendment would work in practice. For example, how does it link up with the CWU and Unite's representation of the workforce and their roles in collective bargaining?
I should say that the Government are not saying that there should never be an employee representative on the board. Royal Mail may decide in future that there are advantages to doing exactly that. I refer us back to my noble friend Lord Eccles, who suggested that Moya Greene might be a wonderful example of someone who could be brought on to the board to the benefit of the company, as she is at the moment the chief executive. However, I do not believe that it is appropriate to impose such a requirement through legislation.
Issues relating to board composition are properly issues for the company and its shareholders who, thanks to the Bill, will include its employees. I therefore ask the noble Lord to withdraw his amendment.
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