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Guaranteed Minimum Pensions Increase Order 2011

Guaranteed Minimum Pensions Increase Order 2011
16th Report Joint Committee Statutory Instruments

Motion to Approve

8.52 pm

Moved By Lord Freud

Motion agreed.

Postal Services Bill

Main Bill Page
Copy of the Bill
Explanatory Notes
Amendments
(Supplementary) Amendments
9th Report Delegated Powers

Committee (2nd Day) (Continued)

8.52 pm

Amendment 13

Moved by Lord Young of Norwood Green

13: Clause 2, page 2, line 3, at end insert-

"( ) The Secretary of State will ensure that any relevant disposal guarantees that the existing rights of recognition of employees are maintained."

Lord Young of Norwood Green: My Lords, this amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that the existing rights of the workforce recognition are maintained. There are two themes at work here. The first is that the workforce by its own efforts has unionised the industry to such an extent that recognition of the union was achieved more than a century ago. Long before the existing recognition rights existed in legislation, postal workers had come to an agreement with the employers and behind them the Government on the existence of the workforce's trade unions. This has shaped employment relations in the industry; both workforce and management have seen the value of organised bargaining and representation. We are looking at a mature attitude to industrial relations. Both parties know of each other's interests and concerns and are usually able to accommodate them. Despite the media caricatures, the reality is that organised industrial relations have created ways of working that make the industry productive and safe; every day many thousands of hurdles small and large are overcome by the timely recourse to the recognised framework of industrial relations in the industry.

If you looked at the media, you would imagine that everything was in total conflict, whereas the reality is very much different. If one looks at some of the

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positive aspects, one may remember the severe winter that we have come through recently and how tributes flowed as workers in the Post Office and Royal Mail worked with might and main to ensure that whatever the conditions the mail got through. Then there is the role of union learning representatives in encouraging people to lifelong learning and to embark on training. That is another very positive aspect that is overlooked.

Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in the right way and in a fair way. As I remarked on Second Reading, if one wants a good example of that, go to Gatwick to see an example of world-class mail and how well it works when the workforce is involved positively. As I said, the media is interested only in the breakdown of those relations, turning a momentary conflict into a sensation that sells papers. The reality is that countless efforts by management and union reps ensure the everyday smooth running of the industry. It is interesting that the Hooper report apportioned blame when conflicts arise fairly between both management and unions. I am sure that the noble Baroness would agree that that is an impartial analysis.

The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disbursal. Recognition has not just been won as a legal right, it has been established by the efforts of generations of postal workers and managers. Any new owner must begin by recognising that they are buying in to an organised workforce. Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner is in doubt, the Secretary of State will be obliged to dispel that doubt, as the new owner must learn to work with the unionised workforce. Tributes have been paid to the new CEO, Moya Greene, and her ability to work well and productively with the unions.

The second theme on recognition is that bargaining is a natural part of such recognition. It may be argued that under TUPE transfer, the workforce carries across existing terms and conditions, although some comments in the press on TUPE recently give me cause for concern, so that may be true but insufficient. The workforce is an organised one which will address any new employer with the expectation that its bargaining rights remain intact. That is not just about what is currently earned or what is currently an entitlement-to paid holidays, for example-it is also about the right of the workforce to address its future conditions with confidence that it can resolve its problems through negotiations.

Any new employer who bought into Royal Mail on the assumption that it could simply impose its vision, priorities or methods on the workforce would break down what we see now, to which the noble Baroness paid tribute: what we have achieved in the current transformation and modernisation agreement; really constructive partnership working. The workforce has agreements which have been hard-won and painfully negotiated, and it would expect any changes to be negotiated.



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That is not necessarily a conflict-ridden process-on the contrary, the only cost for the vast majority of agreements has been the time and patience of management and union reps-but such rights are valued greatly by the workforce. Postal workers know that the industry is constantly changing. They have had to accept losses of about 69,000 jobs over the past decade. It has been painful, but they have seen that as a part of improving productivity and accepting the modernisation programme. That also means that working arrangements and conditions change. That is on the understanding that postal workers will buy into those changes by helping to shape them. Those of us with experience of employment relations know that that is the best way forward.

We expect the Secretary of State to be entirely clear with the new owner of Royal Mail that recognition of the workforce and its union involve a negotiated bargaining framework for employment relations in the workplace. That fact of life will have to be addressed. It is best that we make that clear in the Bill to any potential investor in or buyer of the industry. Carrying the amendment would do exactly that. I beg to move.

9 pm

Baroness Donaghy: My Lords, I speak as a former chair of ACAS. One of the joys of ACAS is that I probably know more about the employment relations of most industries in this country than anyone else; one of the frustrations is that I follow the ACAS tradition of not speaking about them in detail.

I want to speak in general terms about the importance of recognition. I am sure that noble Lords from all sides of the House recognise that whatever final shape the Postal Services Bill takes, this will be an unsettling time for employees and will increase their anxiety for their future.

Whenever ACAS became involved in labour relations in a particular industry, its key concerns were transparency, consultation and employee buy-in, and we would take both sides through the steps required to achieve success. Continued recognition of the appropriate trade unions would always be a key element in achieving employee buy-in. It would be enormously reassuring during these uncertain times if the Government were to agree to uphold in the Bill existing recognition rights. It would be much more than a gesture of good faith; it would be a statement that the worker's voice will be heard, and their involvement assured, in negotiating both their own future and that of the industry to which they are committed.

Recognition rights do not mean that an employer has to accede to union demands or to weaken its position commercially. They represent an acceptance that employees are an asset and that their commitment is a commercial asset. I hope that the Government will accept the amendment of the noble Lord, Lord Young of Norwood Green.

Lord Lea of Crondall: My Lords, I am afraid that we now see week after week in some newspapers-I would include under that heading a magazine such as the Economist-thinly disguised attacks on collective bargaining. We cannot debate that topic in its totality this evening, but I refer the Committee to the central

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point. Across the OECD countries, there is a close statistical fit between the amount of collective bargaining in a society and its equality. It is therefore the grossest hypocrisy-it is not conscious, but perhaps subliminal-for people to say that they do not like the gap between rich and poor when they are attacking collective bargaining. Both at a point in time and over the decades, the weakening of collective bargaining means that the forces in society are no longer balanced. We now have a gross imbalance between the oligopoly of power in the City of London and the attempt to weaken the workforce.

I think that we will see in the demonstration to be organised by the TUC in London on 26 March that the workforce has woken up. It will demand that its rights be respected, which will have great resonance with the people of this country. I therefore fire a warning shot across the bows of people who think that they are now able to administer the coup de grace to people who have collective bargaining. When the postal services are in the private sector, they may be expected to fit the private sector model whereby workers are not covered by collective bargaining and it is much more difficult for them to be so. Therefore, it is fair to take the opportunity to point out, in the spirit of this amendment, that it would be very unwise for people to think, "The public sector has collective bargaining. In the private sector, we don't have collective bargaining and we can just say goodbye to it". Anybody who thinks that is deluding themselves.

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, Amendment 13 seeks to place a duty on the Secretary of State to ensure that employees' existing rights of recognition are maintained. I am not sure whether the amendment fits neatly into Clause 2, which is intended to place a duty on the Secretary of State to report to Parliament when a decision has been made to undertake a disposal of shares in the Royal Mail company. However, I am happy to debate the specific issue raised by the noble Lords.

Before I do that, I reiterate that the Government welcome the positive changes in the relationship between Royal Mail's management and the CWU over the past 12 months. I say this because, notwithstanding the historic references made by the noble Lord, Lord Young, industrial relationships at Royal Mail have undoubtedly been poor in recent times. The national strikes in 2007 and 2009 were damaging for the company and for the postal market but the business transformation agreement, reached in March last year, has seen the implementation of a new approach to union-management relationships. It has enabled progress on the much needed modernisation of the company and I urge both sides to continue to work together in that improved way.

The noble Baroness, Lady Donaghy, was concerned about uncertainty for employees. Let me be clear that the worst thing for employees would be for us to do nothing and to let the Royal Mail decline through inaction and a lack of investment. People want to work for a stable company and to have a secure pension, and I believe that our proposals will help us on both those fronts.



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On employee representation, employees at Royal Mail are mainly represented by the Communication Workers Union and by the Communication and Managers' Association, which is a section of UNITE. This representation is recognised in voluntary agreements between these unions and the management. The Government do not play a role in these agreements. Such voluntary agreements occur across industries where there is a union presence and it is good practice for the employer to take full account of the views of employees when deciding whether a union should be recognised or continue to be recognised. Union membership remains relatively high within most grades at Royal Mail. That fact suggests that most staff support union recognition.

I have no reason to believe that any new owners would seek to change such agreements, provided, of course, that the employees wish to continue to be represented by those unions. Any new owner will fully appreciate the need to work with employees' representatives to secure the future of the company in the changing postal market. Management most certainly cannot do this alone. However, as I have said, union recognition within Royal Mail-or any other business-is primarily a matter for the employer and the trade unions concerned. I do not therefore believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements in Royal Mail. I therefore hope that the noble Lords, Lord Young and Lord Lea, will take time to consider my response and that they will withdraw their amendment at this time.

Lord Young of Norwood Green: I thank the Minister for her response, even if it did not go as far as I would have liked. I also thank my noble friend Lady Donaghy for contributing to this debate and for pointing out that at a time of great change-and moving to a privatised environment will be a great change-the role of unions will be absolutely vital. My noble friend Lord Lea warned about not taking trade unions for granted in the current environment.

While the Minister welcomed the new approach between management and unions and laid stress on the question of voluntary agreements, any new owner ought nevertheless to recognise the environment that they will be coming into. If they want the company to succeed, it will mean working with the unions, in our view. We will reflect on what has been said and consider whether we need to bring this back on Report. On that basis, I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Amendment 13A

Moved by Lord Lea of Crondall

13A: Clause 2, page 2, line 3, at end insert-

"(3A) In the event that a sale is made by an initial public offering, a relevant disposal may only take place if the conditions in subsections (3B) and (3C) are met.

(3B) Shares representing no more than 30% of the value of a Royal Mail company may be disposed of before 31 July 2012.

(3C) No other shares shall be disposed of before 31 July 2013."



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Lord Lea of Crondall: My Lords, Amendments 13A and 14 cover two complementary points; I shall deal with the first aspect and my noble friend Lord Young of Norwood Green will deal with the second. The key words in Amendment 13A are "initial public offering". In the event that a sale is by means of an IPO, the relevant disposal should take place only in circumstances where different tranches are put forward one after the other. I shall relate that to the experience of the big wave of privatisations in the 1980s, which had some clear lessons.

The sale could be to a single entity but, if one reads the report by Mr Richard Hooper of 2010, one sees the presumption of some likelihood that an IPO will be the modus operandi-in other words, there will be a sale of shares to the public. Incidentally, in this case all the arguments that we have heard about concealing the price would evaporate, because for an IPO there is an offer price and share traders would decide whether to buy at that price and how much to buy. However, in the heyday of privatisation in the 1980s, privatised companies were consistently sold at too low a price. That was the experience for British Airways, British Gas and British Telecom, where the undervaluation on the first day of trading amounted to over £2 billion-£2 billion of our money went somewhere else. Indeed, it has been estimated that, for 1986 alone, the average share issue premium on major share issues was 7 per cent, but on privatisation issues the average premium on the first day of trading was 77 per cent. Tony Blair pointed out at the time that-to vary "The Importance of Being Earnest"-if something was negligent at 7 per cent, what is it if that suddenly becomes 77 per cent?

I am not suggesting that the circumstances for selling Royal Mail will be exactly analogous; the forecasts of offer price and outcome are hard to judge. However, the experience remains relevant. That is why I propose that a sale by an IPO should be phased in tranches, with no more than 30 per cent sold before 31 July 2012 and no other shares to be disposed of before 31 July 2013. I have already talked about the critique of revealing a price; I do not know whether the Minister will repeat that contention, but the notion that revealing a price is difficult does not apply to an IPO, where shares are at a set price.

I trust that the Minister will accept that to carry out the sale by tranches will be a more certain way to protect the public interest. If she has arguments against that, I will be interested to look at them and see what the rationale is; we will have to study them and think about it. It is incumbent on her to state the arguments explicitly and not just keep repeating them like Pavlov's dog, so that we can consider what she has said carefully before we return on Report to what we believe-until convinced to the contrary-is a compelling case.

9.15 pm

Lord Young of Norwood Green: I beg to move the amendment standing in my name.

The Deputy Chairman of Committees (Lord Skelmersdale): You are speaking to it.

Lord Young of Norwood Green: My apologies, I shall speak to it.



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Lord Razzall: Speak for England.

Lord Young of Norwood Green: My Lords, the purpose of Amendment 14 is to provide for the disposal of shares to take place in tranches or batches rather than all at once. In keeping with our previous amendment, the batches are at 30 per cent and 19 per cent, to maintain Royal Mail in overall public ownership. Of course, the Government may wish to propose different figures, but the same principle would apply.

One of our difficulties with the Bill is in trying to grasp the detail and discover exactly what information is in it-whether there will be an initial public offering or a trade sale at auction. The Government have not set a clear timetable and they have not explained whether there will be a general sale of shares to the public-an IPO-a restricted sale to certain categories of buyer or a trade sale by auction to a single buyer, such as a private equity firm or a postal competitor, which may raise competition issues. They have not been clear about how valuable public assets will be allocated between Post Office Ltd, the pension funds and Royal Mail, thus finding their way into private hands. They have not indicated how the board might be constituted. They have not ruled out dismantling Royal Mail and selling off the most profitable parts, in particular GLS, its successful European parcels service, and Parcelforce. They have not indicated how they will guard against a buyer with short-term horizons seeking to squeeze costs and cherry pick the assets.

Before any sale takes place, this House will want to be assured about the future of the universal service, the exact regulatory regime and the future of the post office network. The Government have not explained any measures to ensure value for money for the taxpayer and-this is the subject that this amendment focuses on-they have not explained whether they would sell the whole company all at once, with the risks that that involves of selling cheaply, or whether they would be prepared to sell in tranches.

There is a huge amount of evidence that, when privatisations have taken place in the past, the value for which the businesses were sold was too low, as my noble friend Lord Lea has demonstrated. This is most clearly evidenced where a general sale of shares has taken place. When the shares are traded, it is easy to see what price they trade at and how this compares with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that the shares should have been sold at a higher price-the taxpayer has lost out and someone has pocketed a pretty penny as a result. With Associated British Ports, which was 35 times oversubscribed, the share price rose 23 per cent in one day. With Amersham International, sold for £71 million, the share price rose 32 per cent on the first day of trading.

As early as 16 May 1984, the Public Accounts Committee in its 17th report expressed concern at stock in public corporations being sold, in the words of the committee, at an,

It recommended considering selling in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a

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number of cases. For example, in the case of National Power, the share price rose 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. Powergen's first tranche of shares appreciated by 22 per cent within one day, but the second batch rose only 3 per cent the day after.

Of course, it is difficult to predict what the reaction of investors will be to the disposal of shares. It is undesirable for the shares to be offered, either in an IPO or a trade sale, in one single tranche, which would have the effect of transferring 100 per cent ownership in one go, albeit with 10 per cent or so employee shares, if that is to be the figure. There is a strong case that transfers should therefore be staged. Our amendment proposes this, such that shares representing no more than 30 per cent of the value of the business should be capable of being transferred in the first year following the Act coming into force and no more than a further 19 per cent in the following year.

The Secretary of State has complete discretion over the disposal of all Royal Mail shares. There are a number of issues to consider. The market may be glutted by a complete offering and so reduce the value. Privatisation of Royal Mail separate from the post office network is an innovation, so it will be best to proceed by degrees to ensure that the universal service is not jeopardised. If the value of the shares rises, the taxpayer would be a loser if the initial share sale were a complete sale.

There is a real prospect that Royal Mail may be undervalued or overvalued by the Government. Ministers have yet to put a value on the Royal Mail Group at this time-or, if they have, they are being exceedingly coy about it. Estimates of the value of Royal Mail have varied wildly. Many factors will impact on the value of the business. The prospective regulatory regime, the industrial relations climate, the onerous nature of the obligations placed on Royal Mail-all these factors and others will determine the value of the business and its share price on flotation.

There are, then, strong arguments for the sale to be implemented in tranches. That would allow for a wide variety of approaches to possible amendments. For example, tranches could be subject to various reporting procedures to Parliament to guarantee effective oversight. I stress that in our amendment we have been consistent with our wish that overall ownership of Royal Mail should remain in the public sector. However, the principle of selling by tranches to avoid underpricing would apply to any percentage of sale, including 90 per cent or 100 per cent. I hope that the Minister sees merit in the notion that disposals should be by way of tranches and that she will either accept the amendment or give assurances to the Committee about how the Government intend to proceed.

Lord Razzall: I cannot say how much I respect the views of the noble Lord, Lord Lea of Crondall, and the noble Lord, Lord Young of Norwood Green, but I have to say that from what they have just said they are living in fantasy land. We are faced with a situation where, unless the Royal Mail gets significant investment from a third party, it will be in serious financial difficulties. The idea that there will be an IPO or a sale with tranches is from a fantasy world. If people want

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to oppose the Bill, they should say so; they should say, "We don't agree that it should all be sold off". But, as those of us who deal with the markets every day know, to suggest that in some way we could have 30 per cent here, 30 per cent there and 19 per cent there is a fantasy world.

Lord Lea of Crondall: I-

Lord Razzall: May I finish what I am saying? We are in Committee; the noble Lord does not have to interrupt me. The noble Lords are quite right: in the world under the Labour Government, they successfully sold off all sorts of things in tranches. However, we are not talking about the businesses that they sold off; we are talking about a business that is in serous financial difficulties. The idea that we can go to the market on an IPO and sell only 30 per cent, or sell 30 per cent now and trickle out the rest of the sales, simply will not happen. If noble Lords oppose the Bill and do not want Royal Mail to go into the private sector, they should say so, but they cannot pretend that we can do this in the way that they propose.

Lord Lea of Crondall: My Lords, the noble Lord has sat down. Did I hear him say that a sale through an IPO per se was unlikely? Clearly there is a difference between a sale through an IPO and a sale to an individual but, as my noble friend Lord Young and I have pointed out, it is perfectly straightforward to say that the public interest would have been served in the 1980s if there had been tranches. Presumably, the noble Lord is saying that the financial position of Royal Mail makes tranches impossible. In that case, it is up to him to prove that he would not be making a catastrophic mistake in an IPO about the initial sale price. Is that not correct?

Lord Razzall: It is not for me to respond to this; I am sure that the noble Baroness can do so more eloquently than me. But anybody who thinks, in the Royal Mail's current circumstances, that there can be an IPO, is living in a total fantasy world. In the world in which we live, and the numbers we have from the Royal Mail-we know what they are-there is no way that suddenly an IPO will be forthcoming. I understand the noble Lord's point-theoretically there could be an IPO-but we should not clutter the Bill with theoretical amendments. It simply will not happen. There might have been the possibility of an IPO under the noble Lord's Government if they had got there quickly enough 10 years ago, but it is too late now. The pass has been sold, and this is fantasy.

Lord Lea of Crondall: If the noble Lord will allow me, it was the Hooper report that said that the most likely presumption of going forward was an IPO, and that was very recent.

Viscount Eccles: Yes, it was in 2008, when Hooper gave an update-

Lord Lea of Crondall: 2010.

Viscount Eccles: Hooper said in 2010 that the situation had worsened, although he acknowledged that things were happening at Royal Mail which were a great improvement. The big snag with an IPO is that it does

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not bring Moya Greene's £2 billion. The noble Lord, Lord Clarke of Hampstead, would certainly buy some shares, and I might if the price was low enough, but you would not get any part of the £2 billion from either of us.

Baroness Kramer: My Lords, does not the dispute that has just taken place make it clear that this House and the other place are not the appropriate organisations for detailed discussions on how to do a disposal of shares? Obviously there are many different views, but this is not the kind of issue that can be put in the Bill. The financial circumstances of the Royal Mail have to be considered, as have the financial markets and the trade buyers that may be available. There will be a wide range of issues. I agree with those who have criticised past sales.

Lord Young of Norwood Green: My Lords-

Lord Razzall: We are in Committee, you do not have to interrupt.

Baroness Kramer: I am perfectly happy to sit down if that is helpful.

Lord Young of Norwood Green: I do not normally intervene; indeed, I am impelled to do so only by the contribution of the noble Lord, Lord Razzall. The noble Baroness, Lady Kramer, compounded the situation by saying that this was not the place to discuss this. I reject that. This is absolutely the right place for us to test the water on this issue. We are entitled to put the argument about tranches; we are entitled to see the Minister's response. On the point of the noble Lord, Lord Razzall, we have made it clear that we oppose the core of the Bill, which is to achieve 100 per cent privatisation, but we have not adopted a negative attitude in an attempt to undermine every stage. We have endeavoured to engage in constructive debate, and we have a legitimate right to do so on this issue.

Baroness Kramer: The noble Lord, Lord Young, and I seem to have discovered a knack of talking past each other. I have no criticism of anyone raising the issues-in fact, I think it is good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets. However, I argue that putting down a set of rules such as 30 per cent, 90 per cent or whatever else does not belong in the Bill. I am not saying that the issue should not be raised or that the matter should not be debated but that one cannot define it in the Bill when it depends so much on market conditions, particular financial circumstances, the specific issues of the time and the deals that can be negotiated. The Bill is the wrong place in which to set down hard and fast and black and white rules on this matter. That does not mean that debate and reporting back on the whole process is not necessary, but I regard those as two different issues. I hope that the noble Lord, Lord Young, is aware of that.



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9.30 pm

Baroness Wilcox: My Lords, this has been a stimulating evening all round. Amendment 14 is a sister amendment to Amendment 2 which we debated last week. Amendment 13A provides a new twist on the disposal of shares in Royal Mail and seeks to place time constraints on the disposal of shares specifically in the case of an initial public offering-an IPO.

I will first respond to Amendment 14 which seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government's Postal Services Bill which was considered by this House in 2009 but never found its way on to the statute book. As I said when we debated Amendment 2, the Government 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. Amendment 14 proposes a staggered approach to a sale of shares but with a limit on the disposal of 49 per cent of the value of the shares in Royal Mail. Given that the Government are also committed to establishing an employee share scheme-we will come later to amendments from noble Lords opposite to increase the size of the scheme-these amendments would in fact limit even further the amount that could go to private investors. However, the difference between this Government's position and the previous Government's position is that we do not believe that it is necessary for the Government to retain overall ownership of the Royal Mail.

The noble Lord, Lord Young, was concerned about maximising the value of Royal Mail. That concern is welcome although somewhat surprising given his earlier amendments which sought to limit how much could be sold, which would undoubtedly impact on the value. The Bill as drafted allows for the sale of shares in tranches, as set out in Amendment 14. However, we do not believe that there should be a rigid structure for how shares can be sold. There is nothing to stop the Government, in the first instance, selling a minority stake in Royal Mail or for Government to retain a stake in the company in future. However, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. As I have said before, our focus is simply on what is best for the Royal Mail and the taxpayer.

The noble Lord, Lord Lea, was concerned that Richard Hooper had steered the Government towards an IPO and that the Government would undervalue Royal Mail in such a flotation. I wish to make it clear that Richard Hooper did not express a preference for any form of sale. In his 2010 report he said that an IPO had become an option as Royal Mail now had less need for corporate experience from a partner thanks to its strengthened board. The Government are focusing on securing the best outcome for Royal Mail and the taxpayer. I hope I have already assured the noble Lord that we can sell in tranches, as he suggests, if that best meets our twin objectives.

As I said in my remarks on Amendment 14, and earlier amendments, the Government want to maintain maximum flexibility in the method and timing of any disposal of shares. This will give the Government the opportunity to make the right decision at the right

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time and to ensure that we can get the best result for Royal Mail and the taxpayer. Placing statutory arbitrary deadlines in legislation will not help to achieve the Government's objectives. If we choose to dispose of shares through an IPO, I believe that it would be impractical to be faced with a deadline of 31 July 2012 and to have to rush the process through by then. We heard last week from the noble Lord, Lord Jones, and the noble Baroness, Lady Kramer, about the damage caused by imposing statutory deadlines on commercial transactions. What if we were not ready to launch a flotation until August 2012? We would then have to wait until July the following year to make the disposal and give Royal Mail the access to the capital that it so badly needs. That would be in the interests of neither the company nor the taxpayer.

As I said on Amendment 14, nothing in the Bill would prevent the Government staging a disposal in the way that the noble Lord, Lord Lea, suggests, but Amendment 13A would reduce the flexibility to make the right decision and I do not believe that that would be in the best interests of Royal Mail or the taxpayer. I hope that the noble Lord is persuaded by my argument and I therefore ask him to withdraw the amendment.

Lord Lea of Crondall: My Lords, it will not surprise the House that I will in due course withdraw the amendment pro tem, but that in no way assumes that our arguments have been overwhelmed by the firepower of the noble Lord, Lord Razzall, or the Minister.

The Liberal Democrats must have been reading too much Machiavelli recently. I am not surprised at that, given the extraordinary arrangements that they have been making with the Conservative Party, and I am sure that they are being kept awake at night wondering who is going to stab them in the front instead of in the back. As to the idea that the amendment is aimed at killing the Bill, we have experience of killing Bills but this would be a peculiar way of going about it. This is about helping the Government and society to avoid a fiasco by feeling our way on how this disposal will be carried out.

Is the noble Baroness prepared to respond on whether it is her view-along the lines of the view of noble Lord, Lord Razzall, for whom he knows I have the greatest respect-that we are living in fantasy land if we think that this sale can be carried out by way of an IPO. The alternative, presumably, is the Sheikh of Kuwait. It may be that Colonel Gaddafi is no longer the likeliest candidate. The alternative is an IPO. We will all avidly read Hansard tomorrow-which means that we will not-but I do not think I said that Hooper advocated an IPO. I said that the most likely presumption to be made after reading Hooper is that an IPO would be a strong candidate as the means of sale. If that is the case, the amendment is the exemplar and states that if the scenario is an IPO, some of the experiences of the IPOs in the 1980s should be borne in mind.

Lord Razzall: I must intervene before the noble Lord withdraws the amendment. I am a student of Machiavelli and I have always regarded the noble Lord, Lord Lea of Crondall, as the model of The Prince.



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Lord Lea of Crondall: I take compliments of that type. I do not receive many compliments and I shall take that as a compliment and have it framed. In conclusion, a point of analytical disagreement has come out in the past 20 minutes such that I am pretty sure that my colleagues and I will return to this matter on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment 13A withdrawn.

Amendment 14 not moved.

Earl Attlee: This might be a convenient moment to remind the House that we are in Committee, we can speak as many times as we like, we are having a great debate and we accept interruptions, but that we tend to avoid them because we are in Committee and do not need to interrupt each other. I hope that that is helpful to noble Lords.

Amendment 15

Moved by Lord Stevenson of Balmacara

15: Clause 2, page 2, line 12, leave out subsection (5) and insert-

"( ) In order to ensure that it remains a single company, for the purpose of this Part "Royal Mail company" means the company that provides the universal postal service."

Lord Stevenson of Balmacara: My Lords, I thought that, following that interruption, we should have a few seconds of silence to gather our thoughts in case we are interrupted.

This amendment restricts the issue or transfer of shares in Royal Mail to the whole company by defining a "Royal Mail company" as the company that provides the universal service. Clause 2 allows for the issue or transfer of shares in a Royal Mail company. The Bill defines a Royal Mail company as one that,

That, I think, means that, as the Bill stands, the Secretary of State can dispose separately of the various companies that can make up the Royal Mail Group.

The Royal Mail Group provides the universal service. It currently consists of a number of business units, the largest of which is Royal Mail, or Royal Mail Letters. This is the part of the business that deals with the collection, sorting and delivery of letters, packets and parcels, and it accounts for more than 70 per cent of the Royal Mail Group's revenue.

Royal Mail Letters is a huge operation, delivering some 70 million items every day to more than 28 million addresses. It is at the core of the Royal Mail Group, ensuring the maintenance of the universal postal service. However, it works only because it is an integrated whole. Large volumes allow the business to achieve sufficient economies of scale to make the universal service affordable and to pay for the countrywide labour-intensive network on which the postal service depends.



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We believe that Royal Mail must remain an integrated whole if the universal service is to survive and if postal services are to thrive in the United Kingdom. The financing of the universal service has already been put under strain by the operation of upstream competition in the mail market and by the way in which the market for access mail has developed.

Royal Mail has lost over 60 per cent of the pre-sorted bulk mail market. This is mail which competitors collect and sort and give to Royal Mail to deliver. Royal Mail therefore handles far fewer items upstream than it used to and it has had to cut back its upstream operations as a consequence. Royal Mail must maintain a viable upstream business if it is to be able to provide the universal service at an affordable tariff. It is therefore important that an integrated business model is encouraged and supported through legislation and regulation.

We believe that it would be in the public interest if an integrated Royal Mail business model were established by legislation. The amendment would prevent the separation of Royal Mail through the sale of separate business units and through the break-up of Royal Mail Letters and its sale as a series of separate business units.

There will be an appetite among Royal Mail's private competitors for the break-up and sale of Royal Mail. This might suit their business models. However, it would be short-sighted and would eventually damage the postal industry and the provision of postal services in the UK.

If anyone would like to see Royal Mail stripped down to only a core delivery network, with all other parts of the business separated and broken up, that would not help the provision of a robust universal service. Competitors might wish to collect and sort bulk mail but they do not generally wish to collect and sort individual items from domestic customers. Royal Mail must do this as part of its universal service. The universal service will become more expensive and less sustainable unless Royal Mail can continue as a viable, integrated end-to-end operator.

Along with Royal Mail Letters, the Royal Mail Group further consists of Parcelforce, Global Logistics Systems-GLS-and a number of other smaller businesses. It also consists of Post Office Ltd, whose sale is of course restricted by the Bill, and we welcome that.

Parcelforce and GLS, the third biggest parcels provider in Europe today, are both profitable businesses-GLS particularly so, with £122 million in operating profit in 2010 alone. That is almost the same level of operating profit as was seen in the whole of Royal Mail Letters, a company with four and a half times GLS's revenue. That means that GLS is a target for Royal Mail's competitors. Many would like to get their hands on it, but they are less keen to take on the difficult but important operations undertaken by Royal Mail Letters. The sale of GLS and Parcelforce separately from Royal Mail would be revenue-generating but would leave Royal Mail, the universal service provider, in a much weaker position.

Royal Mail needs to operate as an integrated business and it needs to be able to hold on to what valuable assets it has while it goes through its current difficult

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and costly transition. We do not want to see it asset-stripped. It is therefore important that restrictions are placed on the sale of Royal Mail that mean that it can be sold only as a single company, and that it cannot be asset-stripped or broken down in the interest of short-term gain to appease the company's competitors or to consolidate a regulatory model that has damaged the business and is in desperate need of change. I beg to move.

9.45 pm

Baroness Wilcox: My Lords, I believe that the intended effect of Amendment 15, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, is to seek to ensure that Royal Mail remains a single company providing the universal postal service and that it is the only universal service provider. We will, of course, come on to the protection of the universal postal service when we debate Part 3 of the Bill, but I should make it clear now that we expect Royal Mail to be the universal service provider in the UK for the foreseeable future. I hope that reassures noble Lords.

I now turn to the issue of whether Royal Mail should be a single company. I do not consider that we should be legislating on the future structure of a company that will no longer be in public ownership. A privatised Royal Mail should be free to organise its business and operations in such a way that enables it to provide the universal postal service efficiently and effectively. This could mean establishing subsidiaries to deliver part of the service or it might mean no change at all. We simply do not know, in 2011, what the best operational structure should be for Royal Mail. Through a disposal of shares, we are giving Royal Mail real commercial freedom, and I do not consider that it is appropriate for the operational structure of Royal Mail to be set in primary legislation.

I have two answers in the question and answer part of the brief on subjects that the noble Lord mentioned. On whether Parcelforce or GLS will be part of the package, no decision has been taken on the formal method of sale. Just as for the Royal Mail, we have no plans to retain either Parcelforce or GLS in public ownership in the long term. The noble Lord also asked about the risks of a new owner stripping the assets from Royal Mail. The Government simply would not sell to a bidder if they believed that they would not assist in securing the future of the universal postal service. Furthermore, any shareholder would want to see a successful business and a sustainable universal service, given that the cash generated by a successful Royal Mail will outweigh the asset value in a very small number of years. Investors would also face significant reputational damage if they allowed Royal Mail to become insolvent. We believe that there is ample protection against that, both in the Bill and more generally. With those answers and the answer I gave previously, I ask the noble Lord to withdraw his amendment.

Lord Stevenson of Balmacara: I thank the Minister for that response. We seem to be placing a great deal of stress on hopes and aspirations about what will happen after the sale-other noble Lords picked up on this, I think-and very little on what many people in the

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country would regard as sensible and appropriate public interest measures, which are being taken on board by the Government or even considered in a serious way.

From what the Minister has said, there is a grave danger of cherry picking. That will still be a possibility. If the successful owner is robust and strong enough, they will be able to do what they wish once they have control of the assets. It is particularly important to register that the Government have not ruled out dismantling the Royal Mail and cherry picking the most popular parts, in particular GLS, which is the most successful European parcels service, as I said earlier. That must be a worry as we go forward.

The assets can be taken away; they do not have to be very large or prestigious to be capable of being sold. On the first day in Committee, the noble Lord, Lord Christopher, considered selling the Oxford sorting office at a profit. Heaven knows why. I have not visited it yet, but perhaps the Minister has. If that is his vision of it, then clearly the assets are valuable and they will go. There is also the possibility of the Royal Mail being split in a geographical way or by function, which would undermine the viability of the universal service provision, which in effect cross-subsidies rural and other diverse locations. We think this is an important issue, but on this occasion we shall not push the matter to a vote. I beg leave to withdraw the amendment.

Amendment 15 withdrawn.

Amendment 16

Moved by Lord Low of Dalston

16: Clause 2, page 2, line 17, at end insert-

"(6) Prior to any disposal of shares in Royal Mail, the Secretary of State shall consult service user groups including small businesses, pensioners, people with disabilities and people in rural and remote areas.

(7) Following the consultation in subsection (6) and prior to any disposal, the Secretary of State shall lay a report before Parliament which sets out how the universal service provider shall maintain the minimum requirements set out in section 30."

Lord Low of Dalston: My Lords, Amendment 16 is designed to strengthen the rights of users of postal services. As has been seen in the past, with privatisation and a greater focus on commercial imperatives, it is all too easy for the most vulnerable users of services to be put at the greatest disadvantage. Let us take the energy sector. The most expensive way to buy gas and electricity is with a prepayment meter, yet it is the poorest in society who are forced to buy them in this way as they do not have access to direct debit facilities. There is a real risk that certain groups of service users who rely on Royal Mail more than others will similarly be vulnerable to change. I believe it is important that Parliament sends a strong message that it expects the services provided to vulnerable groups to be maintained.

To take one example close to home-and I declare my own interest here-on the one hand, the Bill legislates to protect specialist services for blind people, but on the other, it requires the proposed postal services regulator, Ofcom, to review that service and all the other services contained within the universal postal

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service within 18 months of the Bill coming into force. The Minister was very clear at Second Reading that this review is not intended to lead to a reduction in the minimum requirements of the universal postal service. However, in discharging its primary duty to secure provision of the universal postal service, Ofcom must give specific consideration to the financial viability and efficiency of the service. The review will decide whether the current universal service obligations work in the interests of users. I believe they do, but I do not think a regulator with a remit to further competition in postal services necessarily would.

A similar concern applies to the concept of the single tariff: a single price for a stamp. At the moment, Royal Mail is obliged to offer customers the same letter service without discriminating on price, regardless of the distance between the point of posting and the point of delivery. This works in favour of people who live in rural areas, but once the accountants and management consultants are let loose, questions about why users in urban areas should go on subsidising an often loss-making postal service in rural areas are bound to arise. Why not reduce the cost of a stamp in the cities and make those in the countryside pay a price that better reflects the cost of providing the service?

Small businesses are equally vulnerable to changes in the price of letters and packets. The Federation of Small Businesses has expressed concern about the Bill. It is worried-and I can understand its fears-that a more aggressive pricing regime will harm small businesses. The collection and delivery of postal packets forms part of the universal postal service. Such a service is vital for small enterprises. With economists in charge, these businesses could well be charged a price for the service they receive based, at least in part, on their location. Small businesses in rural areas are perhaps the most vulnerable to the more commercial spirit that will inevitably come with privatisation.

Older people, pensioners, who are a growing section of the community, again rely on the postal service more than younger users. With the advent of electronic communications, there has been a seismic shift away from writing and sending letters in the conventional way, but many older people are marginalised when it comes to such technologies. They are more reliant on the traditional postal service as a means of communication. It is important that a privatised Royal Mail does not operate in such a way as to disadvantage older users of postal services.

I am not against this Bill. I simply want to strengthen it so as to protect the postal service for those who live in a rural area, who run a small business that is reliant on Royal Mail, who receive specialist services for blind people or who are elderly. The object of this amendment is to restrict the ability of Royal Mail and the postal services regulator to use their new-found commercial freedom and a more competitive environment slowly to chip away at those services, to raise their costs disproportionately or reduce their frequency.

The Minister will no doubt say that it is absolutely the intention of the Government to protect these services. I do not question her intention for a moment. But once the Bill receives Royal Assent, the Minister

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hands over responsibility for the maintenance of these services to the regulator. An obligation on the Secretary of State to consult in the way I have suggested with this amendment and to report to Parliament strengthens the hand of the consumer and helps to build into the legislation another safeguard for service users. I beg to move.

Lord Touhig: In supporting the amendment tabled by the noble Lord, Lord Low, I shall speak to my Amendment 16A. The Bill does little to ensure accountability to the devolved Administrations in the United Kingdom. Yet we must recognise the vital services provided by the Royal Mail to the whole of Great Britain and Northern Ireland. It is part of our country's infrastructure, supporting economic and social interaction across all the nations and regions, and we should retain universality of service across the whole country.

The needs of service users varies depending on where they live, with those in rural and hard-to-reach areas particularly dependent on postal services and vulnerable to changes that may follow from the introduction of the Postal Services Bill. For that reason, I believe that the devolved Administrations must be kept informed about the developments in postal services. Specific analysis should be undertaken and the likely impact of changes to postal services in Scotland, Wales and Northern Ireland should be properly considered. Moreover, specific consideration should be given to those with particular needs, such as pensioners and people with disabilities, a point eloquently argued by the noble Lord, Lord Low of Dalston, a few minutes ago.

The devolved Administrations already take a keen interest in postal affairs and recognise their importance. Economic development has been important to the Welsh Assembly and the Scottish Executive. They support the needs of small business in rural areas and both Administrations have made significant investments in their post office networks over these past years. In my view, it is unlikely that any of the devolved Administrations would want to see the break-up of the universal service. Providing detailed reports to the devolved Administrations would give them the opportunity to comment on particular implications of changes and will be important to improving oversight and accountability.

The future of Post Office Ltd and the continued provision of the universal service are a particular concern. Scotland, Wales and Northern Ireland contain large rural communities that would be disproportionately affected by any further decline in the post office network. The post office network is struggling. More than 150 post offices were closed as long-term temporary closures in 2010 alone and more than 900 post offices are up for sale. Sub-postmasters are struggling to make a living from their post offices. I fear that this Bill will potentially make things more difficult for them if we do not seek to improve it.

Breaking the link between Post Office Ltd and Royal Mail puts one-third of the Post Office's revenue at risk. If the two cease to be part of the same company, there will be no guarantee that Royal Mail

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continues to sell its products through the Post Office. The Government's proposals for the redesign of the post office network will see 4,000 "main" post offices created and the remaining post offices becoming "essentials" and "locals". Essentials and locals will not provide the full range of post office services and some 2,000 sub-post offices would be transferred into essential or local category by 2014. They will offer only a proportion of the widespread post office services now available. I think that all remaining non-main post offices are likely to follow soon after.

10 pm

In order to ensure that all areas have access to the full range of postal services, the post office access criteria should be extended to ensure that the spread of main post offices across the United Kingdom is equal. Without such criteria, it would be possible for there to be no main post offices located in Scotland, Wales and Northern Ireland, and no access to the full range of government and post office services as a result.

Post Office Ltd's financial position is a particular issue for Scotland, given that 70 per cent of the branches there are in rural areas where revenues are significantly lower than average. In 2009-10, there were 1,446 branches in Scotland, including 90 outreach services. Of those post office branches, 68 per cent are in rural areas and the proportion of rural branches is significantly higher than UK average of 55 per cent. The network in Scotland is in a precarious position financially, with rural post office branches typically being less well remunerated and less economically viable. It is clear, however, that the post office is a vital public institution in Scotland, a matter of great concern to the Scottish Parliament and the Scottish Executive.

Wales also has a higher than average number of rural post offices, at 71 per cent compared with the UK average of 55 per cent. There were 963 post offices in Wales in March 2010, eight fewer than the previous year. Only 17 per cent of Welsh post offices are in urban areas, compared with an average of nearly 34 per cent for the rest of the United Kingdom. Some 16 long-term temporary post office closures were made in Wales in 2010, all in rural areas, and the Post Office is currently advertising 56 post offices for sale across Wales. But the post office remains a lifeline for communities in Wales. Research for Consumer Focus Wales has found that 96 per cent of people in Wales use the post office, 53 per cent at least once a week and, of those interviewed, 10 per cent said that they visited three times a week or more. Some 47 per cent-almost half-of all those who use the post office in Wales use it as a bank, to collect benefits, pay money in, take money out and pay bills. This is particularly the case for people over the age of 65, where 58 per cent of that age group use the post office. Some 66 per cent of people who do not have a car in Wales use the post office, while 61 per cent of the long-term ill and disabled use it; 65 per cent of post office users in Wales do not have access to the internet, and 58 per cent are on low incomes. This shows the importance of the post office network and why the Welsh Assembly should be consulted about any changes,

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along with the Scottish Parliament and the Northern Ireland Assembly. There are 480 post offices in Northern Ireland, 68 per cent of which are in rural areas, and in 2010 there were at least eight long-term temporary post office closures. The Post Office is currently advertising 19 post offices for sale in the Province.

The Postal Services Bill sets out a minimum standard for the universal postal service. However, it is just a minimum. The Bill also contains numerous routes by which those minimum standards can be reviewed and reduced. This is of especial concern to those in rural, hard-to-reach areas where the universal service is particularly expensive to provide and where Royal Mail will come under pressure to reduce such services. People living in rural areas are particularly at risk from the erosion of the universal service. An affordable, universal service is essential for small businesses and domestic customers if they are to engage in the economy and enjoy the benefits of the internet. Much has been made of the revolution of the digital age and its impact on Royal Mail, but we must not forget that without Royal Mail's universal service, people in rural communities will not be able to buy online, to sell online, or enjoy the benefits of running a small business from home. With each possible reduction in the universal service obligation, mail services in Scotland, Wales and Northern Ireland are at particular risk. Parcelforce and other parcel providers feed parcels into the Royal Mail's networks for delivering to the Highlands and Islands. Given the additional financial burden that accessing these areas presents, any reductions in the service based on cost are likely to hit these regions first and hit them hardest. There must be proper analysis of the impact of the changes in Scotland, Wales and Northern Ireland. It is important, therefore, that the report should be made by the Secretary of State to the devolved Administrations.

The noble Lord, Lord Low of Dalston, spoke eloquently about the impact that the changes could have on pensioners and disabled people and, in view of the time, I will not rehearse those arguments now, but I entirely support the points that he made. I hope that the Government will consider the amendments before them. The Minister and I met by chance earlier this evening. I was waiting to go into the Interview Room and she was just coming out having had a meeting with her officials. We politely exchanged conversation and I was presumptuous enough to say that as a former Minister my advice to a current Minister is not always to take the advice of her civil servants. If they have advised her to resist these amendments, I suggest that she listens to my advice and not to that of her officials.

Lord Razzall: My Lords, I do not want to intrude in the debate on this amendment, but unfortunately the noble Lords, Lord Touhig and Lord Low of Dalston, were not in their places when I made this point earlier. If we are to preserve the reputation of this House for knowing the facts and having expertise, we really must not say things that are not true. As I said earlier, the issue for the Royal Mail is not about whether it can deliver to rural Wales or rural Scotland. As I said earlier, it is more expensive for the Royal Mail to deliver to Norwood Green or Hampstead than to maintain the service to the Orkneys and Shetland.



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If we are to debate this issue, the concern should not be about whether or not the universal service can be maintained to outer Wales or northern Scotland. It is about whether we can maintain it to Hampstead or Norwood Green. If we are to debate this issue, we should not fall into the trap of thinking that this is about how we preserve the service to the outer islands or parts of the UK. All the other issues that noble Lords have raised are worthy of debate, but if we are to be the serious House that knows the facts, we should take that on board.

Lord Touhig: Did the noble Lord suggest that the noble Lord, Lord Low, and I were somehow misleading the Committee by not telling the truth in this matter? I take exception to that. I am sorry that he has this metropolitan view. I know that his party is not that strong in Wales and will probably be wiped out in the coming elections, but there is no need to dismiss Wales as if it is at the other side of the moon.

Lord Razzall: No, I actually said that the noble Lord, instead of making party-political, snide comments, should actually learn the facts. The facts are that the Royal Mail at the moment is seriously under pressure delivering to Norwood Green and Hampstead, not to outer Wales, which is easy for Royal Mail to deliver to. That is the truth and he cannot deny it just because he wants to make Labour party-political points.

Lord McAvoy: I am tempted, especially by the last speaker. I am sure that every Liberal candidate in Scotland will welcome his intervention, but I can assure noble Lords that every Labour candidate will welcome it even more. The noble Lord mentioned the "outer" areas. Such contempt-such arrogance and such an unctuous dismissal of other people's points of view in this House-is against the very nature and style of this House. That is one of the most arrogant, aggressive statements that I have ever heard in my short time in this place.

I support the contents of the amendment of the noble Lord, Lord Low of Dalston. There is so much practical common sense in it that I do not know why-there is no logic or reason-it should not be accepted.

I am especially grateful to my noble friend Lord Touhig for his amendment because of its reference to the "outer" areas of Britain-the intervention by the noble Lord, Lord Razzall, will go down extremely well and will be well quoted. The point is that we have devolution. Let there be no doubt that I speak as a confirmed unionist-I always have been and always will be-who has no truck with the nationalists in Wales or Scotland, particularly Scotland. However, the democratic will of this United Kingdom Parliament set up the institution of the Scottish Parliament. To have devolution and not involve the devolved Administrations and not have lines of communication to them is a failure of the UK Government.

I would also like to restore a bit of balance-this is also relevant to the amendment-given that I have heard the phrase "the previous Government" about 25 times this evening. As my noble friend Lord Stevenson

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mentioned, the Labour Party manifesto said that all proceeds from any sale of the Post Office and Royal Mail would go straight back into modernisation and assistance. That is the sort of thing that would have helped Scotland. I understand that that was also a Liberal promise, but then again, like so many promises that the Liberals made, it vanished into a haze when they got the shock of being asked to deliver on their promises. We would have done that, but not one person from the Liberal Benches has mentioned that they had that commitment as well. Their whole principle is to surrender for power-or the illusion of power-because they have to be in government for a wee while.

Scotland, Wales and Northern Ireland-I am delighted to see the noble Lord, Lord Empey, here-are different because, unlike most parts of England, they comprise extensive geographical areas that can be sparsely populated. Some of those areas are not particularly well-off economically. However, there is a missed opportunity in the Bill. Previously in Scotland, there were closures of some post offices, which I fully accept were uneconomic-the closures were opposed by local Liberals, who are opportunists par excellence. There is an opportunity in Scotland, and no doubt in Wales and bits of Northern Ireland, where local authorities have a much more involved role locally than some of the big English councils. There is more localism there, and I believe that there is an opportunity to keep post offices going, in light of local circumstances. In Scotland-I am talking particularly about Scotland here, as I know it best, although I know Northern Ireland well, too-local councils could have co-operated with government and all types of bodies, including co-operatives, to ensure that a local service was still provided and not swept away. I declare an interest as a Labour and Co-op Peer. A big opportunity is being lost here. Scotland has a number of outreach services such as temporary vans or mobile post offices, so the whole difficulty facing the universal service in Scotland is different from that facing metropolitan areas in England.

I do not know about Hampstead and Norwood Green, but I know that that universal service is threatened in Scotland because of this Bill. What we have here is an authoritarian Government backed up by-I am astonished to say-an authoritarian Liberal Party that is only interested in getting legislation through. We in Scotland are going to lose out. I think Northern Ireland will lose out. My noble friend Lord Touhig has indicated that Wales will lose from it-there is a big loss there.

However, there will be a price to pay, because there are elections coming. In England, the local council elections will soon put pay to the Liberal votes. In Scotland, we have renewed vigour in our party, as have other parties, because Liberals have been exposed. In Wales, I think that the same will apply for elections to the Welsh Assembly. One thing about the House of Lords and the House of Commons-the Westminster Parliament-is that they provide an angle on British politics. Great things are being discussed here that, come election time, will have terrific resonance outside.



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10.15 pm

Lord Razzall: My Lords, I normally try to avoid rising before the Minister's response. Although the noble Lord does not know my name, I think that he is the noble Lord, Lord McAvoy. One of the conventions in this House is that if you are going to be rude to somebody, as he was, you ought to know their name. I am Lord Razzall.

I am terribly sorry that the noble Lord did not know my name. He called me unctuous. Yes, I probably am quite unctuous, because I am quite polite to various people on his Benches. The only point that I was trying to make, which cannot be denied, is that the Royal Mail cost figures demonstrate easy-to-provide services to northern Scotland and rural Wales. That was the only point that I was making. Why that produced a diatribe against the Liberal Democrats I do not know, but I suppose that that is what he has introduced to this House. I am Lord Razzall, by the way, if he wants to name me.

Lord Touhig: The noble Lord suggested that people were not telling the truth. I do not know where he has been this evening-perhaps he has had a very good dinner. However, it is quite improper without any evidence to suggest that either I or the noble Lord, Lord Low-he followed both of us-were not telling the truth.

Lord Empey: My Lords, I do not wish to get involved in this particular exchange, but I declare an interest as a Member of the Northern Ireland Assembly.

The point that the noble Lord, Lord McAvoy, makes is valid. Like it or not, people who are furthest away from the centre in any country feel-rightly or wrongly-that whenever there is an economic contraction it comes from the outer areas and goes to the centre. That is not exactly a surprise. I hope that in her response the Minister will be able to reassure people in the regions.

I took the opportunity to make my maiden speech on this Bill at an earlier stage because I regard this service as a fundamental piece of national infrastructure. It is just as important to people as railways, air links, or whatever. It is not only a vital service for individuals. We must remember that we spend large amounts of money pushing rural development. That has not only a European but a national dimension; we spend a lot of money and time trying to develop rural businesses. One of the principal mechanisms that they have to distribute their products is the Royal Mail.

I fully understand that people feel the risk, whenever there is a contracting situation, that people at the outer edges will be disadvantaged. I hope that the Minister will be able to reassure us. I have no difficulty with the regional Administrations being consulted; that makes sense. We are trying to have a balance: not to impose a whole lot of conditions on the sale that make it less likely to happen at a good price for the taxpayer but at the same time to ensure that people in less central areas-let us face it, that applies to areas of England as well as to Scotland and Wales-feel that their interests are being taken seriously into account at the core. I hope that the Minister can reassure the House that, when it comes to consultation on the matter, those interests will be taken firmly into account.



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Baroness Kramer: My Lords, I say to the noble Lord, Lord McAvoy, that I remember, not that long ago when we were standing not that far apart on the Floor in the other place, when he whipped his rather unwilling troops in to vote for the closure of 4,000 local post offices. I remind him that his views have taken a rather dramatic turn between that House and this one.

I turn to the issue that seems to be in contention here, which is whether deliveries to the outer parts of the British Isles-such as Orkney and Shetland-are subsidising deliveries to areas such as mine in Richmond or vice versa. Intuitively, I had assumed simply that the more rural the area, the more costly the delivery. I understand that that is not justified by the numbers, and I was going to suggest to the Minister that she might wish to speak to the Post Office because I presume that the appropriate numbers that make that clear could easily be placed in the Library for everyone to look at. That might clarify an issue of fact.

I have relatively little sympathy with Amendment 16A because the devolved Assemblies have many mechanisms for regular conversation with government departments here. They can come to their conclusions and make whatever representations they consider important without us having to encumber the Bill with further administration and burden. As others of us have said, it is important that we proceed in as accelerated a way as possible to make sure that both Royal Mail and the post office network are rescued before more financial damage can be done by the passage of time without a change in regime.

I am concerned that Amendment 16, moved by the noble Lord, Lord Low, might have been obscured in this conversation. That is the important amendment in this group. Whether it is justified or not, many people who are more vulnerable are very concerned by the changes that are coming to Royal Mail and the Post Office. There are many protections in the Bill for people who are more vulnerable and for small businesses, but it is not right to expect people to delve into the details of the Bill and spend time trying to work their way through the Explanatory Notes in order to come to an independent conclusion. It is crucial that the Government and the department are in conversation with more vulnerable groups and small businesses to make it clear that their needs are being recognised and heard, and that a response is available within the context of the Bill. Whether that is done via the mechanism of a formal consultation or in some other way, it is crucial to draw attention to people who are vulnerable.

I remember when local post offices were closed. I have mentioned before the ward of Ham, the most deprived ward in my old constituency. All three branch post offices were closed there. Many older people found themselves deprived of their independence because they had to get a friend to drive them to the post office. They could no longer walk there themselves; they were not capable of getting on to the bus to make the journey. It was an appalling experience for all of them and they still live without a post office. The noble Lord, Lord McAvoy, will be aware of what they went through because this all happened on his watch.

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That group will be anxious; it will not be certain that the Post Office recognises its needs; and it needs the additional reassurance that the amendment of the noble Lord, Lord Low, in many ways underscores. That is the amendment that we should be debating. The devolved Assemblies have mechanisms of their own which I am sure they are using most successfully.

Lord Young of Norwood Green: My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.

We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.

I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.

It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.

Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.

Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an

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obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.

Baroness Wilcox: My Lords, I suppose that I ought to start by saying that I live in Cornwall, which may put the Committee's mind at rest. I have some idea about the differences of living in Cornwall and in the centre of London. Indeed, I apologise, for so does the noble Baroness, Lady Dean. There are quite a few of us around the Committee tonight.

Amendments 16 and 16A touch on the issues that we will be debating under Clause 11, about the annual report on the post office network, as well as under Part 3 on the regulatory framework for the postal sector. Amendment 16 would require the Secretary of State to consult various groups before a disposal of shares and to lay a report before Parliament setting out how the minimum requirements for the universal postal service, set out in Clause 30, will be maintained. Amendment 16A requires the Secretary of State to submit reports to the devolved Administrations about the impact of proposals in the Bill on post offices, small and medium-sized businesses, communities in remote areas, pensioners and those with disabilities. I hope to reassure noble Lords that the existing and future duties of Ofcom and existing reporting requirements are sufficient to meet their concerns.

I will first address the points raised in Amendment 16 by the noble Lord, Lord Low. Under Part 3, Ofcom will have responsibility for regulating the postal sector and its primary duty in that regard will be to ensure the provision of the universal postal service. The noble Lord, Lord Low, was concerned that Clause 29 would allow the minimum requirements of the USO, particularly the requirement for Articles for the Blind, to be reviewed by Ofcom and changed within 18 months. Let me reassure him that the requirement for a review within 18 months is for the very particular products and services that Royal Mail is required to deliver. It can have no impact on the statutory protections for the minimum USO requirements in Clause 30, including free services for the blind.

The noble Lord, Lord Low, was also concerned that a private Royal Mail could charge higher prices to customers in rural areas. Again, let me reassure him that Clause 30 also provides that pricing of the universal service must be,

As I said when we debated Amendment 10, Ofcom will report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay that report before each House of Parliament.

10.30 pm

I shall address the concerns of my noble friend Lady Kramer, among others, about vulnerable people. When performing its duties under the Bill, Ofcom's general duties in the Communications Act 2003 will also apply. In everything that Ofcom does on post, it will have to have regard to various areas and groups as

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set out in Section 3(4) of the 2003 Act. Those include: the needs of persons with disabilities, of the elderly and of those on low incomes; the opinions of consumers in relevant markets and of members of the public generally; and the different interests of persons in the different parts of the United Kingdom, of the different ethnic communities within the United Kingdom and of persons living in rural and urban areas. That list covers all the groups set out in the amendment tabled by the noble Lord, Lord Low, so I hope that he will be reassured by that. Importantly, those requirements on the performance of Ofcom's duties will apply to all future regulation of the postal sector, so they will be more enduring than a snapshot assessment at the time of sale. Given Ofcom's role and duties, it would not therefore be necessary for the Secretary of State to lay a report to Parliament on the maintenance of the universal service, as suggested by Amendment 16.

I now turn to Amendment 16A in the name of the noble Lord, Lord Touhig, whom I met coming out of the room as he was going into it. I think I said something to him like, "I hope that the atmosphere that I have left behind me will make for a convivial exchange of opinions today". The noble Lord, Lord Razzall, guaranteed that that happened for absolute sure. There is no doubt about it; if anything can ever be said of this man, it is that he is as subtle as an air raid.

The proposals in the Bill have one overarching objective: to secure the universal postal service in the United Kingdom. I place emphasis on the "United Kingdom", for that is what it is and because that is what the universal service is all about. It is a postal service that is available to all and delivers to all addresses in our United Kingdom. We have ensured in the Bill that the universal service continues to include uniform prices, so that the price of a letter from London to Surrey will always be the same as a letter from London to Aberdeen. We have been asked about a note possibly being put in the Library giving us all clearer information on that. I am sure that the people behind me in the Box are frantically thinking what they will put in it and that they have everything at their fingertips, so I hope that will be the case. Not only does the Bill ensure uniform prices, it also ensures, through Clause 33(6), that the other minimum requirements of six-days-a-week delivery and collection cannot vary across the country. The minimum requirements, in any respect, in one part of the country cannot differ from those in another.

The amendment tabled by the noble Lord, Lord Touhig, would require the Secretary of State to submit reports to the devolved Administrations on the impact of the proposals in the Bill on the service in Scotland, Northern Ireland and Wales.

Lord Young of Norwood Green: I am sure that the Minister is right about the attentiveness of the Bill team in the Box; they all look exceedingly alert to me-bright eyed and bushy tailed. I just want to be sure what we are seeking, as it is not the guarantee that the universal service will be provided. The debate is about the cost of delivery in urban as opposed to rural areas; I trust that I have got that right. Can I see them nodding in the affirmative over there? I hope so.



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Baroness Wilcox: I thank the noble Lord for expressing that more clearly than I did. The Government have already produced an impact assessment on the proposals in the Bill. It looked at the impact of the proposals on all parts of the United Kingdom. The universality of the universal postal service means that the impact is the same across the UK. The assessment also looked at the impact on small firms, rural communities and disadvantaged groups.

As I said in my remarks on Amendment 16, it will be the regulator, Ofcom, that will have responsibility for ensuring the provision of the universal postal service. Ofcom will report annually on its activities, including ensuring the provision of the universal service throughout the United Kingdom. In addition, we expect that Royal Mail will report, as now, on its quality of service performance broken down by postcode areas, so that there continues to be transparency about the provision of the universal postal service to all parts of the United Kingdom.

With regard to post offices, Clause 11 requires a Post Office company to send a report annually to the Secretary of State on its network of post offices. The report on the post office network must contain information about the accessibility of post offices to, among others, individuals living in rural areas, small businesses, individuals with disabilities and elderly individuals. In recognition of the importance of post offices to all communities, Clause 11 requires the Secretary of State to give a copy of the report to Ministers in the devolved Administrations, as well, of course, as laying the report before this Parliament. I expect that we will discuss this reporting requirement in great detail when we come to Clause 11.

The noble Lord, Lord Touhig, raised a number of specific points on the post office network and I am sure that we will consider these issues in full when we debate the proposed amendments to Clauses 4 to 7 and to Clause 11. The report in Clause 2 is specific to when a decision has been made to undertake a disposal of shares. I reiterate that, regardless of any change in ownership from the public to the private sector, the obligation on Ofcom to ensure the provision of the universal service will remain. The universal service is protected by Parliament through this regulatory framework, not by the Government's ownership of Royal Mail.

The information that is already in the public domain and that which will be provided as a result of the Bill will provide long-term transparency on the protection of the universal postal service and the accessibility of post offices throughout the United Kingdom. I therefore, at this late hour, ask the noble Lord to withdraw his amendment.

Lord Low of Dalston: My Lords, I am grateful to the Minister for her full reply and to all noble Lords who have spoken. At times I felt caught in the crossfire

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to the right and the left of me when I was simply moving a simple amendment designed to secure a fair deal for users of postal services. I am certainly most grateful to the noble Lord, Lord Razzall, for his intervention. I am sorry that I was not in my place earlier when he made his point and he had to repeat it, but I am grateful to him for repeating it because I yield place to nobody in my commitment to evidence-based legislation. The point that the noble Lord brought to our attention for a second time struck me as being counterintuitive, as the noble Lord, Lord Young of Norwood Green, said, but there are many things that are counterintuitive and may yet be true. I will certainly take the opportunity, before we come to Report, to follow the lead that the noble Lord has helpfully given us.

I assure the noble Lord that I was not making any party-political points; I was simply interested in curbing the rough justice that the market can sometimes cause in the interests of the consumer. I am sorry that the noble Lord felt it necessary to make his point with such acerbity. I may unwittingly have said something that was not correct, as the evidence and my further researches may reveal, but I assure the House that while I may have been mistaken there was no intention to mislead the House or to say anything that was untrue. I will follow that up and will be able to set the record straight by the time that we come to Report.

The Delegated Powers and Regulatory Reform Committee has pointed out that the Secretary of State has a power to alter the minimum requirements of the universal postal service. Without following the conclusions of the Ofcom review, this is, as the Committee pointed out, a significant power for the Secretary of State to have. It would not be unreasonable for the Secretary of State to be obliged to consult the groups that we have mentioned in the amendment before having the opportunity to exercise that power.

At this late hour I do not wish to press the amendment, but I will look carefully at the Minister's reply-I repeat that it was very full and I am sure that it was helpful-to ensure that it contains the safeguards that we are looking for and I reserve the right to return to the matter on Report. For now, I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

Amendment 16A not moved.

Clause 2 agreed.

Amendment 17 not moved.

House resumed.

House adjourned at 10.42 pm.


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