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House of Lords

Wednesday, 4 May 2011.

3 pm

Prayers-read by the Lord Bishop of Birmingham.

Charity Commission: Bogus Charities

Question

3.07 pm

Asked By Lord Naseby

Lord Taylor of Holbeach: My Lords, a number of government departments, including Her Majesty's Revenue and Customs, work closely on these matters with the Charity Commission, which has a range of statutory powers and regulatory tools with which to investigate allegations of possible abuse and to ensure that charities are complying with their obligations. The commission also works closely with the police and other law enforcement agencies where there is evidence of criminality and works to raise awareness of the risks of terrorist finance to the charitable sector.

Lord Naseby: Is my noble friend aware that there are two further areas on which the Charity Commission needs help? First, in relation to Sharia law, all Islamic financial institutions must by law give charitable donations. Secondly, in relation to Sri Lanka, despite the ending of the war, there are still bogus Tamil charities collecting money for Eelam rather than sending it to Sri Lanka. In both cases, should not there be a case for better monitoring, particularly of where the money has gone that has been collected in the UK? Might Her Majesty's Government consider our embassies and high commissions checking on the ground on what exactly the money has produced? After all, the British public provide gift aid.

Lord Taylor of Holbeach: My Lords, I hope that the House will forgive me if I do not comment particularly on individual cases. It should be stressed that links between charities and terrorism are very rare. By far the vast majority of charities operating overseas are to be commended for their inspirational work and the relief they bring, often operating in very difficult circumstances. We must be able to identify and tackle any abuse but at the same time be careful to enable the vast majority of legitimate charities to get on with their important work without being bound up in red tape. In my view, the regulatory framework gets it about right.

Lord Phillips of Sudbury: Does my noble friend accept that it would be wise for the Government, when they undertake the shortly to be commenced review of the Charities Act 2006, to review the present planned

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reduction in Charity Commission funding of one-third over the next four years? Will they not at least think to ring-fence that part of the commission expenditure that relates to enforcement, which is vital to maintain the cherished integrity of charities?

Lord Taylor of Holbeach: I cannot deny that there is always a link between resources and function. My noble friend points out that there is a review of the functioning of charities legislation coming up at the end of this year, which will be very important and I am sure will have these matters in mind. But I am also sure that noble Lords will appreciate that the Government's priority at the moment is about spending priorities, given the need to provide deficit reduction.

Baroness Royall of Blaisdon: My Lords, what criteria does the Charity Commission apply in its assessment of whether UK charities with expenditure overseas do conform to charitable objectives as defined by statute?

Lord Taylor of Holbeach: My Lords, it is up to the trustees of all charities because they are responsible for the audit trail of their financial expenditure. On scrutiny, all charities are subject to proper regulation of their gift aid through HMRC.

Lord Boateng: My Lords, one of the joys of charitable law is the fact that it is possible to establish a charity in England without having to consult a lawyer. Will the noble Lord please make sure that the Government do not introduce such a high level of regulation that the strong and dynamic voluntary sector is held back by the necessity to employ lawyers and accountants before ever getting a charity under way?

Lord Taylor of Holbeach: I hope the noble Lord will accept that in the first supplementary answer I gave I said that I totally agree with that view. It is the voluntary impulse that makes charitable giving and charitable activity so important and useful. On the other hand, in asking the Question in the first place, my noble friend pointed out that Governments do have to be aware that there are people who will use charities for malicious ends, so we in Government have to be on our toes to avoid that happening.

Lord Elystan-Morgan: Does the Minister recollect that our late colleague Lord Pilkington was in possession of clear documentation showing that on many occasions the Charity Commission had been offered confidential information by intelligence agencies on both sides of the Atlantic but did not feel able to avail itself of that advantage on account of the conditions under which such information would be released? Is the Minister aware of that, and is he able to comment on the situation, albeit, of course, in general terms?

Lord Taylor of Holbeach: My Lords, my response will have to be in general terms. I am well aware that the Charity Commission receives quite a lot of information, and the pursuit of validating that information takes up quite a lot of the commission's time. It is right and proper that any allegations are investigated, and I am sure that that is exactly what happens.



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Lord Tebbit: My Lords, I gained the impression from my noble friend's original Answer that he does not think that anything more needs to be done about this problem than is being done at the moment. Am I right in that assessment?

Lord Taylor of Holbeach: I hope I can reassure my noble friend that I am not complacent on this issue. What I am saying, however, is that considerable resources across Government are devoted to making sure that there is no abuse of charitable funding and no misapplication of funds for terrorism. We have the Charity Commission itself, HMRC, the police and the National Terrorist Financial Investigation Unit. All these bodies, as part of Government, are dedicated to making sure that there is no abuse of charitable giving.

Lord Foulkes of Cumnock: As charity legislation is devolved, will the Minister discuss the issue with the Scottish Executive to make sure that they are also keeping an eye on this?

Lord Taylor of Holbeach: I am sure that the review of the Charities Act 2006 will take into account the connection with the devolved authorities, and we will want to make sure that they are fully in the picture. Indeed, I hope that the noble Lord is in a position to reinforce the determination of the Government here in Whitehall to deal with this problem.

Manufacturing: Economic Policy

Question

3.15 pm

Asked By Lord Sheldon

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, the Government receive representations from manufacturers and representative bodies such as the manufacturers' organisation, the EEF, which contribute to the debate on a wide range of topics, including the Government's economic policy. EEF recently stated that the Government's growth review has now started to deliver tangible progress in removing barriers to growth, investment and job creation in the United Kingdom.

Lord Sheldon: My Lords, I thank the noble Baroness for that Answer. The United Kingdom, of course, is now the world's sixth largest manufacturer by output. Although some emerging economies are able to produce goods cheaper than in our country, we still have a number of advantages in design, research, pharmaceuticals and technology. However, there is still a problem between the level of economic activity in high employment regions and areas of high unemployment. What action do the Government propose to limit these variations?



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Baroness Wilcox: My Lords, the Government fully recognise that a strong manufacturing base across the whole of the country is an essential component of a balanced and dynamic economy. We are working with business, taking action to strengthen manufacturing capability, addressing the barriers to growth in areas, trying to cut excessive red tape, encouraging innovation, export and business investment and improving skills throughout the country. It is a long haul but we are certainly on the move.

Lord Bilimoria: My Lords, there is a perception that manufacturing in Britain is dead. However, as the noble Lord, Lord Sheldon, said, we are still the sixth largest manufacturer in the world and manufacturing makes up almost 15 per cent of our GDP. What are the Government doing to help address this misperception? Furthermore, does the noble Baroness agree that the increase in manufacturing recently has been as a result of the weak pound and strong exports? Does she further agree that if consumption suffers because of cuts and tax increases, manufacturing may suffer as well?

Baroness Wilcox: My Lords, there were many questions in there and a great deal of good information too. Perhaps I should say that I agree with an awful lot of what the noble Lord has said and see whether that helps me. We are aware that we should look at tax and all the other things which hold back business, and we are doing so all the time. It is important for us to make the United Kingdom Europe's leading exporter of high-value goods and related services, and anything the noble Lord can do to encourage and help me I will listen to.

Lord Razzall: My Lords, bearing in mind that the clear objective of Her Majesty's Government, as has been articulated by the noble Baroness, is to rebalance the economy away from financial services, particularly in London and the south-east, is she concerned about today's statistics indicating that growth in manufacturing is now slowing?

Baroness Wilcox: My noble friend has read the same newspapers as me this morning. I think he is referring to the purchasing managers' index, which suggests that there is a slowing of the growth rate in orders and output although it remains positive. What has been slowing is consumer spending at home and, in some ways, it is difficult to say that people should go out, get themselves into further debt and spend just to help our industries. The most important thing our industries can do is to make sure that we have the right skills and the right people doing the right jobs. The fact that we are doing so well at exports is the one thing that is absolutely glowing ahead for us.

Lord Corbett of Castle Vale: My Lords-

Baroness Wall of New Barnet: My Lords, we have heard from employers about the importance of apprenticeships and the way in which they are encouraged in economic policy. The Minister referred to the skills which come from apprenticeships. Does she agree that apprenticeships are very important?



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Baroness Wilcox: I of course agree with noble Baroness. The Government are putting in place funding for 75,000 more adult apprenticeships than the previous Government were providing-and they were providing a lot, too. So we are on the way. The Government are committed to increasing the number of apprenticeships -particularly advanced apprenticeships-so that we bring people up with the skill base that will be relevant for this century and the next.

The Earl of Courtown: My Lords, as many noble Lords are aware, I have run an SME for many years. One of the real problems we have found is access to funding. Can my noble friend say how Her Majesty's Government can help access to funding, particularly where growth is concerned?

Baroness Wilcox: My noble friend Lord Courtown speaks well for SMEs, as he always does. We are trying to ensure the flow of credit to viable SME manufacturers. This is essential for support and growth and is a core priority for government. Some of the things we are doing to help include: continuing the enterprise finance guarantee until 2014-15, potentially enabling more than £2 billion of additional SME funding; continuing the enterprise capital funds programme to provide £300 million of venture capital for early stage innovation SMEs with high growth potential; and working with the British Banking Association on a range of commitments to assist SMEs with accessing the finance that they need. In addition, the Government are taking forward a package of investment readiness support for high-growth potential SMEs through the Business Coaching for Growth programme. My gosh, we should not fail with all that going on.

Lord Davies of Oldham: My Lords, the House will have noted that the Minister agreed with the noble Lord, Lord Bilimoria, that the single most positive factor in favour of manufacturing at present is the decline of the exchange rate. What does the Minister say in response to the independent Office for Budget Responsibility which has reported that government policies on the economy and in particular on manufacturing are likely to have a minimal effect?

Baroness Wilcox: My Lords, I repeat what the Chancellor said when we started on this rocky road last summer: we face the deepest recession that we have ever faced and we are going to go through very choppy waters. I have no doubt that, if I read out the hundreds of words that I have here to the noble Lord, we would agree that there are times when we get it right and times when we do not, but at the moment we are on the right trend.

Education: Gypsy, Roma and Traveller Children

Question

3.22 pm

Asked By Baroness Whitaker



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The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford): My Lords, this year the Government have allocated £201 million to schools for ethnic minority achievement via the dedicated schools grant. This is higher than the amount provided in 2009-10 via the former ethnic minority achievement grant. Schools may use this grant to purchase additional support for Gypsy, Roma and Traveller children or, if schools forums agree, local authorities may retain some or all of the allocation to deliver centralised Traveller education and ethnic minority achievement services.

Baroness Whitaker: My Lords, I thank the Minister for that reasonably sympathetic reply, but is he aware of the NUT report of last November which found that the Traveller education services were taking a disproportionate share of the cuts? Eight local authorities had completely abolished the service. Does he agree that the 20 per cent drop-out rate between primary and secondary school is disastrous for Gypsy and Traveller employment chances and that the school exclusion rate is higher than for any other ethnic group? What can be done?

Lord Hill of Oareford: My Lords, I agree with the statistics mentioned by the noble Baroness. Exclusion rates are, I think, three times higher for Gypsy, Roma and Traveller children than they are for the average of the population. Their achievement both at primary and secondary school is far lower. Unfortunately, the attainment gap over the past four years has widened rather than narrowed, despite all the efforts that have been made. There is clearly not a simplistic answer to this problem. I know that the noble Baroness has been concerned and acted in this area for a long time, as have other noble Lords. There is no simple answer. Clearly, the Government hope to go in the direction of devolving more responsibility to schools. As I said in my Answer, schools forums can choose to carry on funding a centralised service if they think that will work better. I hope that the pupil premium will provide additional resources for schools where they have Gypsy and Roma Traveller children. A lot of this is cultural and educational. Ideas that the noble Baroness and other noble Lords may have as to how one can chip away at this problem will be gratefully received.

Lord Laming: My Lords, does the Minister accept that the best way of hoping to integrate future generations of children from Traveller families is through education? Because of the higher levels of illiteracy in the adults and the low value which is attached to education in many areas, it is necessary not only to support the specialist service but to ensure that children are helped to get ready for school in the morning and to make sure that they are able to attend school on a regular basis. That is why this service is so important.

Lord Hill of Oareford: My Lords, I accept the points that the noble Lord has made. It is the case that we are already seeing that in some parts of the country where the problem is more acute-because it is not geographically equal across the country-it will make sense for school forums to come together and to continue with that kind of service.



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Lord Avebury: My Lords, does my noble friend agree that, without a framework of targeted support at local and national levels, the outcomes for this group of children are likely to remain unacceptably low? Although he says that additional support is being given to the local authorities for deprived and disadvantaged children, does not experience show that local authorities will not spend this money on Traveller education services because they are busy sacking such staff and getting rid of them?

Lord Hill of Oareford: The difficulty that we have-and one of the questions I asked about this whole area-is in trying to evaluate what in the past has been successful in making progress. As far as I have been able to see, the evidence for what has worked in the approaches that have been tried so far does not seem very clear or compelling. Unfortunately, as I indicated earlier, the gap has widened. So I do not believe that there is a simple answer. I know that many Members of this House know far more about this than I do. If the noble Lord has particular suggestions, I would be keen to discuss them with him.

Baroness Hughes of Stretford: I wonder whether the Minister is aware, as noble Lords are indicating, that Gypsy, Roma and Traveller children are much more likely to do better and to get into paid work if they are educated in schools and colleges than if they are not. What assessment has he made of the particular impact on these children of the withdrawal of education maintenance allowance? I ask that particularly in the light of the Government's equality impact assessment, which I understand now admits that there is likely to be unintended discrimination as a result of the withdrawal of the EMA on certain groups of children, of which these are one.

Lord Hill of Oareford: I clearly accept the noble Baroness's first point-that if children, wherever they come from, stay on at school and do well there, they are more likely to do better thereafter. As for the education maintenance allowance, one issue that we have with Gypsy, Roma and Traveller children is that half of them are dropping out well before they would be entitled to claim EMA. As I have said before, there is a complex of difficult issues to which there does not appear to be a simple answer; if there were a simple answer, I know that the approaches that were in place under a previous Government would have worked in delivering improvements. Sadly, despite the best efforts of all sorts of people, including local authorities, central government and everyone else, with all the tools that they used, that did not appear to work.

Lord Boswell of Aynho: My Lords, the Minister has already referred to a large number of the matters that have concerned those of us who have taken an interest in this area, including the high level of exclusions. I might add to the pot the concern about current implications of a large-scale eviction, which can of course threaten the viability of an individual school as well as the pupils' education. Would he or his department be amenable to receiving representations from across the House to try to get to the bottom of some of these issues and to have a more informed and extended discussion on what are clearly complex issues?



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Lord Hill of Oareford: Yes, of course, my Lords. I am glad to say that a group chaired by the noble Lord, Lord Avebury, is already in existence, but I shall be very happy to do that and to facilitate a meeting with my honourable friend Nick Gibb, who is the Minister responsible. I would be delighted to do that.

Hallmarking

Question

3.30 pm

Asked By Lord Trefgarne

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, there is no such consultation. The Government recently launched their red tape challenge initiative, aimed at reducing the burden of unnecessary regulation on business. Under its terms, anyone is invited to suggest which regulations might be scrapped or retained, with the emphasis on regulations which impose costs on business. The retail sector is the first theme to be considered and thus hallmarking legislation is among those on which comment is invited. Where regulations are identified as burdensome, Ministers will need to justify to an independent review panel any decision to retain them.

Lord Trefgarne: My Lords, I am grateful to the Minister for that reply. If I am under some misapprehension on this matter, as she appears to suggest, most of the hallmarking industry is also under the same misapprehension, including the heads of the four United Kingdom assay offices. Will she therefore be good enough to receive a delegation from me with such people so that she can set that misapprehension to rights?

Baroness Wilcox: I am happy to see my noble friend at any time and I am happy to see him with a delegation. I was wondering how I was going to answer his second question, which I thought was going to be about why hallmarking was included with this initiative at all. The reason is that we are looking at retail, and things that are sold from jewellery shops are usually retail. That is the only reason why it is in there. We have had an awful lot of responses; more than 5,000 people have contacted us to say how much in favour they are of keeping it. I am sorry that this story has gone out, but it is a misapprehension. Anyone in the retail trade can write in with anything that they think is too much red tape. The consultation is for three months. It finishes for this particular group on 5 May, which is tomorrow. After consultation, a decision will be taken on the letters and e-mails received. I hope that helps.

Lord Corbett of Castle Vale: Is the Minister aware that those who make use of the Birmingham assay office, set up by Matthew Boulton and his chums, do not regard the activities of that office as in any way burdensome? What it does, as the other assay offices

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do, is guarantee the integrity and quality of the massive array of goods produced by Birmingham's viable jewellery quarter. Will she feed that in as part of this consultation?

Baroness Wilcox: My Lords, your Lordships can be sure that I will be feeding back in everything that is said in this exchange today. I should add that, when I chaired the National Consumer Council, there was quite a lot of pressure from the European Union for British hallmarking to be considered unnecessary, but it is something that we hold dear. Your Lordships can be sure that I shall be feeding this back in on this, the very last day.

Baroness Trumpington: My Lords, is the Minister aware that I have had the great good fortune of watching the excellent workers in the assay office turn down a large silver tea service because the metal was not of sufficient quality and was therefore returned to its country of origin? Does she not agree that, if it had not been for the assay office, that silver tea service would have been sold on the open market as being the real thing?

Baroness Wilcox: The assay office has always made a very special contribution, as is being shown all through the House today. I am happy to have this exchange sent back.

Lord Palmer of Childs Hill: My Lords, I welcome the Minister's reply about the length of consultation, but would it not be a good idea to extend the consultation to something like 100 years in order to protect the value of the hallmarking of antiques? To remove hallmarking would destroy things like "Antiques Roadshow".

Baroness Wilcox: My Lords, this ambitious project, which has been opened up to the public by the Government, is being conducted over a two-year period, during which time some 21,000 individual regulations will be scrutinised. I say again that this affects the whole of the retail sector. I am not really sure-none of us is-why the hallmarking industry feels under such threat, but certainly, from the responses that we have had in support of hallmarking, it can be seen that the general public hold it very dear. Although I cannot say at this stage that things will be done, it is part of the whole project.

Lord Davies of Oldham: My Lords, the Minister doth protest too much. The problem is that the Government that she serves have a slash-and-burn attitude with regard to essential areas of consumer protection on the grounds that all that they are dealing with is so-called red tape and bureaucratic interference. Here we have a very clear illustration of why it would in fact be quite wrong to pursue that policy. I hope that the Minister will think again.

Baroness Wilcox: I hope that the noble Lord will look at the result of this first tranche, which has gone through in the earliest months, and feel at the end that the results coming through were well worth having.



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Baroness Oppenheim-Barnes: My Lords, my late father was a royal warrant holder for two generations of British royalty. His hallmark was something of great importance in our family. In subsequent years at the Department of Trade, I introduced regulations to have country-of-origin marking on all manufactured goods in the UK, which was welcomed by all but struck out by the EU, which described it as a non-tariff barrier. If we are to lose hallmarking and country-of-origin marking, it will be a sad day for consumers in this country.

Baroness Wilcox: My noble friend has now put that on the record. It has gone into Hansardand I am sure it will be of great value. For your Lordships' information, the next section being looked at is hospitality. If any of you wish to write in to the Cabinet Office, I am sure it will be delighted to receive that.

Lord Foulkes of Cumnock: If the Government are going to consider any options for changing this, could this House first be given a vote by first past the post?

Baroness Wilcox: I am checking to make sure that I have absolutely the right answer for the noble Lord. At the end of the three months, an independent panel will review the comments received and Ministers will be asked to justify the retention of legislation proposed for repeal. It is fairly straightforward and an open process, which I am sure your Lordships will be interested to hear the results of.

Charities (Pre-consolidation Amendments) Order 2011

Motion to Approve

3.37 pm

Moved By Baroness Verma

Motion agreed.

Postal Services Bill

Amendments

Report (1st Day)

3.38 pm

Amendment 1

Moved by Lord Lea of Crondall

1: Before Clause 2, insert the following new Clause-

"Restriction on disposal of shares in a Royal Mail company by Initial Public Offering

A relevant disposal by an Initial Public Offering may only issue or transfer shares representing no more than 30% of the value of a Royal Mail company within the period of one year after this section comes into force."



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Lord Lea of Crondall: My Lords, if the Bill reaches the statute book in its present form, in a year or so we will almost certainly have a repeat of the public interest being prejudiced by the modalities of the sale by merchant banks, as has happened some times before. However, as all noble Lords are surely aware, Conservative Governments have form on the modalities of sales of public assets-in effect, selling the family silver on the cheap. As Harold Macmillan remarked, you can only do that once. How do we then protect the public interest?

During the debate in Committee on the sale of Royal Mail, whenever noble Lords sought to ensure that value for money for the taxpayer would be achieved if Royal Mail is sold, the response came that it would be foolhardy to reveal a valuation, because once the bidders got to hear of it they would never exceed it. One could of course imagine arrangements whereby an independent valuation was obtained and not published for the world to see. It could even be shared on a strictly confidential basis with, for example, members of the Public Accounts Committee. However, that is not the main point. As these arguments flew back and forth, I realised that in some noble Lords' minds was a fixed picture of a set of competing companies bidding to buy Royal Mail as though it were a valuable silver cream jug at Christie's-in other words, what is known as a trade sale.

However, I ask noble Lords to consider the scenario that the company will be put up for sale in an IPO-an initial public offering or a sale of shares to the public. From Richard Hooper's 2010 report, this certainly seems to be a possibility that he has in mind. However, after that report and in our previous debate on 14 March, the noble Lord, Lord Razzall, who I am glad to see in his place, declared that,

Richard Hooper and Ministers, however, have repeatedly included that option. In his most recent report Richard Hooper stated that,

More recently, in oral evidence to the Public Bill Committee in another place, he said:

"There are various ways of getting private sector capital. One is a trade buyer and another is a private equity player".

He went on:

"There could, of course, be an initial public offering".-[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 109.]

Coalition colleagues are also open to an IPO. At Second Reading the Conservative noble Baroness, Lady Wheatcroft, in a well-considered contribution, stated:

"I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government's position is that the sale is open to all comers, but an IPO would get my vote".-[Official Report, 16/2/11; col. 743.]



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In the BIS document, Delivering for the Future: A Universal Mail Service and Community Post Offices in the Digital Age, published in October 2010, paragraph 2.6 states:

"We will retain flexibility so that we can negotiate the best possible outcome, including keeping options open as to whether a trade sale or initial public offering is more appropriate".

Let us consider the possibility of an initial public offering. There is a very strong case that shows that in the heyday of privatisations in the 1980s and 1990s, privatised companies were consistently sold at too low a price. For British Airways, British Gas and British Telecom alone, the undervaluation on the first day of trading amounted to more than £2 billion. 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.

One case illustrates the point very well. British Telecom shares were sold in three tranches. It was difficult to establish a correct sale price. There had not been a market by which to establish a clear and correct opening share price, as there will be for Royal Mail if its sale comes about. After the first tranche of shares was sold, the share price rose. Over the course of a year, the BT shares increased in value by 84 per cent. Several factors could conceivably have caused that increase, very sharp though it was. All share prices could have been rising, or there could have been an improvement in the company's prospects, but what if I tell noble Lords that on the day after the original flotation anyone who had bought the shares at the offer price saw the value of those shares increase by some 90 per cent in 24 hours? The obvious conclusion is that a higher price could have been achieved for the taxpayer-in other words, the shares were underpriced and the taxpayer was short-changed. Fortunately, not all the shares had been put on the market on that fateful day.

Having regard to that experience, with the second tranche there was still an increase the next day but it was 5 per cent, rising to 22 per cent a year later. In the third and final tranche, the shares rose by just 5 per cent the next day and were still just 5 per cent higher a year later, so the pricing was much closer to the right level and the taxpayer was saved a very large sum. That is not surprising as the offer price in the new tranches could be judged against an existing traded price of shares from the original tranche. Therefore, this amendment proposes that in the event of the sale of Royal Mail by means of an IPO or general sale of shares, the sale should be phased in tranches, with no more than 30 per cent being sold before 31 July 2012 and no other shares being disposed of before 31 July 2013.

3.45 pm

In conclusion, it is now plain as a pikestaff that the Government will remove all guarantees of universal service obligations in order to sell off Royal Mail at a high price. Secondly, if we miss the opportunity to amend this Bill, there will be no robust interbusiness agreement for the throughput of Post Office Counters-that links this part of the Bill with the next part; some people do not seem to comprehend that relationship-with

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all the devastating effects that that will have on thousands of post offices and their customers in towns and villages through closures that will in effect be forced on them. It is not a case of the Government holding a smoking gun, but that is in effect what will happen, as we shall discuss later today. I beg to move.

Baroness Turner of Camden: My Lords, I rise to support my noble friend's amendment. As he rightly says, the new clause that he is presenting to the House would set a restriction on the sale of shares in an initial public offering to 30 per cent of the value of an RM company within the first year of the clause coming into force. The text of the Bill places no constraints at all on what the Secretary of State may do. It is true that he has to report to Parliament, but that is after the decision has been taken. No constraints at all are placed on what he may or may not do. That is unfortunate because we are talking about what is after all a major public institution, and it is very important to ensure that it is not underpriced. It is important to avoid a scandal whereby a valuable part of our national infrastructure is underpriced. My noble friend has set this out in detail. The new clause would be an important addition to the Bill. We need to ensure that some constraints are put on what the Secretary of State may do when, and if, the Bill eventually becomes law.

Lord Young of Norwood Green: My Lords, I support the amendment in the name of my noble friend Lord Lea of Crondall. It provides for the disposal of shares to take place in tranches or batches, rather than all at once. The Government have not set a clear timetable for the sale, 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 postal competitor, which may raise competition issues. The Government have not explained whether they would sell the whole company at once, with all the risks of selling cheaply, or whether they would be prepared to sell in tranches.

There is a huge amount of evidence, of which we have heard some details from my noble friend Lord Lea, that when privatisations have taken place, the value for which the businesses were sold was too low. That has been most clearly demonstrated when a general sale of shares has taken place and the shares traded. It is easy to see what price they traded at and how that compared with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that shares should have been sold at a higher price. The taxpayer has lost out and someone has made a successful profit as a result.

A number of examples were given by my noble friend Lord Lea. I should also mention other sales. The sale of Associated British Ports was 35 times oversubscribed and the share price rose by 23 per cent on the first day of trading. Amersham International sold for £71 million and 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,



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That is what we should be concerned about. The report recommended considering sales in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a number of cases. For example, in the case of National Power, the share price rose by 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. There was a similar situation during the sale of Powergen, whose shares rose by only 3 per cent in the second-tranche offer.

The amendment proposes that shares representing no more than 30 per cent of the value of the business can be transferred in the first year after the Act comes into force. I hope that the Minister can give us a reasonable assurance that serious consideration will be given to the danger of a sale that does not take place in tranches, and that the Government will be prepared to address this issue. I look forward to her response.

Lord Borrie: My Lords, I apologise for not rising quickly enough for my noble friend on the Front Bench to notice that I wished to speak. I do so now because my noble friend Lord Lea of Crondall made a practical, reasonable and strong case for his amendment. We are not at this stage of the Bill discussing or arguing about whether there should be a sale of Royal Mail. We are discussing the practicalities of such as sale. We were all around in some way or another during the 1980s and 1990s, and there is no doubt that when industries were privatised, they were often sold off under value. That has been well recognised after the event, if it was not adequately recognised as being likely before the event.

The practical purposes of the amendment are to ensure that we have an initial public offering, an IPO, of the shares, and that they will be offered in tranches. My noble friend is not rigidly proposing any particular dates or percentages, but in any amendment he tables he must put forward something that is reasonably clear. If an improvement can be made on that, there is no doubt that he would be willing to accept it. However, he wants, and we all should want, a practical procedure for ensuring that the public does not get an undervalue. There is to be a sale. Let the public have a good return on that sale, and that is what the amendment is all about.

Lord Razzall: I stand by the point that I made in Committee: in the current climate, it would be extremely unlikely that there would be an IPO for the Royal Mail.

The noble Lord, Lord Lea of Crondall, demonstrates another reason why that is highly unlikely. The fundamental difference between this and the privatisations to which he and his colleagues referred in the 1980s and 1990s is an ideological belief on behalf of the then Conservative Government that those industries were better held not by the taxpayer but by public shareholders. In those circumstances, there was clearly an interest in creating an aftermarket, so that as many individual shareholders-in the case of BT, it was a huge number of individual shareholders-should have an incentive to buy shares and then make a profit. The reason why that would not apply in this case is that the fundamental

4 May 2011 : Column 467

reason for the transaction would be to get resources into the Royal Mail. In those circumstances, the Government would not have an interest in creating the sort of aftermarket that the noble Lord, Lord Lea, fears. The significant interest of the Government would be to maximise the financial return for the Royal Mail, because the whole purpose of this is to get investment into Royal Mail, not to provide a windfall for shareholders.

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, Amendment 1 would restrict the number of shares that can be sold in an initial public offering-an IPO-to 30 per cent of the value of shares, and imposes a time limit for the sale of one year from the new clause coming into force.

First, the Government believe that Royal Mail needs an injection of private sector capital to meet its needs in a fast-changing postal market. Unlike the previous Government, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. The Government's objective in disposing of shares in Royal Mail is to secure the future of the company and to secure the best value for the taxpayer. To achieve that, the Government must have flexibility on when to sell shares and how much should be sold.

The noble Lord, Lord Lea, is concerned that previous privatisations have resulted in the taxpayer losing out through undervaluation; the noble Baroness, Lady Turner, spoke in support of his concerns. Noble Lords have a great deal of knowledge of previous privatisations; it is one of the great assets of your Lordships' House. I cannot answer for why they were done as they were, or what were the objectives of those privatisations. I am absolutely clear that our intention will be to secure the best deal for the company and the taxpayer consistent with our objectives. We will ensure that whatever form private sector investment takes in this instance, it will be with those objectives in mind. I thank the noble Lord, Lord Razzall, for his clarifying statement on that.

As I said in Committee, the Bill would allow the sale of a minority of shares in Royal Mail, and a sale by means of an IPO, if either or both were decided to be the best route to achieve our objectives. We do not, however, believe that there should be a time limit on the sale. The Government must have the flexibility to choose the right time to dispose of shares to ensure that we can get the best result for Royal Mail and the taxpayer.

The noble Lords, Lord Lea, Lord Young and Lord Borrie, also asked how Royal Mail will be valued. If I may, I will come back to those issues when we discuss Amendment 3, which directly addresses that point. Arbitrary deadlines in legislation would mean that the process might be rushed through, which is not the best way to conduct what would be a significant commercial transaction. I do not believe, therefore, that Amendment 1 would be in the interests of either Royal Mail or the taxpayer, and I would therefore hope that, following my explanation, the noble Lord will feel able to withdraw his amendment.



4 May 2011 : Column 468

Lord Lea of Crondall: I thank the noble Baroness for her courteous reply. I am obviously very pleased to have heard the three contributions from these Benches but I want to pick up on the point made by the noble Lord, Lord Razzall.

Of course, nothing is exactly the same as it was 20 or 30 years ago but it remains the case that the only way that the Government can get a very high price is to say that there will be no universal service obligation. I do not know whether the noble Lord, Lord Razzall, and others would generally agree with that, but clearly the less you guarantee a universal service obligation, the more you can get, whether through an initial public offering, Deutsche Post or anything else. Furthermore, we are still waiting to see the guarantees on the inter-business agreement.

The public interest-that is, the public in cities, towns and villages-is at risk, as is, by the way, the workers, and if I say "by the way, the workers", noble Lords will know where I am coming from. Later in our debates on the Bill we may hear something more specific and concrete from the noble Baroness in terms of commitments on the universal service obligation or the inter-business agreement. That is the context in which we are talking. As regards arbitrary deadlines, I am not the first person to mention dates with regard to the Bill. Indeed, it is self-evident that you have to mesh what we are talking about today with all the other dates that are flying around.

I do not think that noble Lords should be denied the opportunity to express their opinion on this question and I therefore wish to test the feeling of the House.

4.02 pm

Division on Amendment 1

Contents 155; Not-Contents 227.

Amendment 1 disagreed.


Division No. 1


CONTENTS

Ahmed, L.
Allan of Hallam, L.
Anderson of Swansea, L.
Archer of Sandwell, L.
Armstrong of Hill Top, B.
Bakewell, B.
Barnett, L.
Bassam of Brighton, L. [Teller]
Beecham, L.
Berkeley, L.
Bilston, L.
Blood, B.
Borrie, L.
Bragg, L.
Brooke of Alverthorpe, L.
Campbell-Savours, L.
Carter of Coles, L.
Christopher, L.
Clancarty, E.
Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Corbett of Castle Vale, L.
Corston, B.
Crawley, B.
Davies of Coity, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Drake, B.
Dubs, L.
Eames, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Evans of Watford, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gilbert, L.
Glasman, L.
Golding, B.
Gordon of Strathblane, L.
Grantchester, L.


4 May 2011 : Column 469

Grenfell, L.
Grocott, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Henig, B.
Hilton of Eggardon, B.
Hollins, B.
Hollis of Heigham, B.
Howarth of Newport, L.
Howells of St Davids, B.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Hutton of Furness, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Judd, L.
Kennedy of Southwark, L.
King of Bow, B.
King of West Bromwich, L.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Layard, L.
Lea of Crondall, L.
Lister of Burtersett, B.
Lofthouse of Pontefract, L.
Low of Dalston, L.
McAvoy, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Meacher, B.
Mitchell, L.
Morgan, L.
Morgan of Drefelin, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Moser, L.
O'Neill of Clackmannan, L.
Patel of Blackburn, L.
Paul, L.
Pendry, L.
Peston, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Puttnam, L.
Quirk, L.
Radice, L.
Ramsay of Cartvale, B.
Rees of Ludlow, L.
Rendell of Babergh, B.
Richard, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Sherlock, B.
Smith of Basildon, B.
Smith of Finsbury, L.
Snape, L.
Soley, L.
Stern, B.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Temple-Morris, L.
Thornton, B.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Wall of New Barnet, B.
Warner, L.
Waverley, V.
Wedderburn of Charlton, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Young of Norwood Green, L.

NOT CONTENTS

Aberdare, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Anelay of St Johns, B. [Teller]
Arran, E.
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Barker, B.
Benjamin, B.
Berridge, B.
Best, L.
Bilimoria, L.
Blencathra, L.
Blyth of Rowington, L.
Bonham-Carter of Yarnbury, B.
Boothroyd, B.
Boswell of Aynho, L.
Bowness, L.
Boyce, L.
Bradshaw, L.
Bridgeman, V.
Brinton, B.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Butler-Sloss, B.
Byford, B.
Campbell of Alloway, L.
Campbell of Surbiton, B.
Cathcart, E.
Clement-Jones, L.
Cobbold, L.
Colwyn, L.
Condon, L.
Cope of Berkeley, L.
Cormack, L.
Courtown, E.


4 May 2011 : Column 470

Craig of Radley, L.
Craigavon, V.
Crickhowell, L.
De Mauley, L. [Teller]
Dear, L.
Deech, B.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
D'Souza, B.
Dundee, E.
Dykes, L.
Eccles, V.
Eden of Winton, L.
Elton, L.
Emerton, B.
Empey, L.
Falkland, V.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Fellowes of West Stafford, L.
Ferrers, E.
Finlay of Llandaff, B.
Flight, L.
Fookes, B.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freud, L.
Fritchie, B.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
Glendonbrook, L.
Gold, L.
Goodlad, L.
Greengross, B.
Grey-Thompson, B.
Griffiths of Fforestfach, L.
Hameed, L.
Hamwee, B.
Hanham, B.
Hannay of Chiswick, L.
Harris of Richmond, B.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hodgson of Astley Abbotts, L.
Home, E.
Hooper, B.
Howarth of Breckland, B.
Howe, E.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Hurd of Westwell, L.
Hussein-Ece, B.
James of Blackheath, L.
Jay of Ewelme, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Cheltenham, L.
Jopling, L.
King of Bridgwater, L.
Kirkham, L.
Knight of Collingtree, B.
Kramer, B.
Laird, L.
Laming, L.
Lee of Trafford, L.
Lexden, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Listowel, E.
Liverpool, E.
Loomba, L.
Lucas, L.
Luke, L.
Lyell, L.
McCluskey, L.
MacGregor of Pulham Market, L.
McNally, L.
Maginnis of Drumglass, L.
Mancroft, L.
Maples, L.
Mar, C.
Mar and Kellie, E.
Marks of Henley-on-Thames, L.
Marland, L.
Marlesford, L.
Mawhinney, L.
Mawson, L.
Mayhew of Twysden, L.
Miller of Hendon, B.
Montgomery of Alamein, V.
Morris of Bolton, B.
Murphy, B.
Naseby, L.
Neuberger, B.
Neville-Jones, B.
Newby, L.
Newton of Braintree, L.
Northbrook, L.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
O'Neill of Bengarve, B.
Oppenheim-Barnes, B.
Palmer, L.
Palmer of Childs Hill, L.
Parminter, B.
Perry of Southwark, B.
Phillips of Sudbury, L.
Prashar, B.
Ramsbotham, L.
Rawlings, B.
Razzall, L.
Reay, L.
Rennard, L.
Renton of Mount Harry, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rogan, L.
Rowe-Beddoe, L.
Ryder of Wensum, L.
St John of Bletso, L.
Saltoun of Abernethy, Ly.
Scott of Needham Market, B.
Seccombe, B.
Selsdon, L.
Shackleton of Belgravia, B.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Shipley, L.
Shrewsbury, E.
Skelmersdale, L.
Slim, V.
Smith of Clifton, L.
Spicer, L.
Stair, E.
Stedman-Scott, B.
Steel of Aikwood, L.
Stewartby, L.
Stowell of Beeston, B.
Strathclyde, L.
Sutherland of Houndwood, L.
Taverne, L.


4 May 2011 : Column 471

Taylor of Holbeach, L.
Tebbit, L.
Tenby, V.
Teverson, L.
Thomas of Gresford, L.
Tonge, B.
Tope, L.
Tordoff, L.
Trefgarne, L.
True, L.
Trumpington, B.
Tugendhat, L.
Tyler of Enfield, B.
Ullswater, V.
Verma, B.
Waddington, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Walpole, L.
Walton of Detchant, L.
Warnock, B.
Wasserman, L.
Wei, L.
Wheatcroft, B.
Wilcox, B.
Williams of Crosby, B.
Williamson of Horton, L.
Wilson of Tillyorn, L.
Young of Hornsey, B.
Younger of Leckie, V.
4.16 pm

Amendment 2

Moved by Lord Young of Norwood Green

2: Before Clause 2, insert the following new Clause-

"Royal Mail companies to be publicly owned

(1) Each Royal Mail company must at all times be publicly owned.

(2) Accordingly-

(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: My Lords, in rising to move this amendment I cannot help reflecting that last Friday the vast majority of the nation was enthralled by the marriage of Prince William to Kate Middleton, now the Duke and Duchess of Cambridge. Even those who have doubts about royalty as an institution could not help but wish the young couple well. One of the ways in which the nation celebrated the wedding was through a series of special stamps featuring the royal couple during their engagement, and now I understand that stamps are to be issued featuring the wedding itself. What a fitting way to celebrate this royal occasion, through commemorative stamps issued by Royal Mail-and I stress Royal Mail. It is royal because it was founded by the monarch more than 350 years ago; opened to the public during the reign of Charles I, it has operated as a public service ever since. The Bill before us marks a momentous and historic change-it is an iconic Bill.

In Clause 1 the Government have made it clear that they propose to sell off 100 per cent of Royal Mail, albeit with up to 10 per cent of shares held by employees. The Royal Mail Group has an annual revenue of some £9 billion. Royal Mail itself has an annual turnover of some £6.5 billion and employs more than 155,000 staff. That is impressive. However, this privatisation represents something more: the sale of one of the nation's oldest and most cherished enterprises.

The Royal Mail is a great public institution that has a fine history in the development of the culture, social cohesion and economic strength of this nation, and that still today provides a vital public service. We should not underestimate the importance of a trusted,

4 May 2011 : Column 472

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. It was an early information superhighway-a social network, in fact, ahead of its time.

As for the modern day, Richard Hooper described Royal Mail and the service it provides as,

that binds communities together. I think that he was absolutely right. Many Members of this House have praised the work of Royal Mail and the social value of the country's 11,900 local post offices, but let us also remember that despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, Royal Mail still delivers some 70 million letters a day to the 28 million homes and businesses of the United Kingdom. The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard. I am sure that the whole House appreciates that regardless of whether they support the move.

Referring to the Postal Services Bill in 2009, the noble Lord, Lord Hunt, said that all those on the Front Benches were in favour of it. Indeed they were. However, 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, which meant that it must be in overall public ownership.

The Postal Services Act 2000, still in force today, permits joint ventures between Royal Mail and private companies. Though the 2009 Bill envisaged a minority private-sector partner, majority ownership would remain within the public sector. Neither the 2000 Act nor the 2009 Bill permitted 100 per cent privatisation, which the Bill before us today proposes. The amendment that we have tabled reinserts the original intent of the 2009 Bill that each Royal Mail company should remain in overall public ownership, with the majority of the company in public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time, and indeed the Liberal Democrats, supported that proposition. At the time, there was broad consensus that Royal Mail should remain in overall public ownership, with the possibility of a joint venture or a minority private sector partner but, I repeat, not 100 per cent privatisation of Royal Mail.

We might find a clue in the 2010 general election manifestos of the two parties that came together to form the coalition Government. If you searched in the Conservative or Liberal Democrat manifestos of 2010 for the privatisation proposals in the Postal Services Bill, you would search in vain. Even the coalition agreement speaks cryptically of introducing private capital into Royal Mail, but does not say that that would mean 100 per cent privatisation. There was no Green Paper or White Paper to pave the way for this Bill, but our debates on Royal Mail have been usefully

4 May 2011 : Column 473

informed by two reports produced by Richard Hooper's panel in May and December 2008 and by him, sitting alone this time, being asked by the current Government 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 volume. Other operators taking advantage of liberalisation and of what are now regarded as generous terms for access to Royal Mail networks have been taking 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 and deliver their customers' mail into the Royal Mail system for final delivery. The pace of technological change continues apace through e-mail, web-based advertising, text messaging, mobile phones and all the other means 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. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have been recounted.

There was therefore a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper's report entitled Modernise or Decline recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in the structure of Royal Mail: the injection of private capital and the involvement of private sector management. However, he rejected full privatisation, declaring:

"This option would only be appropriate and feasible if modernisation had been completed".

He concluded:

"In short, we believe that partnership is the only approach which can deliver Royal Mail's ... universal service".

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. There was agreement that regulatory oversight should be by Ofcom dealing with the wider world of communications rather than by a body restricted to the postal sector only. There was consensus that access pricing needed to be addressed, which is still a live issue.

Richard Hooper's 2010 report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change, given the changes that had already taken place. It states that:

"The specific need for corporate experience is reduced today".

He praised the progress that had been made by Royal Mail's management and by the CWU in adopting a ground-breaking modernisation agreement, which is proceeding and has done significantly well.

The chief executive of Royal Mail, Moya Greene, giving evidence to the Public Bill Committee in another place on 9 November, 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

4 May 2011 : Column 474

amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs"-

hand-held personal digital assistants to help with tracking and tracing postal items-

Hooper maintained his stance on those issues, but he came up with a different recommendation on the future of Royal Mail in proposing a 100 per cent sale. There are a number of elements in this Bill that we would broadly support, including employee share ownership. The possible mutualisation of the post office network deserves positive examination. We agree with the recommendation of Sir Richard Hooper, this Government and others that the historic pension fund deficit must be dealt with. We agree that regulation should move to Ofcom, but we fundamentally disagree with the 100 per cent privatisation of Royal Mail.

Although Richard Hooper recommended the 100 per cent sale of Royal Mail in his 2010 report, he seemed less sure in giving oral evidence recently. On 11 November 2010 he said:

"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 Committee, 11/11/10; col. 108.]

We probably endorse that view, but it is an interesting shift from that previous rather firm statement.

The debate over whether to privatise Royal Mail is about what kind of postal service the public want. We all want a strong, universal, six-deliveries-a-week, one-price-goes-anywhere service and a network of post offices at the heart of our communities. The universal postal service is a public service of vital infrastructure that supports the entire UK economy. Though the postal market might be changing, it remains central to businesses in the UK.

A survey by the Federation of Small Businesses conducted by ICM found that 84 per cent of small businesses use Royal Mail to despatch parcels and express items; 88 per cent of small businesses send post every day; and 59 per cent deliver goods and services by mail. Clearly it is a vital part of our business community. If we are to deliver on growth in those local communities and encourage small businesses and entrepreneurial activity, the Post Office will be at the heart of that success. There are many similarities between the Bill that we proposed in 2009 and the Bill before us today, but there are also glaring differences. Moving from overall public ownership to 100 per cent privatisation of Royal Mail makes a massive difference. All that has been cast aside by the Government.

Our Bill was a proposal for partnership. This Bill is a proposal for privatisation. We were in favour of employee shares, but in a different context. It is interesting that the majority of incumbent postal operators in western economies remain publicly owned. The United States, Canada, Australia, France, Italy, Spain, Switzerland, Ireland, Finland, Israel, Japan and Norway have all

4 May 2011 : Column 475

retained fully publicly owned postal services, so this is a big and fundamental change. Some would say that it is a bit of a leap in the dark.

Richard Hooper's underlying point, which I do not fundamentally contest, is that additional access to capital is necessary, and that capital might well need to be private capital. However, that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government members need to justify and validate that stance.

Royal Mail already has a substantial modernisation programme that is worth some £2 billion. It has reached an agreement with the workforce to implement modernisation, which everyone giving evidence to the Bill Committee in another place confirmed was an important landmark agreement and, as I have said, is making substantial and significant progress. Royal Mail's modernisation programme is fully funded and expects to make normal profit levels by the end of the programme in 2012-13. Furthermore, it will benefit from the Government's proposed action on pensions and hopefully from changes to regulation, which will provide a more substantial buffer during the current difficult economic climate.

We also need to look at the consequences of 100 per cent privatisation. It is at the heart of our concerns about the future of the universal postal service and the future of the nation's post office network. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business that is burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of the universal service. Noble Lords might recall that Pieter Kunz, the managing director of TNT, said that the universal service obligation was,

Clause 30 sets out the terms of the universal postal service obligation, which include the requirement to collect and deliver mail six days a week at one price anywhere in the country. The USO has other elements, including packet delivery, letter and packet collection, affordable and uniform tariffs, registered and insured items, legislative petitions and addresses. It also includes, as we agreed during the course of the last Bill, services for the blind and partially sighted. We know from the contributions of the noble Lord, Lord Low, how much they are valued, but this Bill, particularly in Clause 33, proceeds to provide for changes to the level of the universal service. Later we will look at the ways in which this Bill might deliberately or inadvertently open the door to the diminution of the universal service.

4.30 pm

Ministers have helpfully pointed out that the review that Ofcom will be obliged to conduct within 18 months is a market review rather than a review of the universal service itself. I am sure that the House would appreciate an elaboration of what limits will apply to that market review. However, it is clear that Ofcom may initiate, or be required by the Secretary of State to conduct, a review of the universal service obligation under

4 May 2011 : Column 476

Clause 33. This could begin at any time-18, 12 or even six months after the Bill becomes law. After that, the Secretary of State could by an order subject to the affirmative procedure instigate a reduction in the universal service. Ministers protest that they have no intention of reducing it, and I have no reason to doubt their good intentions, but if the Bill itself permits such a diminution, a future Minister might decide to use it to that effect. We will propose amendments that would give effect to the Minister's stated wish to maintain the universal service at its current level.

My point here is that the move to 100 per cent privatisation magnifies these concerns for the future. There are, of course, Members of this House who can trace their family tree back 350 years, but very few companies can do so. Royal Mail is the honourable exception. It is because of the move to 100 per cent privatisation that Part 4 has been drawn up to deal with potential bankruptcy and the administration of Royal Mail, something that was unthinkable under the 2009 Bill-and if anyone believes that it is an entirely remote possibility, I simply draw attention to the fact that the privatised Railtrack found its way into administration.

What is more, in following the relentless logic of insecurity, the Bill provides for Ofcom to strip Royal Mail of its position as the universal service provider and give it to any other private company. The Bill could commence this process after three years. We are relieved that the Government have seen sense and decided at least to make that impossible for 10 years.

The third major threat posed by 100 per cent privatisation is the threat to the national post office network. The elephant in the room is that nothing in this Bill will require a privatised Royal Mail to utilise the post office network to the same extent as now, and let us remember that Royal Mail generates a significant one-third of post office business. This Bill will sever the link between Royal Mail and post offices in a way that has never happened before in our history. Indeed, the National Federation of Sub-Postmasters has stated that we would be the only country in the world to separate completely its post office network from its primary mail service. That is a huge risk, especially to the future of the post office network.

We know that the Government do not wish to see the demise of the post office network, and the subsidy will continue until at least 2014. Post Office Ltd is under an obligation to have 11,500 outlets open in that year, but Ministers have admitted they cannot ultimately stop the closure of sub-post offices if sub-postmasters do not see a viable business or cannot sell it on when they retire. The fact is that if a privatised Royal Mail, or a different company charged by Ofcom with meeting the universal service, were to pull the plug, probably after 2015, many local post offices would be in severe difficulty.

We have approached this Bill in a constructive way. We have sought to strengthen the safeguards of the universal service and to make regulation fairer. We have argued the case for greater public accountability and have pressed for guarantees on the future of the post office network. We strongly support modernisation and we are not opposed to the injection of private capital, but we feel obliged, as we consider the initial

4 May 2011 : Column 477

clauses of this Bill, to point out the significant difference of opinion on the fundamental question of overall majority ownership of Royal Mail and the risks that come with 100 per cent privatisation. I beg to move.

Lord Jenkin of Roding: My Lords, it was interesting to hear how the opposition Front Bench justifies the amendment. The noble Lord, Lord Young of Norwood Green, has not disappointed us. It took him 18 minutes to do it, but he has done it and he has made the case that he said. However, I think he is wrong and I shall explain briefly why.

During the debate on the previous amendment there was a question about what the objective was, for instance, of the privatisation of British Telecom, which I mentioned briefly at Second Reading because I was the Secretary of State who published the White Paper and put the Bill before Parliament. The objective there was absolutely clear: the chairman of British Telecom, Sir George Jefferson, came to me early on after I had become the industry's Secretary and said, "We are not going to be able to develop this business without access to a great deal more capital investment"-and he mentioned very large figures indeed. I had previously been the Chief Secretary to the Treasury and I said, "You do not think you are going to get it from the Treasury, do you?". He said, "We need it". I said, "The only way you are going to get it is for 51 per cent, at least, of shares in the BT company to be in the private sector". He was quickly persuaded that that was an overwhelming argument for privatisation and we moved ahead from that.

It is exactly the same with Royal Mail-it needs capital for investment. I have discussed this with Moya Greene, the chief executive of Royal Mail, and she is very clear that we cannot develop this business unless we have a greater introduction of new capital. She is very clear, too, that this has got to come from the private sector. The amendment requires that a Royal Mail company shall at all times be in the public sector. I do not know whether the noble Lord, Lord Young, recognises that, if it is, it cannot then borrow without the borrowing going on to the public sector borrowing requirement-and that, in the present circumstances, would be totally impossible. British Telecom, by becoming 51 per cent privately owned in its initial stages, was immediately able to go to the market and borrow money without having to bother the Treasury at all. For that reason, the majority of shares being in the private sector was an integral part of the process of getting new capital into British Telecom.

Exactly the same applies to Royal Mail. If the majority of Royal Mail is going to remain in the public sector, as the amendment requires, then the Government can say farewell to any suggestion that they will be able to raise substantial capital sums from the market. It will be difficult enough to sell the company anyway, but to require that a majority of shares should remain in the public sector is a complete nonsense. I listened carefully to what the noble Lord, Lord Young, said. He marshalled his arguments, as he always does, with considerable skill but they were totally unconvincing. If he decides to call a Division on the amendment, I hope my noble friend will advise the House that we should vote against it.



4 May 2011 : Column 478

Baroness Wilcox: My Lords, Amendment 2 seeks to keep the 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. As I said earlier in response to Amendment 1, the difference between the position of this Government and the previous Government is that we do not believe it is necessary for the Government to retain overall ownership of Royal Mail. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the universal postal service, and that is what we are committed to doing.

The noble Lord, Lord Young, questioned the Government's mandate for the Bill. The Liberal Democrat manifesto was explicit about the need for private sector investment and employee shares. The coalition agreement was explicit that:

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

The Bill does exactly what we said we would do. There are several reasons why we should not seek to retain Royal Mail in public ownership. I covered these at length in Committee but, to summarise: first, the Government cannot provide capital fast enough and any funding we provide has to be cleared by the EU under state aid rules. My noble friend Lord Jenkin of Roding spoke most eloquently from his past experience in support of that. Secondly, 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.

The noble Lord, Lord Young, asked about the provision to amend the minimum requirements of the USO in Clause 33. Again, I will come to those issues when we discuss his Amendments 65 and 66. I ask the noble Lord to withdraw his amendment.

Lord Young of Norwood Green: My Lords, I listened carefully to what the noble Lord, Lord Jenkin, said. I remember that occasion well, given my interests at the time and the continuing interest which I declared on a previous occasion. As I said, we do not seek to oppose the injection of private capital. Interestingly, there was almost unanimous support for the 2009 Bill, which applied the same formula that I applied to the House today. I hear the points made by the Minister on private sector investment but it is not quite true that it said "100 per cent privatisation" in either the coalition agreement or Liberal Democrat manifesto; I noticed that those were not the words that she used. I stick by my original assertion that this is new territory. It is an important and fundamental decision and one on which we should test the opinion of the House.

4.43 pm

Division on Amendment 2

Contents 165; Not-Contents 218.

Amendment 2 disagreed.


Division No. 2


CONTENTS

Adams of Craigielea, B.
Ahmed, L.
Anderson of Swansea, L.
Archer of Sandwell, L.


4 May 2011 : Column 479

Armstrong of Hill Top, B.
Bakewell, B.
Barnett, L.
Bassam of Brighton, L. [Teller]
Beecham, L.
Berkeley, L.
Bhattacharyya, L.
Billingham, B.
Bilston, L.
Blood, B.
Boateng, L.
Boothroyd, B.
Bragg, L.
Brooke of Alverthorpe, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Carter of Coles, L.
Christopher, L.
Clancarty, E.
Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Corbett of Castle Vale, L.
Corston, B.
Crawley, B.
Cunningham of Felling, L.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Drake, B.
D'Souza, B.
Dubs, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Watford, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gilbert, L.
Glasman, L.
Golding, B.
Grantchester, L.
Grenfell, L.
Grey-Thompson, B.
Grocott, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Henig, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Newport, L.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Judd, L.
Kennedy of Southwark, L.
King of Bow, B.
King of West Bromwich, L.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Layard, L.
Lea of Crondall, L.
Liddell of Coatdyke, B.
Lister of Burtersett, B.
Lofthouse of Pontefract, L.
McAvoy, L.
McConnell of Glenscorrodale, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
McKenzie of Luton, L.
Mar, C.
Martin of Springburn, L.
Massey of Darwen, B.
Mitchell, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Myners, L.
O'Neill of Clackmannan, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pendry, L.
Peston, L.
Phillips of Sudbury, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prashar, B.
Prescott, L.
Prosser, B.
Puttnam, L.
Radice, L.
Ramsay of Cartvale, B.
Rees of Ludlow, L.
Reid of Cardowan, L.
Rendell of Babergh, B.
Richard, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Finsbury, L.
Snape, L.
Soley, L.
Stern, B.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Temple-Morris, L.
Thornton, B.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Wall of New Barnet, B.
Warner, L.
Watson of Invergowrie, L.
Waverley, V.


4 May 2011 : Column 480

Wedderburn of Charlton, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Williams of Elvel, L.
Young of Hornsey, B.
Young of Norwood Green, L.

NOT CONTENTS

Aberdare, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allenby of Megiddo, V.
Anelay of St Johns, B. [Teller]
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Baker of Dorking, L.
Barker, B.
Benjamin, B.
Berridge, B.
Bilimoria, L.
Blencathra, L.
Bonham-Carter of Yarnbury, B.
Boswell of Aynho, L.
Bowness, L.
Bradshaw, L.
Bridgeman, V.
Brinton, B.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Byford, B.
Campbell of Alloway, L.
Cathcart, E.
Clement-Jones, L.
Cobbold, L.
Colwyn, L.
Condon, L.
Cope of Berkeley, L.
Cormack, L.
Courtown, E.
Craigavon, V.
Crathorne, L.
Crickhowell, L.
De Mauley, L. [Teller]
Deech, B.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dykes, L.
Eccles, V.
Eden of Winton, L.
Elton, L.
Empey, L.
Erroll, E.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Fellowes of West Stafford, L.
Ferrers, E.
Fink, L.
Flight, L.
Fookes, B.
Fowler, L.
Framlingham, L.
Freeman, L.
Freud, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
Glendonbrook, L.
Gold, L.
Goodlad, L.
Green of Hurstpierpoint, L.
Griffiths of Fforestfach, L.
Hameed, L.
Hamwee, B.
Hanham, B.
Hannay of Chiswick, L.
Harris of Richmond, B.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts, L.
Home, E.
Hooper, B.
Howarth of Breckland, B.
Howe, E.
Howe of Aberavon, L.
Hunt of Wirral, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jay of Ewelme, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Cheltenham, L.
Jopling, L.
King of Bridgwater, L.
Kirkham, L.
Knight of Collingtree, B.
Kramer, B.
Laming, L.
Lamont of Lerwick, L.
Lee of Trafford, L.
Lexden, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Listowel, E.
Loomba, L.
Lucas, L.
Luce, L.
Luke, L.
Lyell, L.
McCluskey, L.
MacGregor of Pulham Market, L.
Maclennan of Rogart, L.
McNally, L.
Maginnis of Drumglass, L.
Mancroft, L.
Maples, L.
Mar and Kellie, E.
Marks of Henley-on-Thames, L.
Marland, L.
Marlesford, L.
Masham of Ilton, B.
Mawhinney, L.
Mayhew of Twysden, L.
Meacher, B.
Miller of Hendon, B.
Morris of Bolton, B.
Murphy, B.
Naseby, L.
Neuberger, B.
Neville-Jones, B.


4 May 2011 : Column 481

Newby, L.
Newlove, B.
Newton of Braintree, L.
Northbrook, L.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
O'Neill of Bengarve, B.
Oppenheim-Barnes, B.
Palmer of Childs Hill, L.
Pannick, L.
Parminter, B.
Perry of Southwark, B.
Ramsbotham, L.
Rawlings, B.
Razzall, L.
Reay, L.
Rennard, L.
Renton of Mount Harry, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rogan, L.
Ryder of Wensum, L.
St John of Bletso, L.
St John of Fawsley, L.
Saltoun of Abernethy, Ly.
Sassoon, L.
Seccombe, B.
Selborne, E.
Selsdon, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shrewsbury, E.
Skelmersdale, L.
Slim, V.
Smith of Clifton, L.
Spicer, L.
Stair, E.
Stedman-Scott, B.
Steel of Aikwood, L.
Stewartby, L.
Stirrup, L.
Stowell of Beeston, B.
Strathclyde, L.
Sutherland of Houndwood, L.
Taylor of Holbeach, L.
Tenby, V.
Teverson, L.
Thomas of Gresford, L.
Thomas of Swynnerton, L.
Thomas of Winchester, B.
Tonge, B.
Tope, L.
Tordoff, L.
Trefgarne, L.
True, L.
Trumpington, B.
Tugendhat, L.
Tyler of Enfield, B.
Ullswater, V.
Vallance of Tummel, L.
Verma, B.
Waddington, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Walpole, L.
Walton of Detchant, L.
Wasserman, L.
Wei, L.
Wheatcroft, B.
Wilcox, B.
Williams of Crosby, B.
Williamson of Horton, L.
Willis of Knaresborough, L.
Wilson of Tillyorn, L.
Younger of Leckie, V.
4.56 pm

Clause 2 : Report on decision to dispose of shares in a Royal Mail company etc

Amendment 3

Moved by Lord Young of Norwood Green

3: Clause 2, page 1, line 15, at end insert-

"( ) Before making a decision referred to in subsection (1), the Secretary of State shall lay before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, and shall make available to the Public Accounts Committee of the House of Commons an independent overall valuation of the business."

Lord Young of Norwood Green: My Lords, before I get on to this amendment, one problem with quoting when you have the author of the report in the Room is the danger of being corrected. I feel that I owe an apology to Richard Hooper, who said to me that he studiously avoided mentioning 100 per cent privatisation in his more recent report, for which error I humbly apologise. I wanted to put the record straight-before I see him in court.

The ability of Governments to value a utility accurately at the point of its privatisation is mixed. The first two large privatisations of the 1980s, British Gas and British Telecom, saw the share values of those businesses

4 May 2011 : Column 482

rise quickly following privatisation. That was of course the objective then; privatisation had to achieve legitimacy and the Government of the time was about creating a shareholder democracy. However, our economic needs now dictate that the Government cannot be so generous towards shareholders if privatisation goes ahead in the form of a share sale. They should set a share price for Royal Mail that properly reflects its valuation. As the noble Lord, Lord Lea, said in Committee-he reiterated this view in today's debate-the public have on many occasions not got a particularly good deal out of privatisations.

Ministers have been coy about the value of Royal Mail. Estimates have ranged from £700 million to £7 billion but the managers and employees who stand to gain 10 per cent of the value of the business will be particularly keen to know whether the upper or lower ends of the estimates are correct. They will want to know that the Government have undertaken a forensic and accurate valuation of the business prior to putting it up for sale. In Committee, my noble friend Lord Stevenson made a strong case for Parliament to receive a report on the valuation of Royal Mail. We believe that it is wrong to ask Parliament to give approval for the disposal of Royal Mail while denying it the powers to scrutinise the effectiveness with which the Executive go about their tasks in this regard.

Amendment 3 seeks an independent valuation of Royal Mail to be made available to the Public Accounts Committee prior to any sale of the business. Such a valuation can be received and scrutinised by that committee in full commercial confidence. The PAC and other committees regularly receive restricted or confidential briefing. Parliament has a long tradition of receiving evidence in confidence. If necessary, the PAC could call the Minister to give evidence in camera but any parliamentary body tasked with ensuring good governance in this area would want to be reassured that an effective valuation of the business has taken place. That would include an assessment of its assets and liabilities, along with the proposed regulatory regime and how that would impact on its future prospects.

The coalition Government make a strong case for transparency in government. We are able to access limitless information about government and local government spending. Freedom of information laws and parliamentary questions and debates are all there to oil the wheels of our democracy. As another great historic public institution sadly shrugs off the blanket of public ownership, it is only right that the people who once owned it are allowed to know how the Government have come to their conclusions of the value of that business.

5 pm

There is support for this from across the political spectrum. The TaxPayers' Alliance and the Communication Workers Union-two unlikely political bedfellows-support the need for an independent valuation. The noble Baroness, Lady Kramer, said in Committee:

"I agree that ... when public entities have been sold ... 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"-



4 May 2011 : Column 483

and a profitable one at that-

Those are wise words.

Some or all of Royal Mail may be passed on to shareholders. When that happens, in many respects the accountability for running that business will pass from the Minister's hands. However, until we reach that point, the Minister remains accountable to Parliament for what he does in respect of Royal Mail. This share disposal and the complex processes that lead up to it fall firmly within that remit of accountability. It would be wrong for Parliament to have to force the hand of the Minister on this matter at a later date. Accountability post sale is no accountability at all. Once the sale has taken place, if the Minister has made a mistake it will be nigh on impossible to rectify. By providing Parliament with an independent valuation in advance of the sale, we can deal with any issues that might arise at the appropriate time. I beg to move.

Baroness Wilcox: My Lords, Amendments 3 and 13 seek to place additional reporting requirements on the Secretary of State, while Amendment 5 would introduce additional parliamentary procedures before there can be a disposal of shares in a Royal Mail company.

Amendment 3 would require the Secretary of State to report to Parliament how the value will be assessed, and to make available to the Public Accounts Committee of the other place an independent valuation of the business. As we debated in Committee, there are incredible sensitivities about revealing the estimated value of Royal Mail shares prior to a commercial negotiation. We would be giving the whip hand to the potential investor. This does not make commercial sense and would greatly reduce the potential for getting the best value for the taxpayer from any future transaction. The Government will work with their advisers to consider the potential value of Royal Mail so that they can properly assess bids from buyers. Before a sale, the accounting officer for the Department for Business would need to scrutinise any future transaction to ensure that it represented value for money for the taxpayer.

I reiterate what I said in Committee: we would expect that, after a sale had completed, both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is completely in line with the reporting requirements for previous sales of government assets.

Amendment 5 would require that the Secretary of State made an Oral Statement and that an order was laid that was subject to the affirmative resolution procedure before there could be a relevant disposal of shares in a Royal Mail company. As I said in Committee, further parliamentary procedures should not be required before there can be a disposal of shares in Royal Mail. The disposal of shares, as set out in the Bill, has been debated fully in both the other place and this House. The Opposition's Postal Services Bill of 2009 did not include a requirement for additional parliamentary

4 May 2011 : Column 484

procedures before there could be a disposal of shares. As they said at the time, such a requirement would cause uncertainty for potential investors. That uncertainty is the same whether we are selling a majority or a minority stake. I said in Committee that I fully agreed that an Oral Statement might be appropriate for the first sale of shares. We will discuss with the House authorities the appropriate format for such reports at the relevant times.

I turn to the last amendment in this group, Amendment 13. The purpose of Clause 2 is to ensure that Parliament has transparency about the way in which shares or share rights in Royal Mail that reduce the proportion owned by the Crown are disposed of. The amendment would require reporting on any subsequent disposal of shares by the original purchaser. I do not consider that such a reporting requirement is appropriate. I know of no precedent for this type of "open-ended" reporting in any previous privatisation. The Companies Act requires that a private company has to disclose a full list of its shareholders on incorporation and then with the first annual return to Companies House following incorporation. It then has to provide such a list every third annual return after a full list has been provided. Information on ownership of Royal Mail will, therefore, continue to be publicly available.

As with discussions we had in Committee on other aspects of the Bill, I see no reason to impose more onerous reporting requirements on a privately owned Royal Mail than those that are currently imposed on privately owned companies. Clause 2 does, of course, continue to apply to any disposals of shares by the Secretary of State himself after the initial sale. The crucial issue, however, is not ownership but securing the future of Royal Mail, and in doing so securing the future of the universal postal service. Regardless of who owns the company, it would still be the universal postal service provider in the United Kingdom. It will still need to comply with any conditions issued by Ofcom in the universal postal service order to be made under Clause 29 of the Bill. The purchaser would, therefore, be fully aware of the obligations that the company it is purchasing must deliver.

The initial conditions in the universal postal service order will follow those currently set out in the licence issued to Royal Mail by Postcomm. Condition 12(5) of that licence requires Royal Mail to notify the regulator if there is any change of control in the company. It will be for Ofcom to decide whether to impose similar conditions in the future as part of delivering its overall duty to secure the future of the universal service. With these reassurances, I ask the noble Lord to withdraw the amendment.

Lord Young of Norwood Green: My Lords, I have listened carefully to what the Minister said and I welcome her assurance regarding the Oral Statement. That represents some progress, but we still feel that she has not fully addressed our concerns about the presale valuation and the ability to report to the Public Accounts Committee in confidence. We will reflect on the situation, but in the light of what has been said I beg leave to withdraw the amendment.

Amendment 3 withdrawn.



4 May 2011 : Column 485

Amendment 4

Moved by Lord Stevenson of Balmacara

4: Clause 2, page 2, line 1, leave out subsection (2) and insert-

"( ) 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 of employees within Royal Mail or its successors will sit on the board of the new body."

Lord Stevenson of Balmacara: My Lords, we discussed the issue of a representative of employees serving on the board of Royal Mail in Committee and it received support from across the Chamber. The noble Lord, Lord Cotter, from the Liberal Democrat Back Benches, drew on his experience as managing director of a manufacturing company. He said on 8 March at col. 1553 of Hansard:

"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".

My noble friend Lord Myners pointed out that the shareholders in a privatised Royal Mail,

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, because postal staff invest their livelihoods and pensions in the company. We will suggest later under Clause 3 that they should be able to invest in trust-owned employee shareholdings in the company. Surely it is not too much to ask that they have a seat at the board table for their chosen representatives.

What do we see when we look across the channel? Employee representation is commonplace. In fact, some of the companies that are held up as shining examples of privatised postal services have employee representatives on their boards. The Minister for Postal Services, in Committee in another place, stated:

"I have never been opposed to the idea of employee representatives being on boards, or on board committees".-[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 325.]

We invite the Minister here to go one step further and make provision in the Bill for this good idea. Failure to introduce representation of postal workers would risk missing a real opportunity to create trust and confidence for the long term. I beg to move.

The Deputy Speaker (Lord Skelmersdale): If the amendment is agreed, I cannot call Amendment 5, by reason of pre-emption.

Baroness Wall of New Barnet: My Lords, I shall speak to my Amendment 11 in the group. Like other amendments, it requires the Secretary of State to lay a

4 May 2011 : Column 486

report before Parliament detailing his decision to dispose of shares in a Royal Mail company. This must be done within a reasonable and practicable time, as we have discussed. My amendment seeks to strengthen the reporting requirements of Clause 2 and to make sure that Parliament has the opportunity to scrutinise the training and skills agenda of the newly privatised Royal Mail.

Royal Mail has a strong and well established culture of training and development, supported by comprehensive agreements with its union, the CWU. The business is committed to modern engineering apprenticeships through the 2010 business transformation agreement that underpins the current process of modernisation. An illustration of how that takes place and the level of that commitment is that last year the company was involved with 300 core apprentices and 200 advanced apprentices. That is a record about which the Minister will share my enthusiasm.

The Government have been vocal, today and previously, in their support for apprenticeships. In the Budget they announced 50,000 new apprenticeship places at a cost of £180 million. This support should ensure no erosion of current positions and opportunities in Royal Mail. I am sure that the noble Baroness would agree that it would be very disappointing if any of the positive and evolving culture of training in Royal Mail disappeared or diminished.

The Government's vision is hugely important and has led Royal Mail in many ways. The impact of privatisation and the short-term cost-cutting agenda makes some people worried that the private shareholder may not bring the commitment that I mentioned. Royal Mail's strong culture in training and skills development is underpinned by a range of robust agreements between the union and the business to ensure effective training for new starters, ongoing training and up-skilling, in line with the introduction of new equipment.

A culture of training and development at Royal Mail is crucial, as it is in many organisations. The noble Baroness will know that most businesses benefit and progress with a culture that encourages apprenticeships and skills improvement at all levels. My worry, and the worry of many people, is that short-term cost savings may need to be made by a reduction in investment in training and development. That would be detrimental to the future success of the business.

Royal Mail and its union, the CWU, have worked hard to introduce a comprehensive training framework that is available to all employees. When employees join the business, they are supported by an induction programme through which they are guided over a 13-week period. This involves induction days, and on-the-job and off-the-job training. This leads to a culture of encouraging further advancement into apprenticeships. Royal Mail embraces and continues many other schemes.

I want to make the quick point that, having grabbed hold of the culture that my Government and now this Government are pursuing and have pursued in apprenticeships, we must at all costs ensure that any sell-off of Royal Mail will in no way be detrimental to the business. A number of young people in Royal Mail are benefiting from that. The whole status of the business is dependent on that skill level being supported.

4 May 2011 : Column 487

I hope that the noble Baroness will assure me and the House that she is well and truly committed to that and that it will be enshrined in how Royal Mail moves forward.

5.15 pm

Lord Clarke of Hampstead: I shall speak to Amendment 36 standing in my name, dealing with trade union recognition. Again, I declare my interest: 65 years ago this month, I joined the then UPW and I am still a member in the retired members' section.

My amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that existing rights of workforce recognition are maintained. That is very important, and I very much hope that the Government will see the benefit of the amendment.

I shall make two main points. First, 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, when the Fawcett Association became the Union of Post Office Workers, founded in Finsbury Circus. Long before the existence of recognition rights, postal workers came to agreement with the employers and, behind them, the Government, on the existence of workforce trade unions. This has shaped employment relations in the industry. Both workforce and management have seen the benefit of organised bargaining and representation. We are now looking at a Royal Mail and its staff who have a mature attitude to industrial relations. Both parties know of each other's interests and concerns and are usually able to reach accommodation.

Despite the media caricatures, the reality is that organised industrial relations have created ways of working which make the industry productive and safe. Every day, many thousands of hurdles, small and large, are overcome by timely recourse to the recognised framework of industrial relations in the industry. Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in a right and fair way.

The media are interested only when those relationships break down. They turn an ordinary little conflict in the sorting office or a pillar box into a massive federal case, as the Americans would say. They love that. The media will attack unions just for the sake of it. The reality is that countless efforts by management and union reps ensure that, every day, smooth running of the industry takes place.

The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disposal. Recognition has been won not just 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 into an organised workforce.

As an aside from the comments that I have drafted, I have one recollection. After the Second World War, when the Control Commission of Germany was setting up Germany's new industry on the basis of industrial democracy, it was the British TUC and the UPW, as it then was, who took part in helping that country rebuild itself. As we know, that led to worker participation on boards, which was the subject of the lead amendment.



4 May 2011 : Column 488

Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner may be in doubt, the Secretary of State should be obliged to dispel that doubt, as a new owner must learn to live with a unionised workforce.

My second point is that bargaining is a natural part of recognition and relationships. It may be argued that under TUPE the transfer of the workforce will carry across existing terms and conditions. That is true but it is insufficient. It is an organised workforce that will address any new employer with the expectation of its bargaining rights remaining intact too. This is not just about what is currently earned or currently an entitlement, such as annual leave, allowances and so on; it is also about the right of the workforce to address its future conditions with the confidence that it can resolve its problems through negotiations. The past couple of years have shown that after a long period of unhappiness these changes can be negotiated.

Any new employer that buys into Royal Mail on the assumption that it will simply impose its vision, priorities or methods on the workforce will be in for a rude awakening. I do not say that with any sense of a threat, but people who have given their lives to the industry will not just roll over while their conditions are reduced and made much more difficult. The workforce expects any changes to be negotiated, and that is why the amendment is necessary. It is not a conflict-ridden process; on the contrary, the only cost in the vast majority of agreements has been the time and patience of management and union reps. Such rights are valued greatly by the workforce.

Postal workers know that the industry is constantly changing. As a postal worker, I have had to recognise that. Being in attendance at this funeral of our great Royal Mail over the next few hours does not give me any happiness but I have had to come to terms with it. The vast majority of workers have understood that it is constantly changing and that working arrangements and conditions also change, but that is on the understanding that postal workers will buy into the changes by helping to shape them.

We expect the Secretary of State to be entirely clear with a new owner of Royal Mail that recognition of the workforce and its union involves a negotiated and bargained framework for employment relations in the workplace. This fact of life will have to be addressed. It is best that we make this clear in the legislation to any potential investor or buyer of the industry, and carrying this amendment would do exactly that.

Earl Attlee: My Lords, this group of amendments covers matters relating to the employees of Royal Mail, without whom of course there would not be a Royal Mail. These matters are employee representation on the board, union recognition and employee training.

I thank the noble Lords, Lord Kennedy, Lord Clarke and Lord Christopher, for tabling Amendments 4 and 10 relating to employee representation on the board of Royal Mail or any new successor body. I say this because, when we debated similar amendments tabled

4 May 2011 : Column 489

in Committee, it was clear to me that your Lordships had concerns about my response. These amendments give me the welcome opportunity to provide more clarity about the Government's position on this issue.

First, I should make it clear that the Government do not have any fundamental or philosophical objections to employee representation on the boards of companies, but we do believe that the make-up of any company's board should remain the responsibility of the company and its shareholders.

As many of your Lordships said in Committee and again today, employees will have a pivotal role in the future of Royal Mail, and there needs to be continual and meaningful interaction between the workforce and the management. In the CWU and Unite, the employees of Royal Mail have strong, active and effective unions. The business transformation agreement reached in March 2010 laid the groundwork for a new relationship between the management and the CWU. This was a ground-breaking achievement and, as recognised by the noble Baroness, we do not want to see the improvements set back.

I have looked back at whether the Postal Services Bill 2009 contained provisions requiring an employee representative on the board. It did not. In fact, the previous Government rejected such amendments to that Bill. The noble Baroness, Lady Vadera, said in Committee debates on the Bill that the Government would have to be persuaded that direct worker representation on the board,

She said that the Government,

While this Government have no objections to an employee representative being on the board of Royal Mail, we do not see that it should be a requirement laid down in statute. I do not believe that there is any precedent for this in any previous privatisation. Under the Bill, the employees will have a shareholding of at least 10 per cent. Whether there should be an employee representative on the board is a matter for the company and its shareholders, not something to be laid down in statute.

The noble Lord, Lord Stevenson, referred to the clear example given in Committee by the noble Lord, Lord Myners, of why large shareholders should not have a representative on a company's board. The noble Lord, Lord Myners, told us that it is quite customary for a body of investors which has a large shareholding, as will the employees under our Bill, to seek board representation. He gave the example of News International and the BSkyB board, but the lesson to draw from this example is that it was a decision taken by the company and was a circumstance of the size of News International's shareholding. It was not a mandatory requirement. I do not see why Royal Mail should be treated differently from other companies in this regard.

The noble Lord, Lord Stevenson, spoke also about the experience in Europe. There is a mixed picture there. Some member states have mandatory requirements for employee representation on boards in certain

4 May 2011 : Column 490

circumstances, but the majority do not. The Government consider that placing such a requirement on Royal Mail, when it is not a requirement on companies generally in the UK, is not appropriate. The wider issue of employee representation on boards is best discussed in the context of company law and not this Bill.

Amendment 11 would place a duty on the Secretary of State to report on Royal Mail's intended policies on training, apprenticeships and skills once a decision has been taken to dispose of shares in Royal Mail. I thank the noble Baroness, Lady Wall of New Barnet, for raising these vital issues. I know that she brings considerable experience to this debate through her work on the sector skills council and her contribution to the All-Party Group on Further Education, Skills and Lifelong Learning. The Government absolutely recognise the importance of training and believe that skills are key to economic competitiveness. Apprenticeships are our preferred vocational route for people of all ages to gain the skills they need to succeed and progress in their careers and for employers to build a workforce with the motivation and expertise they need to compete globally. We are committed not only to increasing the number and range of apprenticeships on offer but also to improving their quality. We want apprenticeships to become the gold standard for workplace training. We are determined to take real action to improve and expand the apprenticeships programme and create more apprenticeship opportunities than ever before.

It has been recognised throughout the debates on this Bill that the workforce is vital to the success of Royal Mail. The company is introducing new working practices and new technology as it adapts to developments in the postal market. It is clear that, to make the modernisation of the company a success, it will need to ensure that its workforce is properly trained and has the right skills, as pointed out by the noble Baroness.

Royal Mail recognises the importance of training, which is reflected throughout the business transformation agreement between the Royal Mail and the CWU. I have no reason to believe that the new owners of Royal Mail would take a different approach given the importance of the workforce. Why would it? The noble Baroness suggested that cost pressures might be an issue, but surely a business of this size must look to the long term and not take short-term decisions. If it did, it could adversely affect its own share price, sending entirely the wrong signals to the market.

5.30 pm

I turn specifically to the amendment. It is highly unlikely that the Secretary of State would be in a position to say anything about the future policies of Royal Mail on training, apprenticeships and skills at the time of the report required by Clause 2. The report is triggered by a decision to undertake a sale of shares and must state the kind of disposal that will be undertaken, together with the timescale. The new owners would, therefore, not be known at the time of the report. What we do know, however, is that thanks to the Bill, Royal Mail's employees will be shareholders in the company and will have a minimum of 10 per cent of the shareholding as part of the privatisation process. Obviously, the employee shareholders will have an interest in future training in the company. Therefore, it

4 May 2011 : Column 491

is not necessary to include in the Bill the reporting requirement proposed by the amendment. No such reporting requirements exist in relation to other companies and there is no compelling reason to single out Royal Mail. I hope that, after the general comments I have made about the Government's policy on apprenticeships, the noble Baroness will not press her amendment.

Amendment 36, in the name of the noble Lord, Lord Clarke, places a duty on the Secretary of State to ensure that employees' existing rights of recognition are maintained. We debated in Committee a very similar amendment in the name of the noble Lord, Lord Young. As I said then, the Government welcome the positive changes in the relationship between Royal Mail's management and the Communication Workers Union since the signing of the business transformation agreement in March last year. We encourage both sides to continue to work together in this improved way.

The representation of employees at Royal Mail by the Communication Workers Union and Unite is recognised in voluntary agreements between the unions and the company's management. Such voluntary agreements are common, and it is good practice for the employer to take full account of the views of employees when deciding to recognise, or continue to recognise, a union. The fact that union membership remains relatively high in Royal Mail suggests that most staff support union recognition, and I have no reason to believe that any new owner would seek to change any such agreements-provided, of course, that that is what employees want. As I said in Committee, I do not believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements at Royal Mail. This is primarily a matter for the employer and the trade unions concerned.

The noble Lord, Lord Clarke, reminded us that we helped to set up the German trade union system at the end of the Second World War. It was pointed out to me during my training at Swiss Industries what a successful way this was to set up trade unions. This piece of history has been a positive lesson to me all my working life. Trade unionism can be very positive.

The amendments in this group have given us the opportunity to discuss important issues relating to employees of Royal Mail. For the reasons that I have given, it is not necessary to include in the Bill the provisions set out in the amendments. I therefore ask the noble Baroness and noble Lords not to press their amendments.

Lord Stevenson of Balmacara: I thank the Minister for his comments. I agree that these debates have allowed us to touch on important issues that affect not just Royal Mail but the wider world of work and how Governments should relate to that. I also thank my noble friends Lady Wall and Lord Clarke for their contributions. The Minister responded positively to their speeches, but unfortunately has not been sufficiently moved to incorporate the amendments in the Bill. Perhaps we can come back to them at a later stage.

The issue raised in Amendment 4 is whether, at the point of transition from its present position as a wholly owned subsidiary of government, Royal Mail should be imbued with many attributes that will allow

4 May 2011 : Column 492

it to sustain and carry on its work. As I understand it, the Minister is very positive about the need for employees to be engaged at all levels in the work of companies, but believes that the responsibility for that must lie with the company and not the Government. We on this side of the House believe that the change from a wholly owned subsidiary to a 100 per cent private company changes the nature of the debate.

History is with us all the time in this debate. It is important to bear in mind that Royal Mail is a public service. It is a company in all but practical separation from the Government, but it is also a public service, and I think that those who work in it believe that that is what drives their motivation and allows them to engage with the public interest more widely than any ordinary employee would do. It also allows them to have high levels of staff retention and works to ensure that their productivity is high. These are public servants in the true sense of the phrase and the change that the Government wish to make-to sell them and their company to a private sector operation-will of course make that completely different. They may or may not be right; time will tell. However, I think that the Government are missing a great opportunity by not building into the new arrangements something of the past and the history of the public service which it represents.

I believe, and I think that many noble Lords on this side would support the view, that company law has perhaps not kept up with the needs of the modern employment world. It does not play well to the idea to which the Minister referred in terms of how companies operate in relation to staff, and it is perhaps not the right place to look for better employee engagement on this. The Government have the option of leaving a mark on the new, privatised Royal Mail. They could do so by a simple amendment-accepting what we have said in this amendment-but they have not done so. The warm words which we have heard are encouraging to those who will read them but they do not lead us to permanent change. I therefore think that we should test the opinion of the House.

5.37 pm

Division on Amendment 4

Contents 175; Not-Contents 198.

Amendment 4 disagreed.


Division No. 3


CONTENTS

Adams of Craigielea, B.
Ahmed, L.
Allenby of Megiddo, V.
Anderson of Swansea, L.
Andrews, B.
Archer of Sandwell, L.
Armstrong of Hill Top, B.
Bakewell, B.
Barnett, L.
Bassam of Brighton, L. [Teller]
Beecham, L.
Berkeley, L.
Bhattacharyya, L.
Bilston, L.
Blood, B.
Borrie, L.
Bragg, L.
Brooke of Alverthorpe, L.
Brooks of Tremorfa, L.
Browne of Ladyton, L.
Campbell of Surbiton, B.
Campbell-Savours, L.
Carter of Coles, L.
Christopher, L.
Clancarty, E.


4 May 2011 : Column 493

Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Corbett of Castle Vale, L.
Corston, B.
Crawley, B.
Cunningham of Felling, L.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Donoughue, L.
Drake, B.
D'Souza, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Watford, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Freyberg, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Glasman, L.
Golding, B.
Gould of Potternewton, B.
Grantchester, L.
Grenfell, L.
Grey-Thompson, B.
Grocott, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Henig, B.
Hilton of Eggardon, B.
Hollins, B.
Hollis of Heigham, B.
Howarth of Newport, L.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Judd, L.
Kennedy of Southwark, L.
Kestenbaum, L.
King of Bow, B.
King of West Bromwich, L.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Laming, L.
Lea of Crondall, L.
Liddle, L.
Lister of Burtersett, B.
Listowel, E.
Lofthouse of Pontefract, L.
Low of Dalston, L.
McAvoy, L.
McCluskey, L.
McConnell of Glenscorrodale, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Mawson, L.
Meacher, B.
Mitchell, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Yardley, B.
Myners, L.
O'Neill of Clackmannan, L.
Parekh, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pendry, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Puttnam, L.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Reid of Cardowan, L.
Rendell of Babergh, B.
Richard, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Gilmorehill, B.
Snape, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Temple-Morris, L.
Tenby, V.
Thornton, B.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Wall of New Barnet, B.
Warner, L.
Watson of Invergowrie, L.
Wedderburn of Charlton, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Williams of Elvel, L.
Williamson of Horton, L.
Wills, L.
Young of Hornsey, B.
Young of Norwood Green, L.


4 May 2011 : Column 494


NOT CONTENTS

Aberdare, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Anelay of St Johns, B. [Teller]
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Ballyedmond, L.
Barker, B.
Benjamin, B.
Berridge, B.
Bilimoria, L.
Blencathra, L.
Bonham-Carter of Yarnbury, B.
Boothroyd, B.
Boswell of Aynho, L.
Bowness, L.
Boyce, L.
Bradshaw, L.
Bridgeman, V.
Brinton, B.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Byford, B.
Carlile of Berriew, L.
Cathcart, E.
Colwyn, L.
Cope of Berkeley, L.
Cormack, L.
Courtown, E.
Craig of Radley, L.
Craigavon, V.
Crathorne, L.
Crickhowell, L.
De Mauley, L. [Teller]
Deech, B.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dundee, E.
Dykes, L.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Empey, L.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Fellowes, L.
Fellowes of West Stafford, L.
Ferrers, E.
Fink, L.
Flight, L.
Fookes, B.
Fowler, L.
Framlingham, L.
Freeman, L.
Freud, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
Glendonbrook, L.
Gold, L.
Goodlad, L.
Greenway, L.
Griffiths of Fforestfach, L.
Hameed, L.
Hamwee, B.
Hanham, B.
Hannay of Chiswick, L.
Harris of Richmond, B.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts, L.
Home, E.
Hooper, B.
Howe, E.
Howe of Aberavon, L.
Hunt of Wirral, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jay of Ewelme, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Cheltenham, L.
Jopling, L.
King of Bridgwater, L.
Kirkham, L.
Knight of Collingtree, B.
Lamont of Lerwick, L.
Lee of Trafford, L.
Lexden, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Loomba, L.
Lothian, M.
Lucas, L.
Luke, L.
Lyell, L.
MacGregor of Pulham Market, L.
Maclennan of Rogart, L.
McNally, L.
Maginnis of Drumglass, L.
Mancroft, L.
Maples, L.
Marks of Henley-on-Thames, L.
Marland, L.
Marlesford, L.
Mawhinney, L.
Mayhew of Twysden, L.
Naseby, L.
Neuberger, B.
Neville-Jones, B.
Newby, L.
Newlove, B.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
Oppenheim-Barnes, B.
Palmer, L.
Palmer of Childs Hill, L.
Pannick, L.
Parminter, B.
Phillips of Sudbury, L.
Ramsbotham, L.
Rawlings, B.
Razzall, L.
Reay, L.
Rennard, L.
Ribeiro, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rogan, L.


4 May 2011 : Column 495

Ryder of Wensum, L.
St John of Fawsley, L.
Saltoun of Abernethy, Ly.
Sassoon, L.
Seccombe, B.
Selsdon, L.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shrewsbury, E.
Skelmersdale, L.
Slim, V.
Smith of Clifton, L.
Smith of Kelvin, L.
Spicer, L.
Stair, E.
Stedman-Scott, B.
Steel of Aikwood, L.
Stewartby, L.
Stowell of Beeston, B.
Strathclyde, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tonge, B.
Tope, L.
Tordoff, L.
Trefgarne, L.
True, L.
Trumpington, B.
Tugendhat, L.
Tyler of Enfield, B.
Ullswater, V.
Vallance of Tummel, L.
Verma, B.
Waddington, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Walpole, L.
Wasserman, L.
Wei, L.
Wheatcroft, B.
Wilcox, B.
Williams of Crosby, B.
Willis of Knaresborough, L.
Wilson of Tillyorn, L.
Younger of Leckie, V.
5.48 pm

Amendment 5 not moved.

Amendment 6

Moved by Baroness Wilcox

6: Clause 2, page 2, line 5, at end insert ", and

(c) the objective intended to be achieved by the undertaking of it.

(3A) The report must-

(a) contain information about the expected commercial relationship, after the proposed disposal, between the Royal Mail company in question and any Post Office company, and

(b) if the proposed disposal would result in shares or share rights being owned by or on behalf of an employee share scheme for the first time, give details of the scheme.

In paragraph (b) "employee share scheme" has the meaning given by section 3."

Baroness Wilcox: Amendment 6 is intended to increase transparency in relation to any future disposal of shares in Royal Mail, as well as to provide further information on the commercial relationship between Royal Mail and Post Office Ltd. At the same time I will speak to Amendment 7 in the name of the noble Lord, Lord Whitty, and Amendment 8 in the names of the noble Lords, Lord Clarke and Lord Christopher. I hope that Amendment 6 will ease the concerns expressed by many noble Lords in Committee and provide further reassurance that the Secretary of State will be open and transparent about decisions taken on the future of these two businesses. The amendment relates to the report which will be laid by the Secretary of State before Parliament once he has made the decision to undertake a disposal of shares in Royal Mail.

Amendment 6 serves three purposes. First, it clarifies that the Clause 2 report must state the objective intended to be achieved by the share disposal. Secondly, it will ensure that when shares are proposed to be put into the employee share scheme for the first time, the report must include details of the scheme. Thirdly, it

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will ensure that the report includes information on the ongoing relationship between Royal Mail and Post Office Ltd after any disposal.

Perhaps I may take these in turn. In terms of objectives, I said in Committee that the Government's overarching objectives from the disposal of shares is to secure the future of the universal service and to ensure that we negotiate the best deal for both Royal Mail and the taxpayer. However, I appreciate that Parliament will want confirmation of these objectives once a decision has been taken to dispose of shares. This amendment will ensure that this is included in the report to Parliament made under Clause 2.

Moving on to employee shares, we understand the concerns of both Houses about the sort of scheme that will be put in place for employees, and I would remind noble Lords that the Bill already makes the strongest statutory commitment to an employee share scheme of any major privatisation. This commitment has been strengthened further by the Minister for Employment Relations, Consumer and Postal Affairs, who put on record in the other place that shares would be put into the scheme at the same time as the first disposal of shares. This commitment was repeated by my noble friend Lord De Mauley in Committee in this House. It is too early to commit to a particular scheme structure as this will depend on factors that are as yet undecided, such as the type of sale, but we have considered how we can provide additional comfort to both Houses. As the amendment sets out, we propose to place a specific duty on the Secretary of State to report on the details of the employee share scheme when shares are proposed to be put into it for the first time.

Finally, the amendment also ensures that the report will include details of the ongoing commercial relationship between Royal Mail and Post Office Ltd after the proposed disposal of shares in Royal Mail. We hope that this amendment will address the concerns expressed by several noble Lords in Committee, in particular the noble Lord, Lord Whitty, and his colleagues on the Front Bench. It will also work in tandem with Amendment 50, which we will discuss later, to ensure that information on the relationship between the Post Office and Royal Mail continues to be publicised in the Post Office's annual report, as required under Clause 11.

Perhaps it will be helpful if I provide a little more detail about what we expect the reporting requirement will provide in practice. We envisage that the details published will be akin to those which a listed company might provide in relation to a material contract when issuing a prospectus offering shares to the public. This provides a fine balance between ensuring that the public-in that example, potential investors-have sufficient information and making sure that no commercially damaging information is inadvertently disclosed. In practice, the information is likely to include much of that which the noble Lord, Lord Whitty, seeks to include in Amendment 7. The contract has yet to be finalised. It does not need to be finalised until the two companies are formally separated prior to completion of a Royal Mail transaction, but negotiations are under way and we would expect a new contract to be ready to be signed by next spring.



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Noble Lords will already be aware that Royal Mail and the Post Office management have committed that the contract will be for the longest legally permissible duration. I would hope that this could be for the 10-year period that noble Lords opposite have sought, but the final duration will depend upon interlinked factors such as volume commitments or exclusivity arrangements. Since the contract has yet to be finalised, the specific details required under Amendment 7 are impractical. For example, it would most likely be impossible to provide accurate annual total contract values to the Post Office as these are likely to depend on the volume of mail and parcels handled over Post Office counters during the relevant years. That is certainly the basis of the current arrangement.

I turn now to Amendment 8, which would require the Secretary of State to include in the report that he has to make under Clause 2 a risk assessment of the proposed disposal and information on due diligence made of the purchaser, along with a comprehensive analysis of the due diligence work. As I have said before, the Government's intention is that a sale of shares will help to secure the future of Royal Mail, and this in turn will help the company to continue to provide the universal postal service. We will, of course, assess the risks and carry out appropriate due diligence as part of that process. The report in Clause 2 is required when the Secretary of State has made a decision to undertake the disposal of shares in Royal Mail, and the report must include details of the kind of disposal. The process of a disposal is unlikely to have begun and so the information set out in the amendment would not be available at the time of the report.

As I said in response to Amendment 5, we expect that after a sale had completed both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would look at the process that was conducted prior to a sale, including the risk assessments and the due diligence. This is recognised as standard parliamentary process to assess whether the Government have achieved value for money for the taxpayer. I certainly expect that process-that is, the work of the NAO and the PAC-to cover work undertaken by the Department for Business to assess the financial and other risks associated with the buyer because they can directly impact, in the longer term, the taxpayer. We do not believe that Amendment 8 reflects the nature of the reporting requirement in Clause 2, which is to report when a decision is taken to undertake a disposal-not on subsequent activities prior to a sale. We also believe that there are existing parliamentary processes in place to scrutinise risk assessments and any due diligence that has been undertaken.

With the assurances that I have given to the House about what the Secretary of State will intend to include in a Clause 2 report, I hope that the noble Lord, Lord Whitty, and the noble Lords, Lord Clarke and Lord Christopher, will feel able to withdraw their amendments at the appropriate time. I beg to move.

Amendment 7 (to Amendment 6)

Moved by Lord Whitty

7: Clause 2, line 6, after "company" insert "in relation to-



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"(i) the minimum contract length for the commercial relationship;

(ii) the details of any contractual break period that may be exercised by any party who enters into the commercial relationship;

(iii) the total value of the contract to the Post Office company for the services provided under the terms of the commercial relationship for each year that the contract runs"

Lord Whitty: My Lords, I am grateful to the noble Baroness for both tabling the amendment in her name-particularly the new subsection (3A)(a)-and for the additional information that she has given today. I am not sure, however, whether that goes far enough to meet the anxieties.

As noble Lords will be aware, the interbusiness agreement is absolutely essential for the future operation of both the Royal Mail part of the unravelled company and, particularly, for the post office network, which is my concern. It is therefore important that when the Secretary of State reports to Parliament on the basis of the procedure, the terms of the agreement between the two parts of Royal Mail are clear, understood and give a robust and sustainable basis for both parts to continue. It will also, of course, have a significant effect on the value of both parts of the set-up-the value to investors in the Royal Mail part and the value to the taxpayer and the community of the network.

The specifics in my amendment to the government amendment would require part of the report to set down the minimum contract length. I know that the Government have said that they wish it to be the maximum that is legally possible, but we have never had a proper explanation of why they feel that there is a serious legal constraint on the length of the contract. It is therefore important that, at the point at which the contract is concluded and the report comes back to Parliament, the terms of the contract are spelt out and that any legal reasons for those terms are likewise spelt out. In terms of the risk that both parts of the organisation take in their new form, there is the issue of which party and in what circumstances can break that contract.

6 pm

Some of these points have been raised with the noble Baroness's officials. Until this evening, we had had no real, clear assurance that they would all be covered. The noble Baroness's words today go some way towards that, but I was rather alarmed that she said that the report would be the equivalent of a material contract when a company sought investment. That is the wrong concept to be pursuing here. That provision is an assurance of due diligence, or whatever, to a potential investor, and that is part of what we are trying to do here. The report to Parliament is about the effect, in Parliament's view, of the proposed changes and therefore what the public interest is in those changes, both in terms of getting an official Royal Mail delivery mechanism and in maintaining a robust and sustainable network of at least the size that the Government say they are committed to. On both fronts, it will be necessary to see the details of the form of those business agreements before the House.

It is important that we continue to press the Government for more information on what will be included in the Secretary of State's report. Clearly the

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Minister tonight is not able to say that because the contract is still under negotiation. I do not expect the details to be in the legislation, but I would expect them to be in the report before Parliament. Despite the additional information which the noble Baroness has given us this evening, I do not believe that we are absolutely clear yet that there will be sufficient requirement to spell out those details in the report. I will consider later whether to press the amendment, but for the moment and for the purposes of the debate, I beg to move.

Lord Christopher: My Lords, I rise to move Amendment 8. I did not move Amendment 13 because, frankly, I was confused by the way in which the Order Paper came through, but it seems that the essential issues are the same. References have been made to the value of this company and the lack of knowledge of that value. It is certainly not BT or British Gas. The closest I can come to previous privatisation operations is British Rail, which I think at least one Conservative spokesman in the past has said might have been carried out more felicitously. It is still being heavily subsidised. As to value, the only thing I know for certain is that it is not a Glencore, which is valued at the moment at some £34 billion. There are going to be considerable problems in achieving a proper valuation of this company.

The problem with the Bill is that we do not really know what we are addressing. We do not know what the Government will do-I am not sure that the Government know that for sure. There are three options: the sale; the mutual, on which we are waiting a report from the Co-operative Society; and the prospect of an IPO. My purpose is not to divide on this but to persuade the Minister that there are still some safeguards that need to be put into the Bill. It is not good enough as it is, when we are dealing with post that is so close to the public, to sell it, wash our hands of it and leave it all to a regulator. We are here in this goldfish bowl of the House of Lords, yet outside things are happening that are bound to make people uneasy about what might happen to Royal Mail if it is sold off to A, B or C under whatever terms. I have sought in my amendment to tighten up what due diligence means, to widen it beyond finance and to look much more carefully at exactly how a buyer has conducted itself and its business history.

We all remember Ford, which bought Volvo, Jaguar and Kwik-Fit. At the end of the day, Kwik-Fit was sold to a private equity house, CVC, at the third of the price that Ford paid for it. Stagecoach bought the American company Coach USA for £1.2 billion, which almost made Stagecoach broke. Closer to present times, Southern Cross, which is the largest provider of care homes in the country-it has 31,000 homes-was owned by Blackstone, an American private equity company. It ensured massive expansion on the basis of sales and leaseback. In the valuation of Royal Mail, I understand that most if not all its sites and buildings have already been sold and are back on leaseback. Some 17.5 per cent of the shares of National Express are owned by the hedge fund Elliott. It is now actively seeking changes in the board, which has been interpreted as a move to make sure that National Express comes on the market. We need something that ensures not

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just the prima facie suitability of an initial buyer but the opportunity, if things are sold off-for example Parcelforce, which seems to be Royal Mail's one growing asset-for the Government to ensure that whatever happens is right and proper.

I mentioned the Netherlands at Second Reading. Four companies now handle the Netherlands' mail. The people of that country can expect to receive mail delivered from these four companies. There is the half-orange post, which is owned by TNT. It delivers six days a week. There is the blue post, a company called Sandd-an acronym for the "sort and delivery" postal service. It delivers two days a week. There is the yellow company, Selekt, jointly owned by Deutsche Post and DHL, which delivers twice a week. That company is interesting because it has never made a profit and is now, it hopes, going to be sold. It is run by home workers, who sort and deliver at and from their homes. The legal low limit for pay in the Netherlands is between £8 and £9 an hour, but this company is very careful to ensure that none of its workers reaches that figure and that they are kept on a monthly basis below the rate that is required by the Netherlands Government of £580 a month. They are seeking now to sell it to Sandd.

The fourth company is called half-orange, which is owned by TNT, and it calls once a week. Again, that is interesting, because there we have TNT competing with itself. Why? Because it is using not full-time post staff but casual labour. This is not something that is happening in a third world country. It simply carries the somewhat dogmatic belief that we can privatise and get competition and that it always works best. I do not think we want to risk anything like what has happened in the Netherlands happening in this country. If the Government do not make it clear in the Bill that the likes of this will not be tolerated and that that is provided for in the Bill, I will think there is something seriously wrong with the Bill-and if things go the wrong way, we will know exactly who is responsible for that.


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