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40: Clause 11, page 6, line 25, at end insert "including reporting for the UK as a whole and separately for England, Wales, Scotland and Northern Ireland against the total population residing-

"(i) within three miles of a post office outlet;

(ii) within one mile of a post office outlet;



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(iii) in urban areas within one mile of a post office outlet;

(iv) in urban deprived areas within one mile of a post office outlet;

(v) in rural areas within three miles of a post office outlet;

(vi) in rural areas within three miles of a post office outlet;

(vii) at the level of each postcode district, within six miles of a post office outlet,"

Lord Whitty: My Lords, I shall speak also to the earlier amendments that were previously grouped with this amendment, and the amendment to which my noble friend has just spoken. They deal with the criteria for access to the post office network. I very much welcome the noble Baroness's reiteration of the commitment to maintain a level of post office network and her comments on the criteria in relation to what the Post Office rather bizarrely calls "business as usual" closures, whereby a sub-postmaster gives up or the post office has to close for another reason. The criteria there are much tighter.

I am a veteran of the last stage of the previous closure programme, which was in many ways unsatisfactory and ended in anomalies. I am familiar with the territory in Vauxhall to which the noble Lord, Lord Jenkin, referred, and the effect of what happened on the other side of the river. That experience has been repeated in rural areas and in deprived suburbs up and down the country. The determination to maintain a minimum network is very welcome.

The jury is still out on the move to Post Office Local. There are significant advantages, particularly in relation to opening hours and the flexibility that that provides. Consumer Focus has heard varying reports on the first batch of Post Office Locals, and that the range of services they provide is differentiated. For example, the USO for the parcel service refers to a 20 kilogram parcel service being available in all post offices, but a lot of locals were not doing that until about this time last year, when the Post Office advised them to do so. It is still not the case that all Post Office Locals, or some other post offices, are providing that service. I am not saying that there should be an absolutely rigid range of services available under Post Office Local, but we need to know that what will happen as a result of normal retirements and closures, new post offices opening, post offices opening in host premises will provide something like the previous minimum access criteria.

The new access criteria will be a matter for the Secretary of State and for Ofcom, but the amendments would require that there be a reporting mechanism which indicates not only how good the access is, in terms of mileage in rural and urban areas, to the nearest post office but what range of services is available. In other words, there would be a matrix that would indicate the services available as well as the number of outlets. In order to be able to monitor over time the effectiveness of post office services and the accessibility to them for communities who have, over the past two rounds of closures, seen some diminution in the number of outlets and now some diminution in the range of services, we need reporting criteria roughly along the

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lines that I propose here, which are the criteria which were broadly agreed at the end of the last round of closures.

I shall not press the amendments tonight, but the Government and the regulator will need a clear reporting process which covers not only the number of outlets but the range of services provided. As others have said, that range of services needs to include some enhanced commitment across Whitehall and local government to provide a wider range of government services-and digital access to them-than currently exists. Unfortunately, over the past 15 years, we have seen a diminution of government business going through post offices. Some of that has been due to technological and behavioural change; some of it has simply been due to false economies. Post offices have missed out there. The post offices should in most communities be the front office of government. In rural communities and more deprived outer suburbs, they are the point at which the community has access to the range of state services. We need to retain that, we need to build on it and we need to know under laid-down reporting criteria how well we are doing.

Although I welcome much of what the Government are committed to in enhancing the number of services that go through post offices as well as preserving the number of post offices in the network, we need to be able to monitor that. That is what my two amendments are about, and I will be interested to hear the noble Baroness's comments. I will not press the amendment tonight, but we may need to return to it. I beg to move.

Lord Young of Norwood Green: I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.

I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister's response.

Baroness Wilcox: My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.

Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country's diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion-for 95 per cent of the

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population in each postcode district, such as BA2 or GU27, to be within six miles of a post office-applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office's compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year's Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.

It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.

Lord Razzall: He has crossed the Floor.

Baroness Wilcox: However, we believe that obliging the Post Office to report against the access criteria separately for each of England, Wales, Scotland and Northern Ireland would be of limited assistance. The previous Government recognised that too when, following a national consultation in 2007, they rejected suggestions from some that the access criteria should apply at an individual national level. This additional reporting obligation would place a significant additional administrative burden and subsequent cost on the Post Office. For example, 17 postcode districts straddle national borders, such as postal district TD15 around Berwick-upon-Tweed. For this reason, I urge the noble Lord, Lord Whitty, to consider withdrawing Amendment 40, which I think he has already agreed to do, and to reflect on what I have said.

I turn to Amendment 41, which again is in the name of the noble Lord, Lord Whitty. It relates to the services offered over Post Office counters on behalf of a universal service provider-in other words, Royal Mail. I hope that the noble Lord will be reassured by the Government's Amendment 50, which obliges the network report to contain details of the services offered by the Post Office on behalf of a universal postal service provider. The report must also contain details of the wider postal services that are available, so services that are not regulated under universal service conditions must also be covered.

I also reassure the noble Lord that new Post Office Locals all offer the full range of Royal Mail's universal service products. Some have voiced a concern that certain Post Office Locals do not offer full universal postal services-for example, through not accepting parcels weighing more than 6 kilograms. However, I reassure noble Lords that the Post Office has, through the current pilot process, now developed the Post Office Local model so that new local outlets will all accept parcels up to the full universal postal service standard of 20 kilograms.

I hope that in the light of those reassurances the noble Lord will feel happy to withdraw his amendment.

9.30 pm

Lord Whitty: My Lords, I am grateful to the noble Baroness for those reassurances. Behind them is a recognition that some reporting provisions need to be laid down and maintained.



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The main disappointment in her response was the reference to not accepting the need for separate reporting for Scotland, Wales and Northern Ireland. As we said before dinner when debating an amendment in the name of the noble Lord, Lord Rogan, the situation is somewhat different. The criteria need to be universal, but it is also important that the particular positions of Northern Ireland, Wales and Scotland must be focused on. There are some fudges at the border, but they are relatively small, and it is important that the Post Office network is seen as part of the social provision of the Government, particularly in remote rural areas, for the rural population and rural businesses. The devolved Administrations have a role in that. Therefore, it is very useful for them to have a separate reporting provision. This does not mean that the criteria should be significantly different, but it does mean that the kind of problems that meeting those criteria may create in those countries could perhaps be devolved by wider rural and social policy in those areas. I would be disappointed if the final form of reporting did not allow for separate or parallel reporting to the devolved Administrations.

Subject to that caveat, I beg leave to withdraw the amendment.

Amendment 40 withdrawn.

Amendments 41 to 45 not moved.

Amendment 46

Moved by Lord Lea of Crondall

46: Clause 11, page 6, line 28, leave out "and"

Lord Lea of Crondall: My Lords, Clause 11 provides for the annual report on the post office network. The amendment seeks to include information in the report on,

The document produced by the Department for Business, Innovation and Skills in November 2010, Securing the Post Office Network in the Digital Age, claimed success for the local pilots in the Post Office Local model. Under pilot schemes, Post Office Local branches have offered longer opening hours of up to six hours per day. Services have been restricted to core services, with what are described as more complex and time-consuming transactions being channelled through main post offices. Post Office Ltd reports that Post Office Locals are being trialled in around 60 locations across the UK. Many operate a small counter located within the premises of another business such as a supermarket. Some have replaced sub-post offices that have closed and some have been set up as new branches. The physical layout of the counter-based model has been replaced by more open-plan arrangements alongside the retail till.

The BIS report says that over the next four years, 2,000 small sub-post offices will convert to the local model, either on-site or in neighbouring premises, with what is described as a major rollout in 2014 following further piloting. It is unclear whether the rollout will be to reach the figure of 2,000 Post Office Locals-or essentials, as they are called-or whether

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this marks an intention to roll out beyond 2,000. It could be a precursor to a much wider application of the model.

The paper proposes two key strands of the network. The Government have asked POL by 2014 to have about 4,000 main post offices in towns and city centres and to convert about 2,000 sub-post offices to the local model. The 4,000 main post offices and 2,000 new locals will leave more than 5,500 branches in the current network untouched. However, the BIS paper states that, under POL's commercial strategy, the Post Office Local model will become the mainstay of the smaller post offices over time. This will mean a fundamental change to the current network.

Consumer Focus, which represents post office customers, has said that the conversion of 2,000 sub-post offices into Post Office Locals will be a major change. For millions of people, it will mean a shift from what they know and trust. The problems that people have experienced with pilot Post Office Locals-some of which are known as essentials-include benefit capping, where branches limit the amount of money that people who are collecting benefits such as pensions can withdraw in a single day. This is to prevent the branch running out of money. Other examples of problems which people have experienced with Post Office Essentials include not being able to access counters if in a wheelchair, staff with inadequate knowledge of services and a lack of privacy when carrying out transactions.

A more recent investigation by Consumer Focus, in March 2011, concluded:

"While consumers are likely to welcome the convenience and extended opening hours provided by PO Locals, without clear improvements to the in-branch experience, some consumers will be likely to perceive the shift in provision negatively ... In particular, our research has found worrying evidence of examples of cash and benefit withdrawals being capped; temporary breaks in service because there are not always trained staff on hand to serve at the counter; and the inconsistent provision of parcel services, which in many instances seems to vary from one PO Local to the next".

Just over half of customers-53 per cent-have had to use an alternative post office because their Post Office Local did not offer the product or service they wanted. Some 43 per cent of customers say that the privacy available is poor, especially for banking or financial transactions. Finally, 61 per cent of customers said that their overall experience was good, but a large percentage -38 per cent-said that it was average or poor.

The Post Office Local model clearly has the potential to impact on the terms under which sub-postmasters operate sub-post offices, and the terms and working arrangements of the staff working in them are also significant, not least the significantly increased opening hours. Those issues therefore deserve a word or two.

The changed physical working arrangements in the open-plan post offices envisaged by the pilot carry implications for the terms, safety and well-being of staff members which need to be taken fully into consideration. Some postmasters have expressed concern that they will see a major shift in their contractual terms away from secure payments to income based largely on commission. That is not just a rumour; I think it has been confirmed by the Post Office. While existing sub-postmasters may have their current income protected for a limited time, this would not last. At the

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same time the range of services on offer under the pilot is restricted to core services, meaning that customers needing to access a more time-consuming or complex transaction will need to go to the main post office. The report does not envisage restrictions being imposed on which services may be regarded as core by a local post office, and which may be dispensed with. Over time this would mean a high percentage of the population having to travel further to access the full range of post office services. I think that I am touching here on some of the points made by my noble friend Lord Whitty.

The problem is likely to be particularly acute in rural areas, where the distance to a main post office is likely to be greater. Although commercial terms between Post Office Ltd and individual sub-postmasters is confidential, it is reported that sub-postmasters converting to the essentials model are seeing a worsening in the terms of their contract and a larger reliance on commission on sales. I shall not cite the many examples from the local newspapers and so on, but Ministers could reassure sub-postmasters by stating that they will not be compelled to move to the Post Office Local model.

The sub-postmasters' fears are summarised in a survey which was commissioned by the Communication Workers Union and reported in today's newspapers. It says that up to 9,300 post offices could close as a result of the Government's sell-off. This prediction is worrying for people living in villages whose post office is the only shop that provides a vital service, particularly for those without cars. Perhaps I may read one or two bits of information from this survey; I do not think that anyone doubts the quality of the very well known company which was invited to undertake this research.

More than 90 per cent of sub-postmasters told researchers that they are very unlikely or unlikely to survive without Royal Mail business if it dries up. This clearly overlaps with all the other questions about the interservices agreement and the universal service obligation. Billy Hayes, the general secretary of the CWU, has said that it clearly demonstrates the fears of sub-postmasters about the fate of the network, which faces a greater threat than anyone previously dared believe.

John Denham, the shadow Business Secretary, has said that postal services policy is now in utter disarray. I am sure that the Minister has a brief prepared to read out on all this, and I look forward to hearing it. Then we will have to consider where this question rests before we come to Third Reading.

Lord Young of Norwood Green: My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.

On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula

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Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.

I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.

Baroness Wilcox: My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office's interest to introduce a model of contract that is not viable for sub-postmasters.

The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.

In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government's £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But

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I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.

I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.

Lord Lea of Crondall: I thank the Minister. However, the competitors of the Post Office may not do this, but they are not the Post Office. They are not what the British people understand to be the service of post offices right across the country. They do not cherry-pick like their competitors, which is why they are part of the fabric of the community. Perhaps one could agree the terms of reference of a public opinion poll whereby all the facts are on the table, as spelt out by the managing director of the Post Office, the noble Baroness and the unions. I include the national federation and George Thompson who, according to the Independent yesterday, said:

"The NFSP has made clear that a minimum 10-year inter-business agreement ... between the Post Office and Royal Mail is required if the companies are separated, both to allow the public and business to continue to access Royal Mail services at their local post office and to secure the large proportion of subpostmasters' income which comes from carrying out work on behalf of Royal Mail".

Parliament is the backstop if something goes wrong with these negotiations. I am not saying that it is a negotiation between an elephant and a mouse. But the idea that the negotiations have as much leverage on the part of the sub-postmasters as on the part of the Post Office under the plans in this Bill is rather fanciful. We will just have to consider where we are. I asked the noble Baroness whether she would comment on the interesting study which says that sub-postmasters believe that 9,000 post offices could close under the Government's plans. I should like to know what was wrong with the methodology of this study. The Government have had 48 hours to look at it. I do not know whether the noble Baroness would like to take this opportunity to say more about that.

Baroness Wilcox: Is the noble Lord, Lord Lea, speaking about the CWU's recent survey on the future of the Post Office?

Lord Lea of Crondall: I am referring to the survey conducted by an opinion research company, which was commissioned by the union.

Baroness Wilcox: I understand that the National Federation of SubPostmasters said in response to recent claims by the CWU:

"We (the NFSP) have played a pivotal role in ensuring that both companies are working well together towards securing a mutually beneficial arrangement and we are confident that a 10-year commercial deal will be achieved".

It continues:

"Scaremongering about the future without an IBA and the forced introduction of the Post Office Local model does nothing but harm to the post office network and to subpostmasters".



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Lord Lea of Crondall: I thank the noble Baroness for reading out what I have in front of me as well. I was asking whether she thinks this so-called scaremongering is actually the survey of the membership of the national federation. It is all very confusing and I do not know any more than the noble Baroness does how one reconciles these two things. But before we get to Third Reading, it is incumbent on BIS to make a more considered evaluation of this remarkable survey.

Baroness Wilcox: I will be only too happy to write to the noble Lord.

Lord Lea of Crondall: That is all that can usefully be said at this stage, and I beg leave to withdraw the amendment.

Amendment 46 withdrawn.

Amendment 47

Moved by Lord Kennedy of Southwark

47: Clause 11, page 6, line 29, at end insert ", and

( ) until delivered, the progress of developing the back office integration with credit unions"

Lord Kennedy of Southwark: My Lords, the link-up with the Post Office is one of the most exciting innovations for the credit union movement and my amendment places a requirement on the Government to report back on the progress to achieving this until such time as it has been delivered. Getting people on the lowest incomes into the habit of saving and giving them access through the Post Office network to affordable credit is something that we can all support. Would this not be the big society in action?

What we do have is some of our poorest and most vulnerable people who are unable to get affordable credit. They are either put into the hands of illegal loan sharks or into the payday loan shops with their exorbitant interest rates. The Government need to take action, and take action quickly. The noble Baroness is fully aware that I have pursued this issue with questions to her and other Ministers, as well as in debates such as this one. It is something that I feel very strongly about. It is an area for which I think there is considerable support around the House in all political groups and on the Cross Benches, but it does require the Government to take action to move it forward.

I look forward to the noble Earl's response. If he is not able to accept the amendment, can I refer him to page 11 of the House of Lords' Proceedings covering the Questions for Short Debate and my Motion on a similar subject? Any help he can give me with the Government Whips' Office in getting that Motion brought forward for debate will be much appreciated. We could then spend a little bit longer discussing these important issues and the progress being made by the Government on them. I beg to move.

Lord Young of Norwood Green: My Lords, I rise briefly to support the amendment. Each week something like 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the Post Office card account. It has been calculated that those aged under 65 who hold such an account are

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28 times more likely to be unbanked. These same people, those in receipt of state benefits and tax credits, are the most likely to use high-cost credit. That is evidence of the justification of the point being made by my noble friend Lord Kennedy about the valuable contribution that credit unions can make. The Post Office product range is such that it will not make personal loans of less than £2,000, yet evidence shows that sums of between £300 and £600 are the primary amounts sought by those using high-cost credit.

In short, the Post Office has the facilities and credit unions have the ability. Would it not be good if we could bring these two groups together to serve the public?

Earl Attlee: My Lords, since he arrived in your Lordships' House the noble Lord, Lord Kennedy, has spoken passionately about the role of credit unions, and with good reason. We all know about the activities of loan sharks. As my noble friend the Minister said in Committee, the Government place a high importance on access to affordable credit and believe that the use of credit unions should be encouraged as a means of saving and obtaining access to short-term loans.

Co-operation between Post Office Ltd and credit unions is already very strong and we support an even closer link-up between the Post Office and credit unions. We have demonstrated clear progress against this aim. The noble Lord's amendment seeks details on that progress and I hope that I can give him some reassurance today. The Department for Work and Pensions recently announced a significant package of support for the credit union sector, including funding set aside for a shared credit union banking platform, which will be subject to a feasibility study, in which the Post Office will participate fully.

The Post Office also continues to develop individual services and assistance to facilitate close working with credit unions, including a new pay-out service which allows people to collect their credit union loans at their local post office branch, and guidance to facilitate local arrangements between post offices and credit unions where both parties wish to participate. These developments build upon existing arrangements whereby many credit union current account holders can access their accounts at post offices through arrangements with the Co-operative Bank. Post Office Ltd expects that around 170,000 credit union transactions will be carried out in post office branches in this way in the coming year. Facilities are also available at post offices whereby credit unions issue customers with a payment card, which they can use to pay off the loans they have received via the electronic bill payment facilities that are available at every post office. More than 60 credit unions have established this facility.

The noble Lord, Lord Kennedy, referred to the possibility of a debate. As he will understand, I can give no assurances on that because it is a matter for the usual channels.

As my noble friend the Minister said in Committee, we recognise the worthy intention behind the amendment and I hope the noble Lord will be reassured by the good work that is already under way in these areas. We will continue to encourage co-operation between the credit unions and Post Office Ltd and to support the

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Post Office in its provision of wider financial services. However, placing this reporting requirement-and, indeed, others tabled by noble Lords-in legislation would simply increase bureaucracy, and the greater the reporting requirement imposed on the Post Office the greater the cost and, therefore, the impact on its competitiveness.

With the reassurance that I have given today, I hope the noble Lord will withdraw his amendment.

Lord Kennedy of Southwark: My Lords, I thank the noble Earl for his response; he has provided some reassurance. I shall return to this issue again but, at this stage, I beg leave to withdraw the amendment.

Amendment 47 withdrawn.

Amendments 48 and 49 not moved.

Amendment 50

Moved by Baroness Wilcox

50: Clause 11, page 6, line 29, at end insert-

"( ) In subsection (2)(b) the reference to postal services includes postal services provided pursuant to arrangements made with a person who provides a universal postal service."

Amendment 50 agreed.

Amendments 51 and 52 not moved.

Amendment 53

Moved by Baroness Wilcox

53: Clause 11, page 7, line 5, at end insert-

"( ) A Post Office company's duties under this section are enforceable in civil proceedings by the Secretary of State-

(a) for an injunction,

(b) for specific performance under section 45 of the Court of Session Act 1988, or

(c) for any other appropriate remedy or relief."

Amendment 53 agreed.

Amendment 54

Moved by Baroness Wilcox

54: After Clause 11, insert the following new Clause-

"Annual report on postal museum collection and archive

(1) A Royal Mail company must send to the Secretary of State each year a report on its activities in relation to-

(a) the British Postal Museum Collection, and

(b) the Royal Mail Archive.

(2) Before preparing the report, the company must consult any Post Office company.

(3) The Secretary of State must lay a copy of the report before Parliament.

(4) A Royal Mail company's duties under this section are enforceable in civil proceedings by the Secretary of State-

(a) for an injunction,

(b) for specific performance under section 45 of the Court of Session Act 1988, or

(c) for any other appropriate remedy or relief.

(5) This section applies irrespective of whether the British Postal Museum Collection or the Royal Mail Archive alters the name by which it is known or forms part of a wider collection or archive."



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Baroness Wilcox: My Lords, during an earlier debate on Amendment 54 the noble Lord, Lord Brooke of Sutton Mandeville, asked what was meant by a consultation with the Post Office company and I should like to respond to that point now. Amendment 54 will require Royal Mail to consult a Post Office company about its activities in relation to the proportion of the archive and museum collection for which it is responsible. I hope the noble Lord finds that helpful. I beg to move.

Lord Brooke of Sutton Mandeville: My Lords, I am most grateful for being guided on the procedures of the House and grateful to my noble friend for remembering that I raised this and providing me with the opportunity of coming to listen to her at this hour. I am still not absolutely certain that I understand what the process of consultation that she envisages will consist of, but at this late hour I would certainly not wish to press her any further than I have already.

Amendment 55 (to Amendment 54) not moved.

Amendment 54 agreed.

10 pm

Clause 17 : Division of the RMPP into different sections

Amendment 56

Moved by Baroness Drake

56: Clause 17, page 10, line 16, at end insert-

"( ) Before making an order under subsection (1)(c), the Secretary of State must obtain a certificate from the government actuary stating that in the actuary's opinion, the allocation of assets between the different sections is appropriate having regard to the liabilities and obligations of each section."

Baroness Drake: My Lords, in moving Amendment 56, I will also speak to Amendment 57.

I thank the noble Lord, Lord De Mauley, for his courteous and helpful letter that addressed several issues relating to the Royal Mail pension plan raised by the noble Viscount, Lord Eccles, my noble friend Lord Young and myself. I welcome the assurances that: the Government are developing a joint communication plan with the trustees so that members are provided with information on the benefits that will transfer to the new public service scheme ahead of that transfer; active members will receive a seamless service from the new public service scheme and the Royal Mail scheme, including the provision of combined benefits statements; benefits which transfer from the Royal Mail scheme to the new public scheme will be replicated exactly; the governance arrangements for the new public service scheme will be the subject of consultation with the trustees and members' representatives; and the Government must consult the trustees on the use of powers set out in Clause 17. I welcome that and the Minister's confirmation that I am correct in my understandings.

However, there remains a matter of continuing concern. The Bill gives the Secretary of State considerable powers to make amendments to the Royal Mail pension plan, including the smaller Royal Mail pension plan-I call it "Mark II"-that is post transfer of assets and liabilities to the new public service scheme. These

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powers include the ability to transfer assets between the Royal Mail scheme and the new public service scheme, to which accrued pension rights will be transferred, and to divide the Royal Mail scheme into different sections, to allocate assets between the different sections and to determine which company or companies is a participating employer in any given section-this in preparation for the sale, retention and restructuring of different parts of the business. I am concerned that the Bill does not allow for some balancing mechanism of protection for scheme members when the Secretary of State exercises those powers. These amendments seek to address that.

I accept that, on the setting up of the new public service scheme, the Bill limits the assets that the Secretary of State can transfer out of the Royal Mail scheme such that the ratio of assets to liabilities in the Royal Mail scheme is no worse immediately after the transfer of those assets than it was immediately before. However, the valuation of those liabilities and assets is to be done in a manner determined by the Secretary of State. There is no explicit role for the Royal Mail scheme trustees, acting on the advice of their scheme actuary, to exercise a judgment on whether the assets remaining in the Royal Mail scheme are adequate in terms of value or appropriate in terms of the types of assets retained or transferred. Similarly, under Clause 17, when the Secretary of State exercises his or her power to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections, there is again no explicit role for the trustees acting on the advice of the scheme actuary.

Amendments tabled by my noble friend Lord Young in Committee sought to address this concern by strengthening the consultation rights of the trustees and involving the Pensions Regulator in any assessment of the transfer of assets and liabilities, particularly between the new sections of the Royal Mail pension scheme. Having reflected on that debate in Committee, I recognise that the Government would probably not want to give the Pensions Regulator the power to impose any methods, assumptions or penalties on the Secretary of State when transferring assets between schemes or sections of the Royal Mail pension plan. Similarly, the Government may well be reluctant to give the Royal Mail scheme trustees a potential power of veto on the transfer of pension assets, which could impact on the sale process itself. None the less, the concern remains that the Secretary of State retains considerable powers when it comes to determining the adequacy and appropriateness of the actual assets transferred.

The issues that we are dealing with here are fundamentally actuarial, ensuring that the assets of the Royal Mail pension plan and its sections are adequate and appropriate in terms of matching assets to liabilities. If these decisions have to be justifiable as a matter of actuarial opinion and the actuary concerned cannot be the Royal Mail scheme actuary acting for the trustees, the best candidate for the job in my view is the Government's own actuary, GAD.

Amendment 56 to Clause 17 would address transfer of assets between the newly created sections of the Royal Mail scheme and Amendment 57 to Clause 21

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would address assets transferred from the Royal Mail pension scheme to the public service scheme. The amendments would require the Secretary of State to obtain a certificate from the government actuary stating that in his opinion, in the first instance, the allocation of assets between the different sections is appropriate, having regard to the liabilities and obligations of each section and, in the second instance, the selection of assets transferred and the assets remaining in the Royal Mail scheme is appropriate, having regard to the liabilities and the obligations of the Royal Mail scheme and the new public service scheme established under Clause 16. In my view, requiring such a certificate from the government actuary would provide a form of protection to the scheme, its trustees and its members when the Secretary of State exercises his powers under Clauses 17 and 21.

The Secretary of State has very wide powers to allocate assets and liabilities and materially alter the strength of an employer covenant backing any of the new sections of the Royal Mail pension plan. These must be seen in the context that, under Clause 8, the Secretary of State has powers to transfer property rights and liabilities between the holding company and other companies that are wholly owned by the Crown, which may occur prior to, and be in preparation for, sale or mutualisation. These powers in Clause 8 could be exercised so as to have the effect of materially weakening the employer covenant supporting any section of the remaining smaller Royal Mail pension plan. To give an example, the Secretary of State could create a separate section of the Royal Mail scheme for Post Office Ltd under Clause 17 and determine which assets and liabilities are allocated to it. The Secretary of State also has the power to decide which assets and property rights are held by Post Office Ltd as a company under Clause 8. When these are taken together, they are considerable powers and reinforce the need for a protection mechanism for scheme members. I believe that certification from the Government's actuary will provide, before assets and liabilities between schemes and sections are transferred, that degree of protection. I beg to move.

Lord De Mauley: My Lords, I thank the noble Baroness, Lady Drake, for giving us another opportunity to discuss the vital provisions in the Bill on the RMPP. Amendment 56 relates to the selection of assets left with individual sections of the RMPP created under Clause 17. That clause allows the Secretary of State by order to divide the RMPP into sections. The Government intend that this power will be used to create a separate section in the RMPP for Post Office Ltd. This is necessary as Post Office Ltd will be separated from Royal Mail, because it is not part of the sale under Part 1 of the Bill. Amendment 57 relates to Clause 21 and the selection of assets left with the RMPP as a whole once the deficit is transferred to the Government.

Part 2 of the Bill will allow the Government to take over the historic deficit in the Royal Mail pension plan. We intend to do this by transferring approximately £35.9 billion of liabilities and £27.5 billion of assets from the RMPP to the Government. This means that Royal Mail will be left with an appropriately sized pension plan to manage.



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We intend that only liabilities relating to the salary link-that is, real growth in salaries for active members-and ongoing pension accruals will be left with the RMPP. We estimate that the salary link portion will amount to approximately £1.5 billion of liabilities remaining with the RMPP at the point at which the Government implement the measures in Part 2. Subject to state aid clearance, we intend to fund fully the liabilities remaining with the RMPP at the point of transfer, which would mean the RMPP also retaining £1.5 billion of assets.

In dealing with both amendments, I want to provide some reassurance on the process that will be followed to transfer assets from the RMPP to the Government. Before any assets are transferred, a valuation of the RMPP will indeed be undertaken by the Government Actuary. That valuation will follow standard actuarial principles and reflect the assumptions agreed between the trustees and Royal Mail for the March 2009 triennial valuation. The output of that valuation will be an up-to-date view of the value of the assets and liabilities in the plan. As a result, there will be no benefit in value for the RMPP, or a section of it, in selecting one type of asset rather than another. As noble Lords have highlighted in their proposed amendments, however, it is important that careful consideration be given to the type of assets that are left with the RMPP and to how those assets might be allocated between the Royal Mail section and the Post Office Ltd section of the plan.

We fully recognise that the assets to be left with the RMPP, and the individual sections, should reflect the future investment strategy of the trustees, and that it should be the trustees, in consultation with the respective employers, who set that strategy, rather than the Government. Jane Newell, the chair of the RMPP trustees, stated during her evidence to the Public Bill Committee in the other place that she would look to engage with us on the selection of assets to be left with the RMPP. I assure noble Lords that officials, with advice from the Government Actuary's Department, have indeed been engaging with the trustees of the RMPP and are making good progress. Indeed, the Government are obliged under Clause 24 to consult the trustees before any orders are made under Part 2 of the Bill.

It is also important to bear in mind that the trustees would be free to sell any assets left by the Government and to change their investment strategy as they see fit. Of course, given the costs that this would involve, it is in everyone's interest that we continue to work with the trustees to reach a satisfactory agreement on this issue.

I understand that concerns have been raised-the noble Lord, Lord Young, and I have corresponded on this-that the Government may seek to make changes to the RMPP by way of the powers in Part 2, even after the pensions changes that I have described have been implemented. I am happy to make clear that the Government intend to use these powers on a one-off basis only, and have no intention of making any substantive changes to the RMPP under Clauses 17 or 18 after the implementation of the pensions solution.



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10.15 pm

Queries have also been raised over how Clause 8 might interact with the Part 2 provisions. Clause 8 provides for the reorganisation of the property rights and liabilities of Royal Mail companies. As the assets of the RMPP are held on trust for the benefit of the members of the scheme, Clause 8 would not be used in a way that would affect the allocation of assets within the RMPP. I assure your Lordships that the Government have absolutely no intention of using Clause 8 powers in a way that would weaken the employer covenant of the scheme. I hope I have sufficiently reassured noble Lords opposite that the proposed amendments are not necessary, and that they will therefore feel able to withdraw Amendment 56 and not move Amendment 57.

Baroness Drake: I thank the Minister for that detailed response. I am conscious of the lateness of the hour and that the detail of pension valuations is not everyone's cup of tea. I took from what the Minister said that the Government's actuaries will be involved in making a full assessment of the value and type of assets in relation to liabilities before any transfers are made under Clauses 17 and 21. It would be very helpful for the record to show that. That is exactly what I sought to achieve.



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I noted the assurance that the Government would not seek to deploy Clause 18 in a way that weakened the employer covenant. Wholly hypothetically, if Post Office Counters did not retain the Crown offices on its balance sheets and did not get a good settlement on the transfer of assets and liabilities, my concern is that the combined effect would not be very helpful to the members in that section of the Royal Mail scheme. However, the Minister has given assurances that that is not the Government's intention, and that they will actively seek to ensure that the application of Clause 18 does not weaken the employer covenant behind any of the sections. Those assurances are very helpful and, if the record shows them, I can withdraw my amendment.

Amendment 56 withdrawn.

Clause 21 : Restriction on power to transfer assets

Amendment 57 not moved.

Consideration on Report adjourned.

House adjourned at 10.18 pm.


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