MR JOHN HUTTON MP

22 OCTOBER 2007

  Q60  Mr Wright: At the outset of the dispute Royal Mail had asked Postcomm whether or not they would take into account the dispute in their delivery targets. Do you know whether this has taken place?

  Mr Hutton: I do not know the outcome of that. I think that is still a matter for discussion between the Royal Mail and Postcomm.

  Q61  Mr Wright: Finally, one of the concerns that the CWU has expressed, and indeed it was mentioned early on in the dispute, was over the question of the loan that was given by the Government to Royal Mail, that it was not being spent effectively. As a matter of fact, I think as late as June it had not been spent at all. What measures have you got in place to ensure that the £1.2 billion loan given to Royal Mail is going to be used quickly and effectively in bringing about modernisation?

  Mr Hutton: The package has not been approved yet by the European Commission under the state aid rules. I think you are right that none of it has been drawn down yet by the Royal Mail. The precise sequence in which that resource will be drawn down I do not have in front of me but I am very happy to set it out for the Committee if that would be sensible.

  Q62  Mr Wright: So you have got no timescale?

  Mr Hutton: I am not sure I can give you a specific answer in relation to the timescale on that, but what is certainly true, because of the industrial action, is that the Royal Mail are behind in terms of the modernisation that they wanted to see in place, the improvements in technology and so on. There is a delay now, I am afraid, in getting that investment in but I hope it can be made up.

  Q63  Mr Wright: When those discussions are taking place will you communicate with us?

  Mr Hutton: Yes. I am very happy to do that.

  Q64  Chairman: Can I just clarify, Secretary of State, that point about the state aid procedure? Your predecessor expressed confidence that there would not be a problem with the state aid procedure. I cannot remember what timescale was envisaged by him but I am slightly concerned that here we are in the second half of October and it has not been approved yet. Am I right to be concerned?

  Mr Hutton: No, I do not think so. I think it is imminent, but again I would be very happy to write to the Committee setting it out.

  Q65  Chairman: I would appreciate that very much indeed.

  Mr Hutton: We remain confident that it does satisfy the state aid rules.

  Q66  Chairman: There is no indication, informal or otherwise, that there might be a problem with that state aid procedure?

  Mr Hutton: No. I have received no indication of that.

  Q67  Chairman: Just to clarify my mind, you are going to consider what timescale and what mechanism to use for your manifesto commitment to review the Royal Mail in the light of all this?

  Mr Hutton: Yes.

  Q68  Chairman: Because already Postcomm have done a lot of work on the redefinition of the universal service obligation, I see, so you will have to dovetail with Postcomm's work, presumably, on the different aspects.

  Mr Hutton: Indeed. We will obviously have to take that into account.

  Q69  Chairman: Can you just clarify one point of detail for me? The report and accounts, have they been published yet?

  Mr Hutton: I think they are going to be published this week.

  Q70  Chairman: It is a little later than might have expected. I would have thought it might be well to have had them during the industrial dispute rather than after it.

  Mr Hutton: I think it will be later this week. It has to be later this week.

  Q71  Mr Binley: Can I just ask a supplementary to that because the commercial agreement reached between the Government and Royal Mail is in reality a commercial loan with the investment from Government having to be repaid over a defined period with interest charged on the money loaned to Royal Mail. Would you be prepared to release the commercial agreement for this Committee to scrutinise?

  Mr Hutton: I will have to think about that.

  Q72  Chairman: We can do that on a confidential basis if necessary.

  Mr Hutton: If it is on a confidential basis it might be possible, but let me have a look at that.

  Q73  Chairman: This has had a huge impact on the economy and our society, so to speak. We have talked a lot about the impact on Royal Mail and business lost to its competitors and business lost to the internet and so on as well, but what impact have you made yet with regard to the impact on the wider economy of this dispute? You say we have been raking over the coals a bit. It is true, we have been. It is to make sure that lessons are learned to make sure this kind of damage is not repeated.

  Mr Hutton: There is a place for raking over the coals, I do accept that, and this is the place, obviously, for that to be done. We have not, as I said, yet made a quantitative analysis on what we estimate the cost of this dispute has been. It has been significant, I do not think there is any question about that, but in relation to the Royal Mail we will not be clear about the damage and how permanent it has been for some time. My very earnest hope is that now that there is an agreement in sight both sides share this common agenda that I referred to about doing all they can to help the Royal Mail succeed. Without that common bond of trust between staff and management that task will be made very much harder.

  Q74  Chairman: The impacts have been very wide and varied. Charles Kennedy in the House last week or the week before put down questions about loss of blood samples in the post. I was hearing about a care home that has not been able to employ its staff because the post is all held up in Liverpool, which is always a bit of a problem for the post. Whether it is wise to put government offices in Liverpool I am not quite sure when you need a reliable postal service, but never mind; it is one of the more difficult areas for industrial relations in the Royal Mail Group. It is not just an economic impact. It is often a very serious social impact as well.

  Mr Hutton: That is undoubtedly true. I think probably some of the keenest damage has been felt by small businesses, and that is a matter of very real regret. There is, in relation to Royal Mail's bulk customers, the prospect of compensation being paid for failure to deliver, but that, I think, is a matter that is being discussed between the Royal Mail and Postcomm at the moment.

  Q75  Chairman: And that really helps the finances of Royal Mail Group as well.

  Mr Hutton: Well, it will not, but look: you do not have this type of dispute and then somehow imagine that it is going to have a positive impact on the finances of the company. This has been nothing but a problem for the Royal Mail and therefore for the taxpayers who have invested in it.

  Q76  Chairman: We have spent a lot of time, implicitly or explicitly, attacking the management of Royal Mail Group and you have insisted there are two sides to every argument. Just give me your assessment of the Union's role in this dispute.

  Mr Hutton: I think the Union have tried to respond to the challenge of change that faces Royal Mail. I think in the past they have shown a willingness to change and adapt. My own personal reflection is that I think they found that the size and magnitude of the change now confronting Royal Mail quite a difficult and thorny issue to deal with, but I think they have tried genuinely to engage with Royal Mail. I think they have tried to find a way forward on this but it has proved very difficult for them as well. They have their conference and mandates and so on that they were trying to operate within. With great respect, Chairman, I am going to try my very hardest to avoid pointing the finger of blame at anyone. I think we could run the risk of reopening the discussion we had earlier. My view of all of this is that this should never have come to industrial action. My own belief is that it was perfectly possible to find a way forward on these proposals without industrial action, which I think has now caused massive damage to the company, huge inconvenience to our constituents and a lot of financial loss to hundreds of thousands of thousands of decent, hardworking postal staff who probably themselves now are left scratching their heads wondering what all this was about. Clearly, there are lessons to be learned. I do not dispute that. Management and unions together have to find a better way of dealing with their business in the future.

  Q77  Chairman: I think we are risk of repeating previous answers. I will just move onto the last and completely separate area of questioning. This Committee expects, if we are reborn in the new parliamentary session, as we expect to be, to do an inquiry into the post office closure programme, probably in the early spring of next year, to see what progress has been made. There is one particular issue there now that I would like to raise with you of which I give you prior notice. There was concern expressed over the summer that sub-postmasters and mistresses were not free to express their views, that mystery shoppers were being sent out to ensure they were sticking by the Post Office line. Obviously, that is rather worrying because they need to be able to inform their customers about what is happening and their views on what is happening. The Post Office assured me that that was a mistake. They said publicly that it was a mistake. They withdrew the letter, but the fact that such a mistake was made in the first place alarmed me very considerably and I have seen a report in the East Anglian Daily Times from 11 October which said that a spokesman for the Post Office Ltd is quoted as saying that sub-postmasters were "encouraged not to talk about the proposals before they were presented for the consultation process at the agreed time rather than the information coming out during the planning process", so they are still being encouraged—and what form the encouragement takes I do not know—not to be completely frank with their customers and, as I say, that worries me.

  Mr Hutton: It worries me too. If that is what is happening it should not be happening, it would be quite wrong to try and gag sub-postmasters and I will try and make sure, Chairman, that if there are any such examples of that we deal with them robustly. The company have made it clear that that letter should not have been sent. They have retracted it and they have apologised to the National Federation of Sub-Postmasters for what I can only describe in my terms—and maybe it is too Allan Leighton-like for this Committee—as a cock-up and it should not have happened.

  Q78  Chairman: I think more Adam Crozier-like, actually. The reason that is important is that in my area the consultation process will be taking place during the school summer holidays, the last two weeks of July and the month of August, which I think is outrageous and I am trying very hard to get the Post Office to change its mind. This means that sub-postmasters and mistresses can only tell their customers what they thought of the plans when they are not there, when they are on holiday, and that seems a little unfortunate, so I do hope you will do all you can to ensure there is a maximum degree of openness in this very important and sensitive process.

  Mr Hutton: We will do that.

  Q79  Chairman: If no other colleagues have anything they want to say on that issue, at precisely half past four, exactly an hour after we began, I can call this session to a conclusion. Thank you very much, Secretary of State, for your first appearance before this Committee. I congratulate you on your appointment, of course. When next we meet, according to our plans, we will indeed be the DBERR Committee rather than the DTI Committee, so this is your first and only appearance before us.

  Mr Hutton: It was a great pleasure.

  Chairman: Thank you very much.