| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Lord Christopher: My Lords, I am sure everyone is glad that my noble and long-time personal friend Lord Clarke has brought forward this debate. It was not my original intention to speak but, as my noble friend Lady Pitkeathley who is currently on the Woolsack will confirm since we all share an office, he talks almost as much about the Post Office as he does about Arsenal Football Club every week. Nothing happens that we do not hear about.
What really disturbs me about what is happening was set out in an article that appeared in the Financial Times a little before Christmas, to which I shall return. I am even more concerned now, having listened to the remarks of the noble Lord, Lord Dearing. He really has put his finger on issues which have not been touched at all—I do not mean just here, but anywhere. We seem to be interpreting "liberalisation" in a way which, in my opinion, lacks any clear indication of what is the goal we are after. I simply do not where it is we hope that we are going. The way we are interpreting liberalisation and a universal service suggests that they are in fact incompatible.
I have read the last Postcomm report. Unusually, while it gives the period it covers, the document is not dated so we do not know when it was issued and it does not give its terms of reference. Whether what it says is in accord with the short version given to the House by my noble friend Lord Clarke, I am not sure, but to me it reads like a very odd document. The virtue is competition, competition, competition. A few more doses of it and we will all live in a postal paradise. That is what the report says. To be frank, I do not believe it. What first sprang to my mind was the bizarre regulation-directed performance on liberalising the telephone directory service. We ended up with a dozen or more companies, all giving us directory inquiries less well and more expensively.
I find it hard to believe that we can deliver a modern postal service as cheaply as we are today and I shall indicate one or two reasons for that. While we should not attack competition or the private sector, we need to think about how we use those in the operations we are seeking to liberalise, to use the current word. We assume that we use words like "privatisation" and "competition" on the basis that everyone understands them. They have a common meaning and purpose, so we can just go ahead and use them. But it is not like that. Perhaps it is a ludicrous comparison, but while
12 Jan 2006 : Column 331
you can have competition in having your hair cut, I do not see how you can have competition in providing probation services. They are totally different operations. If we want the probation service to work better, we have to say, "We want to do this in a different way. We want it to be more efficient and less costly". What we cannot say is that we will get Tesco to do it for us.
I am far from certain that Postcomm has thought this through. There is no indication of where it wants to get us to. Here we are with pretty much the cheapest service in Europe—the first in the field. What was the reason for the rush into liberalisation? It has not been explained. Its own reported survey shows that nine out of 10 users said the Post Office was important to people, and 96 per cent said that they trusted the Post Office. Where on earth did the pressure come from? We are taking some very serious risks and we are even being foolhardy.
I do not wish to be patronising but there is merit in some of the arguments of my noble friend Lord O'Neill. Management could not have been the only answer—it was not the only answer—to the position the Post Office was in. We would not have such a cheap postal service if that was the case. In the current situation, why is it that 14 people want a bit of the action? If the Post Office had had the capital to make the investments to produce the economies of scale which presumably these other companies are able to make, 14 people would not be looking for the work. They are looking for it because it is a cash cow and they are able to get it on the cheap. There are some fairly aggressive dogs out there.
Perhaps I can read three short extracts from the Financial Times article of 29 December. The first is a quotation from Nick Wells, the chief executive of TNT Mail. He said:
"The UK is a very important market for us. Mail volumes are in decline in Holland and we've got to expand internationally. The UK is the second largest market in Europe, it's very strategically important for us; it's critical that we're successful in it".
The article goes on to say—and perhaps my noble friend Lord O'Neill did not see this—that:
"TNT intends to take on Royal Mail head-on with a new end-to-end service. 'We do have a stated ambition to create an alternative final . . . delivery'"
service. So much for "universal" if it does so, but I doubt that he is talking about Brixton, the Welsh valleys, the Scottish Highlands or rural East Anglia. That means that the service will effectively have to be subsidised by the Post Office.
Alex Batchelor, the Royal Mail's director of marketing, said:
"Does bypass [end-to-end delivery] potentially pose a much more dangerous risk longer term than access? Answer, yes".
None of this is being dealt with at all and I hope that the Government will begin to address it. I shall pose one or two questions to the Minister later.
I think that the noble Lord, Lord Hoyle, mentioned the question of VAT. This is an extraordinary situation. They want a level playing field on VAT.
12 Jan 2006 : Column 332
They say that if it is 5 per cent for each, it will come out with no consequence. But that is 1.5p off the present stamp and nearly 2p off the proposed new one. What an extraordinary way to produce a more valuable consumer service.
Perhaps I may ask my noble friend one or two questions. What authority do the Government have in directing what Postcomm is doing? Is it so independent that it can do anything, or have we got some control? Are the Government content with the way that Postcomm is performing and the outcomes? What is the ultimate goal that we hope to see? Do the voters know what that goal is and do they know what is happening from the 1st of this month? It may not lose an election, but the Post Office will affect votes at the election.
1.24 pm
Lord Razzall: My Lords, I join other speakers in thanking the noble Lord, Lord Clarke of Hampstead, for introducing this important debate. Perhaps I can start by reminding your Lordships what his Motion actually says. It is intended,
"To call attention to the case for a Government policy towards the Royal Mail which best reflects the national interest in all respects".
Implicit in what a number of noble Lords have said is that over the past 20 years or so governments of both political persuasions have not had a policy towards the Royal Mail which best reflects the national interest in all respects. Indeed, some might say that they have not had one that reflects the national interest in virtually any respect.
It would probably be common ground historically—taking the Post Office itself first—that there has been a significant failure by governments of both persuasions to invest in the Post Office network, which has resulted in the closure of more than 7,000 branches. There are considerable fears that this will lead to further closures of both rural sub-post offices and urban post offices, as a number of noble Lords have mentioned. There is little doubt that the Royal Mail has been starved of significant investment, which has had serious consequences for its ability to compete effectively.
I know the Minister will guarantee the universal service obligation, but there are fears, as a result of this lack of investment, whether the Royal Mail under the current structure has the long-term ability to deliver mail to every household and business at uniform prices. There is considerable concern about that.
A number of noble Lords have touched on the fairly grim economic circumstances facing the Royal Mail. First, as we all know, the monopoly in delivery of mail ended on 1 January 2006 and so the company is now facing competition in a fully liberalised market. It is contemplating investment totalling, I think, approximately £1.2 billion in modernisation, but, as noble Lords have indicated, this is primarily to be paid for by significant price increases for consumers which the regulator, Postcomm, has indicated it is prepared
12 Jan 2006 : Column 333
to approve. The devastating position of the pension fund, which at the last count had a deficit of approximately £4.25 billion, has also been mentioned.
We are aware that the freedoms available to competitors to raise funds for investment capital are not available to the Royal Mail because it needs permission from the Treasury and the DTI to borrow. Such borrowings count against the public sector borrowing requirement and therefore the Royal Mail is competing with other public sector priorities.
I suspect that business mail—which makes up approximately 90 per cent of the mail carried by the Royal Mail—is now subsidising the universal service obligation. Royal Mail's competitors want to win a substantial share of the business mail, as the noble Lord, Lord Christopher, indicated earlier, and any loss of that market share by the Royal Mail could endanger its ability to meet the universal service obligation.
I do not think that any noble Lord has touched on the next issue, unless it was when I was not in my place. Serious conflicts of interest are inherent in the new arrangements for the mail delivery system. That is because the DTI, which the Minister represents here today, has an obligation to promote the overall health of the mail market. Secondly, it owns the main operator. Thirdly, it is responsible for setting the regulatory framework. Fourthly, it appoints the regulator. So there is a structural difficulty there as we move into the liberalised world that started on 1 January.
There is another built-in disincentive, of course, because the Royal Mail has no incentive to maintain unprofitable but socially important post offices, but has a positive interest in preventing them from winning new business from the new mail delivery companies. Again, there is a structural difficulty there.
It will be widely accepted in all parts of your Lordships' House that the following four principles need to be implemented by the Government if they are to fulfil the objectives of the Motion of the noble Lord, Lord Clarke of Hampstead. First, it is clear that the Royal Mail must have the freedom to make investment decisions to give it the best chance of succeeding in the new liberalised market. There can be no doubt about that. Secondly, the universal service obligation must be guaranteed as a vital public service. I know the Minister will say that he does guarantee it. Thirdly—and this is implicit in what almost all noble Lords have indicated, certainly from the other side of the Chamber—the staff of Royal Mail must be given the opportunity to share in the success of the company, in whatever way that can be structured. Fourthly—taking up the point made by the noble Lord, Lord Christopher, about what the voters want—there is absolutely no doubt that the voters want a reversal of the decline in the Post Office network, both rurally and in urban areas, and they want branches to be improved and enhanced. I think that the four principles I have set out would be consistent with what noble Lords right across the Chamber would want.
12 Jan 2006 : Column 334
The Government can say they are prepared to make the funds available to implement those four principles. Few people would doubt that an investment fund of at least £2 billion will be necessary for the Post Office network when the money runs out in 2008. That will provide the necessary structure for the sub-post office network and maintain the training necessary to enable them to be used as shop fronts for a variety of public bodies and to give them the freedom to win new business as collection and deposit points, not only for Royal Mail but other delivery companies. Individual sub-post offices need to be given the freedom to enter into agreements with private sector companies for bill payment and other services. That is what needs to happen; the Government have to provide the money to do that or look at innovative ways of raising funding from Royal Mail itself.
There are a number of ideas around and I should like to float a couple. First, the Post Office could be separated from the Royal Mail Group. Post Office Limited would then be retained in the public sector, giving post offices the chance to develop the new business opportunities I have articulated. Secondly, the Government could look at a shared ownership model for Royal Mail, with 51 per cent of the shares to be divided between the Government and Royal Mail staff, issuing shares to staff and small investors and selling the remaining shares to the market. The funds raised from that sale could provide the investment in the Post Office network and for the modernisation of the Royal Mail Group.
The Government have a choice: they either provide the money for the objectives I set out, which I think would be universally agreed by all Members of your Lordships' House, or they have to use Royal Mail for some form of innovative financing package to raise the money. But they cannot do nothing.
1.32 pm
| Next Section | Back to Table of Contents | Lords Hansard Home Page |