Royal Mail Privatisation

Tuesday 18th January 2011 Westminster Hall

11:00

[Katy Clark (North Ayrshire and Arran) (Lab)]

It is a great pleasure to see you in the Chair again, Mr Dobbin. I am pleased to have secured this timely debate on the implications of the proposed privatisation of Royal Mail for our post office network. There will, of course, be many repercussions if the privatisation goes ahead, but the subject of this debate is, perhaps, the aspect about which the public are currently most concerned.

No other country in the world has separated its mail service from its post office network, and I hope that the Minister will accept that there is genuine concern that this privatisation will have a negative effect on an already vulnerable post office network. Many of the issues that I will raise today have already been raised with the Government during the proceedings of the Postal Services Bill in this House, and I suspect that they will be raised again in the Lords. I have given the Minister notice of what I will say today—I will ask him many questions that have been put to the Government but that have not, as yet, been answered adequately.

We heard many warm words from the Government during the progress of the Bill about their commitment to the post office network, and, indeed, an announcement of a short-term subsidy. However, my contention is that those warm words will not be sufficient to protect our post office network and that the legal framework that the Government are putting forward with a privatised Royal Mail, which will have a legal duty to its shareholders to maximise profits rather than any duty to the general public, provides no guaranteed protection in law for the post office network as we currently know it, and will put our post offices at risk.

We have read in the media that some fear that the privatisation will result in 4,400 post office closures. That figure comes from the fact that the current access criteria mean that we would have a post office network of 7,500 post offices, and we also know that approximately only 4,000 post offices are currently considered to be financially viable. There is, therefore, a great deal of concern that privatisation could lead to the closure of post offices. There is also concern about whether the standard rate for stamps will be able to survive in a uniform way throughout the country, and that there could be a serious deterioration of the service provided, particularly in rural communities, deprived urban areas and in any part of the country where the postal service is expensive. There is a concern that a privatised Royal Mail will cherry-pick the business and that the post office network will be left with what was left.

During the passage of the Bill, the Government were asked to guarantee the size of the network. The Minister will be well aware of those calls being made to him. We currently have 11,905 post offices. The access criteria laid down by the previous Government would, according to Post Office Ltd, mean that there would have to be a minimum of 7,500 post offices. The Government have said, in the course of proceedings, that they are committed to the post office network and would like to see a network of 11,500 post offices. In her evidence, Paula Vennells, the managing director of Post Office Ltd, said:

“What is absolutely important in this new approach is that there will be no closures whatsoever.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]

That call has been made repeatedly to the Government in the past few months. I ask the Minister again today whether he agrees with that statement by Paula Vennells and that a central plank of the Government’s policy is that there should not be post office closures, and whether he will undertake to ensure that the size of the network will remain at 11,500 post offices, as opposed to outlets, which is something that I will come on to in more detail later.

When those questions have been put to Ministers, the response has been an explanation of how the post office network operates—that, as we all know, post offices are run by private individuals who may decide that they do not wish to continue in the business for a whole range of reasons and that such decisions may not be in any way connected with Government policy or, indeed, the framework in which those people are operating. We all appreciate that, but we are asking the Government to confirm that their policy will be to create a framework that enables existing post offices to continue. It would assist if we had a specific answer on why legal guarantees would not be helpful. Surely the Minister agrees that it would be helpful to the post office network if he came forward with a legal guarantee on post office numbers, given the huge concern. If he is not willing to do so, will he explain why it is such a priority to get a quick sale—probably to a foreign buyer—but not a priority to find a way to give legal guarantees to our post office network?

We also know that the Government are being pressed by a wide range of organisations to guarantee the inter-business agreement between Royal Mail and the post office network. The National Federation of SubPostmasters, the Communication Workers Union and Consumer Focus, as well as a whole range of other organisations, have made that call and, in particular, are asking that a 10-year contract be entered into by Royal Mail to ensure some kind of security for at least that time. Consumer Focus has said that it is concerned about how few safeguards the current legislation proposes. Andy Burrows, its postal services expert, has said:

“There are few safeguards to keep that contract in the long term. It’s entirely conceivable—though it seems an odd thing to suggest—but several years down the line you could have a post office network where you cannot undertake mail transactions. It would be for Royal Mail to determine which operator—whether it was Post Office Ltd or Tesco or whomever—to offer mail services and there would be no requirement for stamps or parcels. You could see a scenario where Royal Mail looked to cherry pick so Tesco, say, could meet its requirements in urban areas and the Post Office could pick up the slack in rural areas where there isn’t anyone else. And that has very serious implications in terms of the viability and integrity of the network because urban areas typically make money.”

That really goes to the nub of the concerns that many people have about the future of our post office network.

Will the Minister respond to the allegation, which has been made again and again, that many of those who run post offices will view the future of work in a privatised Royal Mail to be so uncertain that they will be more likely to leave the business? The Government must respond to that allegation. There is huge uncertainty about what will happen if Royal Mail is privatised, which is bound to lead to individuals making business decisions that will take them out of the trade.

Will the Minister say what steps the Government would take if a privatised Royal Mail decided to award the work to supermarkets rather than to post offices? I want to know whether the Government would allow that to happen. If Royal Mail were to decide not to award work to post offices but to another organisation or range of organisations, would they allow that to go ahead?

My final request to the Minister—again, it has been put to the Government on many occasions—is that we use the opportunity of the Postal Services Bill to guarantee the access criteria in law, so that there is more certainty about the future. I have already referred to the view that the access criteria guarantee only 7,500 post offices, but even that is subject to uncertainty, given the legal framework.

I ask for all that because our post office network is already so vulnerable. More than 150 post offices closed on a long-term basis over the past year, and 900 are up for sale. Over the past 30 years, the number of post offices has almost halved, and the trend has been consistently downwards, irrespective of which political party or, as now, combination of parties is in power.

As someone who represents many deprived mainland communities, many small towns in areas of unemployment and rural island areas, it is clear is that the public are well aware of the vulnerability of the post office network. They are rightly suspicious of the Government’s assurances. That may be why people express a great deal of concern about the proposal to privatise Royal Mail whenever they are asked about it, whether it is through opinion polls or in other ways. The fear is that post offices will be at risk, particularly in deprived and remote rural communities. The Government may say that there will be no closure programme—indeed, they have said that—but that does not mean there will not be post office closures.

We know that the majority of work for post offices comes from either Royal Mail or the Government, but business from those providers is not secure. Royal Mail provides post offices with about one third of their work, and we are told that it is unthinkable that it would not use the network. However, it is clear that many competitors may be interested in the work, including supermarket chains, PayPoint—they are the two most obvious options—and a range of other providers. Surely it is a real possibility that a privatised Royal Mail would tender the work, either in whole or in part, to the cheapest provider in the future.

The reality is that because of how Royal Mail will be constructed legally, it will be under an obligation to ensure that it gets best value for its shareholders. There will be nothing to make it use post offices to the same extent. As a private company, its duty will be to its shareholders, which would put the work that many post offices currently rely on at risk. It is only common sense to think that more post offices would be in greater financial difficulty and that more of them would find it difficult to justify their existence.

We have heard a great deal about alternative sources of work for post offices. Indeed, the previous Labour Government were doing a considerable amount of work to develop a people’s bank, which was dropped by this Government. Will the Minister explain why the Government are not proceeding with some form of post bank or people’s bank? We would like an explanation as to why they do not accept that local post offices would be on a stronger footing if the post bank work had gone ahead. I also understand that the Department for Work and Pensions green giros contract is under threat. Will he explain why DWP work is not being channelled to the Post Office?

The reality, of course, is that the historic link between Royal Mail and the Post Office means that Royal Mail supports post offices in a range of different ways. The Royal Mail chief executive has said that, in effect, Royal Mail subsidises the post office network by £150 million a year through the central provision of services alone. Obviously, if the two organisations were to separate, that would be another way in which funding and support would be taken away from the network.

The previous Labour Government put substantial funding into the post office network, and this Government have announced a £1.34 billion subsidy, which I welcome, although I have been told that it will not increase the level of annual social subsidy to the post office network. However, my greater concern is that the funding is not guaranteed beyond 2014-15, and, even more, that the Government’s stated policy is that the subsidy will reduce over time. That must give us great concern. I do not know whether post offices will be able to survive in the future.

Does the Minister expect that the number of post offices or outlets will shrink over the coming period? Also, does he believe not only that the number of post offices or outlets will reduce but that the quality and extent of the service operated at post offices will shrink? The Government’s plans for changing the network over the next four years include replacing 2,000 post offices with “essentials” or “locals”, which will provide a more limited range of services, often from a venue such as a shop. I understand that the scheme is designed as a pilot, but many of us will already know from our constituency experience of examples of a Crown post office closing down and the service moving into, perhaps, a local newsagent. It is clear that our constituents feel that the quality and range of the service has decreased, even if it is simply because there is less space in the post office area. There is less ability to take in wheelchairs—the conditions are more cramped. That is a great concern to our constituents.

[Lorely Burt (Solihull) (LD)]

I congratulate the hon. Lady on securing this important debate. There is great potential for a more flexible approach to the format of post office that people want. I have one in my constituency that is in a convenience shop. A point has been opened in the shop itself, so people do not have to wait for post office opening hours. The number of open hours is phenomenally greater, so everyone who wants to cash in their lottery winnings goes to the shop. There are great opportunities, and not everyone needs all the services or wants them at specific restricted times.

[Katy Clark]

There may be some benefits in certain circumstances. The example that I was thinking of is a local one. The small town of Kilwinning in my constituency previously had a spacious Crown post office that was heavily used by the local community. When the service moved into a newsagent, the quality of service experienced by constituents became much worse. However, there may well be other situations that are success stories.

One of the concerns at present is that many of the proposals would actually mean a reduction in the number of hours that postal services will be available in some communities. That is the point that I have put to the Minister. There may be exceptions where the service improves, but my contention, and the evidence from the work that has been done, is that the trend is for the range and quality of services to diminish. The reason for that is the difficulty in making post office services pay, which is why we are having this debate. For public policy reasons, post offices are essential parts of our communities, and we should be finding a framework within which post office success would be most likely.

Related to that, a great deal of concern has been expressed about the network size being affected by the extension of outreach services, which are often provided by a van and often mean a substantial reduction in the hours a postal service is available in a specific community. Instead of having a post office, which would be available all week, a van might come once or twice a week, for a relatively small period. Those vans, or many of the facilities to which the hon. Member for Solihull (Lorely Burt) has referred, often do not provide the whole range of postal services that might have been available in a more traditional post office. I ask the Minister to respond to the considerable concern expressed about the quality of services provided by some outreach services.

The Select Committee on Scottish Affairs, for instance, made submissions to the Government after taking evidence in Scotland on such issues. An extension of such outreach facilities leading to a continuing deterioration of service is a concern. I have to declare an interest, because of the kind of constituency that I represent. I have many remote rural areas in my constituency, in particular the island of Arran, the kind of area for which outreach services are often proposed. As we know from the evidence given by members of the public and by hon. Members, often the view is that the level of service is far less good than that which was previously provided.

Huge concern has been expressed about the universal service obligation and whether a postal service could be maintained in all parts of the country, no matter how remote. What is perhaps more at risk is the continuation of the universal service as a six-day service everywhere and of a uniform affordable price throughout the UK. Can the Minister give an assurance on that continuation and whether there will be legal protection? The proposed legislation, similar to current legislation, allows Ofcom to waive the universal service obligation given exceptional geographic or other conditions. Will the Minister outline when that opt-out would be used? What guidance would be given about when Ofcom is allowed to say that the universal service obligation need not operate?

If the Postal Services Bill becomes an Act, we are creating a legislative framework in which it would be quite possible and highly likely that Royal Mail will move its work in the future. MPs of all political parties are concerned about their local post offices and wish them to survive. I urge the Minster to ensure that we organise our postal services in a way that enables them to have the business to make that a realistic possibility in the future. In particular, I ask that he uses the opportunity of the legislation to ensure that we have a legal framework whereby post offices can continue. There is huge concern that a privatised Royal Mail will operate in a manner that will undermine our post office network. Will the Minister please respond to the points made today and over the past few weeks?

11:23

[Anne Marie Morris (Newton Abbot) (Con)]

I thank the hon. Member for North Ayrshire and Arran (Katy Clark) for securing an excellent opportunity to talk about the future of the wonderful post offices that we all love and need and upon which our constituents—in particular, some of our small businesses—are dependent. However, I am surprised that the hon. Lady raised the issue of post offices when the Bill we are talking about and have been debating recently is about Royal Mail. The debate is meant to be about Royal Mail, rather than about post offices, but I was encouraged by the response that the Government gave, indirectly, with regard to post offices, effectively guaranteeing that we would be able to retain post offices, which we all value. I was absolutely delighted.

The other measure in the Bill, which the hon. Lady did not mention but which I find exciting, is the concept of mutualisation. It is a huge opportunity.

[Katy Clark]

There have been many opportunities over the past few weeks to make all sorts of points about Royal Mail privatisation. The debate today is about the implications of Royal Mail privatisation on the post office network. There are genuine concerns. Does the hon. Lady share any of those concerns?

[Anne Marie Morris]

I thank the hon. Lady for her comment but, to be honest, hearing her discussing the concerns about the future of the post offices was very reminiscent of the concerns felt by Opposition Members under the previous Administration. Our concern in opposition, when there were mass closures of post offices, was that the Government of the day had failed to recognise that such post offices were crucial to communities and were providing a social service as much as anything else.

I am delighted that both parties supporting the coalition Government are determined to ensure that post offices have a bright future. I do not share the hon. Lady’s concern about the future of post offices; they are far better off under the new coalition Government than they ever were under the previous Administration.

The hon. Lady made some points about universal delivery, but I am very heartened. It is important. The Government look on it as fundamental and will retain it.

Turning to post offices, we must remember that 99% of the population live within three miles of a post office. In the grand scheme, that is not a bad position to be in. The Government subsidy to non-commercial post offices is currently £150 million, but I am pleased that it will increase to £180 million in the next financial year.

[Nia Griffith (Llanelli) (Lab)]

Is the hon. Lady suggesting that a three-mile access criterion would be sufficient? In other words, as long as someone was within three miles of a post office, that would be acceptable. Is that the sort of network of post offices that she envisages?

[Anne Marie Morris]

I thank the hon. Lady for her comment. Clearly, we need to have as good access as we can for every individual. Therefore, we need to look at a good service and a good distribution of post offices. The sort of figures talked about, and where we are now with the number of post offices, will give a good service. What I would like to comment on, and will come to in my contribution, is what more those post offices could do.

[Karen Bradley (Staffordshire Moorlands) (Con)]

I am interested in what my hon. Friend says about the provision of post office services not only to individuals but also to businesses. Businesses in my constituency are concerned about how the post office network can help them in the current economic downturn. Does my hon. Friend have any thoughts on that?

[Anne Marie Morris]

My hon. Friend makes an excellent point. When we are looking at our small micro-businesses to lead the drive to put the economy back on its feet, post offices have a key role. In my constituency, in the village of Broadhempston, there is a delightful situation. Local volunteers run a small community shop—absolutely an example of the big society—in which they have effectively ensured that the post office can be retained. The challenge—the point made by my hon. Friend—is to ensure that we can grow that service. The shop currently opens in the morning between 9 and 12, but if it opened in the afternoon, it would really be able to offer services to local businesses. I have been looking at that and championing it. Looking at such post offices being able to support small businesses must be the way forward; my hon. Friend’s point is extremely well made.

Post offices are at the heart of the community. With regard to concerns expressed in all parts of the Chamber, post offices need to be able to provide more, not less, to individuals and to small businesses. Indeed, the Federation of Small Businesses has said that it would be an excellent idea to have a dedicated business counter or business advertising. Could not such post offices provide meeting rooms or wi-fi hot spots? As discussed, we could be moving towards providing banking facilities.

The opportunity for post offices is enormous, and I am delighted that they have that opportunity. The big society and the overall push to help small businesses should make that opportunity a reality. Nineteen per cent. of small businesses visit post offices on a daily basis, and 47% visit twice a week. That is excellent news. As I said earlier, mutualisation could be the way to make things possible. I have found a real will to work together in the community, whether that is the business community or the community within a geographical area. Mutualisation is a real opportunity and it may be the solution to the position in Broadhempston.

[Sheila Gilmore (Edinburgh East) (Lab)]

I am a supporter of mutualisation. Many people, however, are concerned that from mutualisation comes demutualisation. Would the hon. Lady be in favour of building a way of preventing demutualisation into any plans for mutualisation, as far as that is possible? People are wary of mutualisation given some of the experiences of the past 20 years concerning building societies and other mutual organisations.

[Anne Marie Morris]

I understand the hon. Lady’s point, but the devil is not in the legislation but in the detail and particular circumstances. I am not a great believer in regulating and legislating; I believe in the free market. It is right to empower communities and businesses, but not to tell them how to do what they do.

In conclusion, I would be delighted to see the Government look carefully at what post offices can do, and then empower them so that it happens, perhaps by looking at how we can improve the number of Government services in post offices. At the moment, people cannot always sort out vehicle taxation at post offices or pay their utility bills—they might not know that they can pay in a post office because it does not say so on the back of the bill. There are things that the Government could do to ensure that where it is financially sensible, more services are provided through the local post office network. There is much that could be done by the business community, and I commend to the Minister the suggestions made by the Federation of Small Businesses.

11:32

[Mr Alan Reid (Argyll and Bute) (LD)]

It is a pleasure to serve under your chairmanship, Mr Dobbin. I too congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing this important debate. We both have rural constituencies that contain islands, and post offices are important in such rural communities.

Post offices are important in the communities they serve. No other retail outlet has such a range of shops that cover the rural parts of the country to the same extent as the post office network. Post offices provide an important social function and assist vulnerable people with help and advice. I am pleased that the Government have recognised that by making a big investment in the post office network, and I am delighted by the guarantee of a no closure programme, which is a complete reverse from the position of the previous Government. During the previous Parliament, debates such as this happened practically every fortnight as hon. Members tried to stop post offices being closed. This debate takes place in a completely different atmosphere as we have a Government who recognise the importance of post offices and back that up with investment.

For post offices to stay open, not having a closure programme is not enough. It is essential that as small businesses, post offices remain profitable for the sub-postmaster or sub-postmistress. Changing lifestyles mean that what was once one of the core businesses of post offices—people taking their pension book to collect their pension—is no longer so important. When people retire, they are more likely to have their pension paid directly into their bank account, as that is what currently happens to the vast majority of people of working age. Therefore, it is inevitable that business will decline. One postmaster put it to me succinctly when he said, “Many of my customers are dying off.” When people retire they do not collect their pension at the post office to the same extent, and that service must be replaced by other Government work.

It is essential that Departments, the devolved Administrations, local government and public bodies give work to post offices. Otherwise, in the long term we will see a gradual decline. There is no immediate threat to post offices, but unless the Government provide commitments to more work, in 10 or 20 years’ time we will see the gradual decline of post offices.

I am pleased to note the Government’s stated policy of giving more work to post offices, but it is vitally important that every Department follows that policy with action. Often, giving a contract to the Post Office will cost more than giving it to another provider, but that is because of the social benefits of post offices. Post office staff will take time to explain things to vulnerable people and give them help and advice that they would not often get in a supermarket or filling station. One can imagine the impatient queue at a filling station if people wanted to pay for their petrol but the assistant was taking time to give advice to an elderly person. Such advice is provided in a post office, but I cannot see it happening to the same extent in a filling station or supermarket. I hope that Departments will not be tempted to save money from their budgets by taking contracts from the Post Office.

[Graham Evans (Weaver Vale) (Con)]

I agree with what the hon. Gentleman says but when it comes to the crunch, sometimes a local post office will close, no matter how unfortunate that is. One of the biggest areas of growth is in supermarkets, whether metro stores or small stores. If a new supermarket contains a post office, would that not keep some of the services, even if they are in a supermarket?

[Mr Reid]

I agree with my hon. Friend; there is no problem with a post office being located in a supermarket and I was not saying that was a bad idea. My point is that a different type of outlet—PayPoint, for example—could be in a filling station but not in a dedicated post office that is part of a supermarket or filling station. In such situations, a person will not receive the same help and advice as they would in a post office located in a supermarket. I have no problem with a post office being located in another outlet—in my constituency, almost every post office is within a shop, filling station or supermarket. However, I would be concerned if the contract for benefit cheques was given to PayPoint, for example, because if an elderly person is in the same queue as people who are waiting to pay for their petrol, they might not receive the same quality of advice and help. A post office in another outlet is great, but if the facilities are simply part of that other outlet they will not offer the same social benefits to the customer.

The benefit cheque contract of the Department for Work and Pensions is for paying pensions and benefits to vulnerable people who are considered unable to use the Post Office card account. That contract was put out for renewal by the previous Government and I understand that the Post Office and PayPoint have bid for it. I hope that once the DWP has weighed up all the factors involved, including social factors and access criteria, it will keep the contract with the Post Office. PayPoint has a large number of outlets, including in my constituency, but nearly all those outlets are in towns and it does not have the same coverage throughout rural areas and islands as the Post Office.

If the contract were taken away from the Post Office and given to PayPoint, it would mean that on several of the islands in my constituency, there would be nowhere for people to cash the cheques. Also, in the rural areas of north Argyll, there would be nowhere for people to cash their cheques, because although there are plenty of PayPoint outlets in Oban, once people go outside Oban, they have to go all the way to Ballachulish or Inveraray to find another PayPoint outlet. It is therefore very important both for social reasons and for access reasons that the contract remains with the Post Office. I hope that the Minister will go away from today’s debate and knock on the door of the Secretary of State for Work and Pensions to tell him just that.

[David Mowat (Warrington South) (Con)]

Does my hon. Friend agree that it is extraordinary that the Government on the one hand are giving much-needed subsidies to the network—£1.3 billion over four years; £50,000 per location per year—yet on the other hand are taking away some of the contracts? No other shareholder or business would act in that way. It just is not joined up.

[Mr Reid]

I hope that the Government will not react in the way that my hon. Friend fears. I share his concerns, however. What worries me—I hope that these fears are ungrounded—is that there may be silo thinking within the Government. Clearly, in these very difficult financial times, with Departments having to make huge savings, it must be very tempting for Ministers to go for the cheapest contract, but I hope that they will resist that temptation, that there will be joined-up thinking in the Government and that the Post Office will be given work because of the good service that it provides. I hope that that will be the case for social reasons and because of the access provided by having a network that is unmatched throughout rural Britain and on many of the islands in my constituency.

Let us consider other Government work. When I tour my constituency, as I do every summer, one bone of contention that keeps cropping up in the rural parts of it is vehicle excise duty. Vehicle excise duty can be renewed only in certain post offices. I understand that that is because the Department for Transport decided the number of outlets that it wanted. However, it means that people living in rural areas must go into the town if they want to renew their car tax at a post office. Clearly, the temptation, then, is to use the internet, and if people do that, the work is lost to the Post Office completely.

My understanding is that the computer system is the same in all post offices, so there seems to be no reason why vehicle excise duty cannot be paid in any post office. Again, I hope that the Minister takes that point away from the debate and has a word with his ministerial colleagues in the Department for Transport, so that when that contract comes up for renewal, the restriction on the number of outlets can be removed.

I also want to refer to the BBC. As we all know, during the last Parliament, the contract for renewing TV licences was taken away from the Post Office and given to PayPoint. When Ministers are questioned on that, we just get indignant responses that the BBC is not part of the Government. However, it is a public body, and I hope that the Government are explaining to all public bodies the benefits of the Post Office and the Government policy of supporting the Post Office, and are encouraging the BBC and other public bodies to use the Post Office.

I was delighted with the commitment given during last week’s Report stage of the Postal Services Bill by the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for postal services, that Post Office Ltd and Royal Mail would sign an inter-business agreement for the longest legally permissible period before they become separate companies. That is important to give post offices time to adapt to being part of a separate company from Royal Mail.

I do not share the concerns of the hon. Member for North Ayrshire and Arran about Royal Mail in the long run taking business away from post offices. I do not believe that supermarkets or other shops could replicate what the post office does. Post office staff undergo a tremendous amount of training. There is also the computer system. One of the hon. Lady’s fears was that in urban areas, supermarkets would take over the contract, but in rural areas the post office would be responsible. That would mean two separate computer systems and training other staff. I simply do not see that happening. As I said in response to a point made by my hon. Friend the Member for Weaver Vale (Graham Evans), I see no problem with post offices being located in supermarkets, but I simply cannot see the benefits to a privatised Royal Mail of having a different arrangement in towns compared with rural areas. Many post offices are located in supermarkets. In the towns in my constituency, that is the norm and I see no problem with it, but I simply cannot see a situation in which there would be separate arrangements in towns and villages.

[Nia Griffith]

The hon. Gentleman has mentioned training, the quality of post office staff and the different reception that people may have in supermarkets and garages. Does he not think that it is precisely that type of thing that makes it possible for supermarkets and high street chains to undercut the price that the Post Office will probably be tendering at, and that therefore there is a real danger that the Royal Mail could switch to a cheaper option, which might be a much poorer-quality service? It may even be a loss leader for some of the big chains.

[Mr Reid]

I simply do not see that happening, because those organisations would have to develop a computer system and train staff. At the moment, in the towns in my constituency, the post offices tend to be located within supermarkets. I do not see any benefit to Royal Mail or a supermarket from developing its own system rather than encouraging a post office to be located in the supermarket.

[Neil Carmichael (Stroud) (Con)]

I thank my hon. Friend for allowing me to speak. I find that exactly the opposite happens in connection with supermarkets. When I was fighting to save a post office near my own home in my constituency, the real problem was that Tesco did not want a post office on its premises because it took up too much space. We had to move the post office and have a community arrangement a few doors down. The essential problem is that supermarkets will not necessarily want a post office on their premises. I therefore agree entirely with my hon. Friend that the post office network is safe and the relationship that it has with Royal Mail will continue.

[Mr Reid]

I am grateful to my hon. Friend for his intervention. I agree: I think that the post office network is safe. The attitude of the supermarkets in his constituency and mine just shows the diversity that we have in Britain. He mentioned space. One thing that my constituency does not lack is space; there is plenty of it, but I can understand that in a crowded urban area, the situation might be very different.

The reason why I came along to the debate this morning was to say that what is very important to the long-term future of our post offices is more Government work and the Government acting in a joined-up fashion, with all Departments being encouraged to give work to the Post Office. I hope that the Minister, in his reply to the debate, will assure us that that is what the Government are doing, that there is joined-up thinking in the Government and that work is in progress to ensure that more Government work is given to post offices, because post offices are in an ideal position to be a front office for Government throughout the country.

11:48

[Lorely Burt (Solihull) (LD)]

The hon. Member for North Ayrshire and Arran (Katy Clark) has rightly initiated this debate today. It is important that we ensure that the Post Office is protected and that legislation such as the Postal Services Bill does not have an undue effect. She asked many pertinent questions of the Minister and, like her, I look forward to hearing the answers.

Having worked for some years on issues within the remit of the Department for Business, Innovation and Skills, under its various names, I have attended numerous statutory instrument Committees whereby the Government of whom the hon. Lady was a supporter put in subsidies year after year to support the Post Office. That was absolutely right. However, what happened under the previous Government was that they managed a decline. The very important social value of the Post Office has been recognised. Nevertheless, it has not necessarily been given the legs to be able to compete in a changing business situation in this country.

The new coalition Government are taking a different approach to the Post Office. We have no less desire than the Labour party to ensure the Post Office’s future, but we are trying to adopt a different approach to enable the Post Office to stand on its own two feet. Several hon. Members have mentioned the £1.34 billion that the Government have committed to protect the network of 11,500 post offices, which we have said will remain. That is considerably better than managing the Post Office’s decline. We do not want any more post office closures. We want the Post Office to remain in public ownership, unless it goes for mutualisation itself.

The hon. Lady mentioned the inter-business agreement at a little length. The chairman of Royal Mail has said that such an agreement will be drawn up for the maximum legal period before any sale. My hon. Friend the Member for Colchester (Bob Russell) raised the issue in a new clause for the Postal Services Bill. It was argued at some length that a long period would benefit the Post Office, and I totally agree. Where I perhaps disagree, however, is on the practicalities. We are talking about an agreement between two commercial companies, which need the flexibility to negotiate an inter-business agreement that benefits both; if it does not, it will not necessarily hold together. There was also some discussion of how such an arrangement could be implemented, and the conclusion was that it would not necessarily work well under existing EU law.

The hon. Lady mentioned the post bank, and I, too, was disappointed that we did not go down that path. However, we have secured the ability for people belonging to virtually every bank in the United Kingdom to conduct transactions. That is a very good second best, which will at least make sure that the banks start to play ball and respond to the need to be more flexible in conducting their financial transactions.

What about the Post Office’s future? My hon. Friend the Member for Argyll and Bute (Mr Reid) mentioned some of the losses that we have seen, as well as some of the potential losses. A little while back, the Post Office card account went out to competitive tender. Lord Mandelson, who had just been appointed Business Secretary, stopped that straight away. I thought, “Brilliant.” We really cannot afford to lose the Post Office card account in that way. Like my hon. Friend, I hope that it will continue.

[Sheila Gilmore]

The hon. Lady mentions the Post Office card account, and those who are active in promoting financial inclusion have suggested that introducing more functions into the Post Office card account might be one way of assisting people who do not have access to mainstream banking. Another issue, which is much discussed, and about which I have heard a lot of discussion since I arrived in the House in May, is the possibility of linking credit unions with post offices. I have to say that there has been more discussion than actual tying things down, and I understand that there are cost issues, but does the hon. Lady agree that those two additional functions would be useful for post offices and contribute to the financial inclusion agenda?

[Lorely Burt]

I certainly agree that it is important that we extend the range of services available to people who do not have a traditional bank account, and the Government are actively considering how that can best be done. I certainly applaud the work of credit unions, although I am not entirely sure whether they have sufficient coverage and continuity to form a national service at this stage. However, the Government are actively considering these matters, and we are doing all we can to reach a practical solution on increasing financial inclusion for those who are unbanked.

The hon. Member for Newton Abbot (Anne Marie Morris) described all sorts of different ways of introducing flexibility, and the Government are fizzing with ideas about how we can be more flexible. We can adapt to the changing commercial landscape and to the internet. My hon. Friend the Member for Argyll and Bute mentioned vehicle excise duty licences, and I am sorry to say that I am guilty of using the internet to renew mine, because it takes five minutes. The point, however, is that there are many other functions that post offices can carry out; they do not have to exist in their traditional format to deliver a postal service to their customers.

I am very hopeful that some of the pilots that are being undertaken will prove successful. It is good that schemes are being piloted, because we can iron out some of the problems that might otherwise ensue. We will take the best ways of responding to the changing landscape. We do not want to continue giving subsidies to the Post Office; we want it to be vibrant, commercial and profitable and to stand on its own two feet.

11:57

[David Mowat (Warrington South) (Con)]

I want to add just a couple of quick points to what has been said.

To put these issues in context, there were 20,000 post offices a decade ago; now, there are fewer than 12,000. The Government have committed to keeping 11,500 of those open for the next four years. I do not share the confidence of my hon. Friend the Member for Argyll and Bute (Mr Reid) that the network will be stable for the next decade. Unless action is taken, it will be stable for only the next four years—that is, for the period of the subsidy that is currently going through. Although I welcome the £1.3 billion subsidy in terms of keeping the network open, 7,000 of the 11,500 post offices that remain are loss making. Unless that is fixed, the prognosis cannot be positive. We have 7,000 loss-making post offices, and that is with the inter-business agreement in place. It is worth telling Opposition Members that. The issue is not the IBA, but sustainability over the medium term.

Will the Minister answer two questions? I want to know more about the modernisation programme that will be put in place over the next four years, which involves something like £350 million. I also reiterate the point that Members on both sides have made about joined-up thinking in the Government. It is not sustainable that we are, on the one hand, investing millions of pounds in trying to make the network better, albeit in ways I am not sure I fully understand, while Departments are, on the other hand, tendering business in a way that no commercial organisation would. I have heard EU legislation being used as an excuse, but I do not accept that and think that the argument should be tested. I do not intend to reiterate the types of Government business that are being removed or that could be removed, but it is anomalous that so much work is potentially threatened, while on the other hand we are spending £50,000 per location, per year, to keep post offices open.

[Mr Philip Hollobone in the Chair]

I shall be particularly interested to hear from the Minister, in relation to the modernisation programme, about who is accountable for its success and what the measures of its success will be. In particular, what is his estimate of the number of post offices that will be in profit after the four-year period has elapsed? At the moment, the number is 4,000. We are to spend £300 million on modernisation. What number would he, at this stage when the money is being committed, expect to be viable after the modernisation programme? The corollary to the answer to that question is what level of subsidy the Government and the Minister expect to be payable after four years to maintain, for the purpose of argument, 11,500 post offices.

12:00

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) on securing this debate on a very important topic. Her worries and concerns are shared by many hon. Members on both sides of the House, as we saw from the number who attended and participated on Report in the debate on the amendment to guarantee a 10-year inter-business agreement.

Post offices are at the heart of our communities and are well loved by the people they serve. Hon. Members will remember the postcard campaign lobbying MPs to keep the Post Office card account; many were contacted by more constituents on that issue than on any other, before or since. They received cards from constituents who used Post Office card accounts, and from people who did not have one but who realised the value of the facility to other members of the community and the account’s value to the post office network, because of the work it brought in, directly and indirectly, through increased footfall in post offices and increased business for the corner or village shop where the post office was situated.

Consumers and sub-postmasters alike recognise that any drop in post office business or footfall could have an impact on the economic viability of the post office or village shop. Yet the Government are complacent about the potential loss to the post office network of some 37% of its current business. The loss of all or even some of that business will inevitably mean a dramatic reshaping of the post office network on an unprecedented scale. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) has not explained that complacency. He has hidden behind some potential barriers, which he seems unwilling to try to shift and which may be more a figment of his imagination than a reality. I hope that the Minister will today be able to give us a better explanation for that complacency.

The Under-Secretary did not tell us, either in Committee or on Report, about any detailed work or discussions that have taken place to secure future Royal Mail business for the post office network. There are many ways in which that might be achieved, but I shall concentrate my remarks on three of them, namely the inclusion of a specific number of access points in the Bill, the inclusion of an inter-business agreement in the Bill and other ways of securing an inter-business agreement. In Committee, the Under-Secretary steadfastly refused to consider any mechanism to protect the post office network or the number of outlets where consumers can access post office services. One of the issues that we debated at length in Committee was including in the Postal Services Bill measures to guarantee the number and geographical spread of access points to postal services, which would guarantee the public a number of outlets across the country to post parcels or register letters. Without that guarantee of a specific number of outlets to serve consumers, there will be nothing to stop a privatised Royal Mail from drastically cutting the number of outlets, and limiting them to the larger centres only, whether through high street chains or part of the post office network.

[Mr Reid]

Under the Bill, Ofcom has a duty to ensure that there are enough access points to meet users’ reasonable needs. Surely that is the guarantee. The Post Office will either remain in Government hands or it will be mutualised, so the Government have a role there. The regulator has a role in ensuring enough access points—that is post offices.

[Nia Griffith]

If the hon. Gentleman looks carefully, he will see that there is much flexibility in the Bill about what can be changed by the regulator and where things can be moved to, so the guarantee is not robust.

Returning to putting more robust access criteria in the Bill, if that does not happen consumers will have to travel much further to access Royal Mail postal services, and inevitably those who have least access to transport will miss out—those who do not have cars and those who are served by an infrequent bus service or by no bus service at all. A reduction in the number of access points would also have a negative impact on small businesses in rural areas that make frequent use of the parcel service and whose costs, both in fuel and time, would increase significantly if they had to travel many extra miles to use postal services. There is nothing to stop the Government including in the Bill that vital guarantee for consumers. Only a simple guarantee of a number of access points similar to the current number of post offices would ensure that consumers would continue to have access to the same sort of availability of counter services as they enjoy at present.

[Mr Reid]

Legislating for a specific number of post offices does not help, because they could all be moved into cities. The problem is writing the requirement for a spread of post offices into legislation. The previous Government’s access criteria could, as we know, be satisfied by closing 4,000 post offices, so the difficulty is writing the spread into legislation. No one—neither the official Opposition nor Back Benchers—tabled such an amendment on Report, because devising the formula is impossible.

[Nia Griffith]

The hon. Gentleman rightly mentions geographical spread, which is important. Provision should be made for it. Perhaps we should look to the Australian model. There it is guaranteed that 90% of the urban population will have a post office within 2.5 km; and almost unbelievably in such a large continent it is guaranteed that 85% of the rural population will have a post office within 7.5 km. If they can manage that in Australia, we could introduce a guarantee that is much more robust than what we now have. The irony is that, if Deutsche Post were to purchase Royal Mail, consumers here could have a reduced service, while they contributed to the profits of a company which must provide a specified number of outlets in its own country. In other words, we could have a poorer service here, while propping up a better service in Germany—a scenario we might associate more with 19th-century colonialism than modern Britain.

The Under-Secretary did not give convincing answers on Report about what exactly the legal obstacles are to the inclusion in the Bill of a guarantee of an inter-business agreement. He did not tell us about any legal precedents on which he was drawing, or what research his team has done on any relevant challenges in EU law.

The Under-Secretary has also failed to tell us about options outside the Bill itself. Currently both Royal Mail and the post office network are in public ownership. Both the chief executive and the chairman of Royal Mail speak favourably of the post office network. They recognise the respect it commands, the trust it enjoys in our communities and its value as a business partner. What, therefore, is preventing the signing of a new inter-business agreement now, while Royal Mail is still in public ownership? I am not now talking about a new clause in the Bill, but a new business agreement: an agreement that goes beyond the end of the current inter-business agreement, which could run out within a couple of years of privatisation, depending on the time scale, and that lasts for an additional 10 years. Has the Minister explored that possibility with Royal Mail? What would be the legal difference between an inter-business agreement with just a couple of years to run and one that was to last five or 10 years? Has he sought to capitalise on the warm words of Moya Greene and Donald Brydon about the post office network? Has he had any talks about an extended IBA between Royal Mail and the post office network?

I am sure that the Minister does not need to be reminded that Royal Mail is currently in public ownership. He must realise how serious the loss of business would be to the post office network. Even though any decision by Royal Mail to abandon the Post Office will be taken after privatisation, and therefore will technically not be a Government decision, he knows that the people of this country will not be slow to make the connection between the privatisation of Royal Mail and the demise of their local post offices.

The pity is that the Minister does not seem to want to take specific action. He seems to think that he can rely on warm words to guarantee Royal Mail business for the Post Office, but people are wary of warm words. There have been warm words about no rise in VAT and warm words about no increase in tuition fees—people are becoming very cynical about warm words. No shrewd business person would trust future business security to warm words. Surely, in his enthusiasm to privatise Royal Mail, the Minister has not overlooked the fact that it is currently in public ownership, and that he therefore has every opportunity to influence the way forward and to negotiate a longer IBA, here and now, before proceeding to privatisation.

Indeed, the Under-Secretary told us on Report that the Government

“as shareholders, will ensure that the commitment that Royal Mail made in its evidence to the Public Bill Committee—that it would conclude the longest legally permissible contract before separation—is fulfilled.”—[Official Report, 12 January 2011; Vol. 521, c. 357.]

I ask the Minister to enlighten us about what talks he or the Under-Secretary have had with Royal Mail about drawing up a longer IBA with the Post Office before privatisation. What was meant by the “longest legally permissible contract”? Is there a legal limit on such a contract? If so, what is it? As I said in last week’s debate, purchasers take over existing contracts and responsibilities in all sorts of takeovers, and such arrangements can be long-lasting.

The hon. Member for Warrington South (David Mowat) rightly questions what joined-up thinking has taken place on the subsidy. In our debate on the subsidy on 20 December, I said that the taxpayer is paying a large subsidy to the post office network, of which only 48% is necessary to continue the subsidy that Labour introduced to maintain the operation of the current post office network. We have been told that the remainder includes money to convert post offices to the post office local model, which involves paying the sub-postmaster by transaction, but that has been criticised by the Rural Shops Alliance, which questions why anyone would want to work longer hours for less income. It predicts difficulty in attracting new entrants to the post office local model; indeed, a similar pilot in Linlithgow ended with the shopkeeper saying that it simply was not worth his while to provide post office services.

Taxpayers will rightly ask what is the point of so much taxpayers’ money going into the post office network, particularly when they are seeing savage cuts in other services, and given that the Government are doing absolutely nothing to help secure the 37% of post office income that comes from the IBA with Royal Mail.

[David Mowat]

The Opposition continually talk about the IBA as if it were some kind of nirvana. Even with it in place, 7,500 post offices in the network are making a loss. At least the Minister has proposals on fixing that and on modernisation. Do the Opposition have any proposals other than the status quo?

[Nia Griffith]

Frankly, despite the Government’s fine words, the Post Office has no new Government contracts and no new streams of business, and it faces the possibility of losing all its Royal Mail business. Taxpayers will ask why they have to pay for that.

Taxpayers understand the idea of investment that brings returns and the value of business start-up funds, which can help to launch new businesses that subsequently stand on their own two feet, and they accept the need for some subsidy to make the network a truly nationwide service. However, if the post office network does not provide nationwide access to postal services or develop new business streams to improve its viability, the taxpayer may well ask what is the point of allocating £1.34 billion to the post office network. The taxpayer has every right to ask what steps the Minister is taking to ensure that the Post Office continues to do for Royal Mail business that provides 37% of its income.

In its recent report, the Scottish Affairs Committee stated that:

“we recommend the Government take a more proactive approach to facilitating a long and robust IBA, through removing any obstacles: practical, legal or otherwise that may exist. Ideally, a ten year agreement should be reached prior to any sale of Royal Mail. We understand that this may affect the marketability of Royal Mail, but it is essential to the sustainability of Postal Services in Scotland. It is in everyone’s interest”.

Members on both sides have stressed time and again the valuable social role of the post office, and the Government’s recent subsidy allocation suggests that it is a role worth paying for.

Will the Minister say whether concern about the marketability of Royal Mail is the reason for the Government’s reluctance to pursue a robust IBA? If so, does he consider potential diminished marketability to be a price worth paying when it comes to guaranteeing the future of 37% of the post office network’s business? What analysis have the Government made of the cost of a presumed lower price for Royal Mail with a robust IBA with the Post Office, and the cost of continued subsidy of the post office network? Once Royal Mail is privatised and possibly sold to a foreign owner without a long-term IBA in place, it will be too late to insist on one.

The Government will not be able to insist on Royal Mail using the Post Office. They will not be able to do what Lord Mandelson did. They have the chance here and now. I want to know whether they are going to take it.

12:16

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

It is always a delight to serve under your chairmanship, Mr Hollobone. It is a delight, also, to welcome a debate on the implications for the post office network of the privatisation of Royal Mail, and I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing it. She introduced the subject with typical courtesy and clarity. I know that her concerns are widely felt, and I want to be as responsive and sensitive to those concerns as I can. I shall try to deal with as many of the points raised in debate as possible; I hope that hon. Members will not mind if I am not as generous as usual in taking interventions, as we have a lot of ground to cover.

The matter has been extensively debated over recent weeks, including during the Committee stage of the Postal Services Bill, the oral evidence session of the Scottish Affairs Committee, the Third Reading of the Bill last Wednesday and at Business, Innovation and Skills Question Time. Indeed, the matter has been aired in a number of forums. I fully appreciate that people are concerned about the future of the post office network. In essence, this debate focuses on that subject, and I shall try to restrict my remarks to that, for understandable reasons.

I start by putting the matter in context. I do not mean the economic context—the fact that the Government inherited the largest peacetime deficit in our history, and that the state is borrowing one pound in every four that it spends and is paying only the interest on the nation’s debt, which costs £43 billion each year, or about £120 million a day. That is not entirely relevant, Mr Hollobone, and you would not want me to dwell on it, but it needs to be said. I mean the context that surrounds Royal Mail—the need to invest in Royal Mail, to update it and to make it a business that can compete in an increasingly complex international scene.

As the hon. Member for Solihull (Lorely Burt) said, social change and the way in which people access, exchange and use information are having an impact on post offices and Royal Mail, as has the increasingly competitive nature of the marketplace. In order to get that investment, the Government needed to think afresh about the ownership of Royal Mail. That is widely acknowledged. I put on record the fact that that the previous Government were indeed considering the matter, and introduced a Bill in the Lords. Had they been re-elected, I have no doubt that we would be having a debate in Government time about the future of Royal Mail, but on a different set of assumptions about its ownership.

The context is one of a need for change, and a need for fresh ideas about how to guarantee a strong future for Royal Mail. In that spirit, I do not want to dwell too much on the previous Government’s record, but it would be remiss of me not to say that between 1997 and 2010, about 7,000 post offices closed, 5,000 of which were in two Government-funded closure programmes in 2003-05 and 2007-09. Government Members should not be expected to take too many lessons from the Opposition.

I do not want to be excessively partisan or to get into an argument about this, but the Government value post offices. We understand their social and cultural value as well as their utility. As constituency Members, we have fought for them to be retained up and down the land, so we have nothing to be embarrassed about in those terms. It is in that spirit that this Government approach the subject of post offices and make it clear there will be no further post office closure programme. That is enough of my partisan points; I just felt that it was important to put them on the record.

Let me make 10 points to kick things off, then I will try to deal with the points that have been raised in the debate. First, the Government have made it absolutely clear that the Post Office is not for sale. Secondly, we recognise that the Post Office is a unique national asset, so there will be no repeat of the closure programmes of the past. Thirdly, we have committed £1.34 billion to the Post Office for it to modernise its network and safeguard its future, thus making it a stronger partner for Royal Mail. Fourthly, the Bill before Parliament proposes to separate Post Office Ltd from the Royal Mail Group, thus allowing the Post Office to focus more attention on developing its business. It also allows for the possible future mutualisation of Post Office Ltd.

Fifthly, under a mutual structure, the ownership and running of the post office network could be handed over to employees, sub-postmasters and communities. Sixthly, the Government are committed to secure a sustainable future for the Post Office and we want it to become a genuine front office for Government at both a national and local level. Seventhly, we will support the expansion of accessible and affordable personal financial services that are available through the post office. Eighthly, we will support the greater involvement of local authorities in planning and delivering local post office provision.

Ninthly, the Government fully share hon. Members’ laudable interest in ensuring a strong commercial relationship between Royal Mail and Post Office Ltd, but we do not share the view that legislating for a contract of between five and 20 years is the way to achieve our shared objective. To pick up on the point made by the hon. Member for Llanelli (Nia Griffith), it is not just that that would make Royal Mail less saleable—although it might—but that it would be legally challenged under competition law and possibly internationally, too. I agree that it is important that the arrangements between Royal Mail and the Post Office are as secure as they can be, and I will return to that point and the particular question that she raised in a moment.

Lastly, as the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), made clear last week, stamps will continue to be issued in the same way.

[Anne Marie Morris]

I am delighted to hear the Minister’s comments about stamps, but I am concerned about those wonderful red pillar boxes and the monogram. Will the Minister confirm that they will also be protected?

[Mr Hayes]

I was about to say that stamps will continue to bear the sovereign’s head, which is right and proper. I hear what my hon. Friend says, and I share her view; it is important that we retain the iconic pillar box with the Royal monogram on. That is something that the Government will consider. I can say no more at this stage, but I know that my hon. Friend will want to take up that point and see what can be done.

In evidence to the Postal Services Bill Committee over recent weeks, there has been strong backing for the separation of Royal Mail and Post Office Ltd. I noted that no one made a case against that today. As I said, it was, I think, accepted by most Members in this House. They are different businesses that will benefit from focusing on different challenges. In his evidence to the Committee, Richard Hooper of Consumer Focus and Postcomm supported the separation of the ownership of the businesses.

In her evidence to the Committee, Moya Greene, chief executive of Royal Mail, said that it would be unthinkable not always to have a strong relationship between the Post Office and Royal Mail. To underline that point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence that before any privatisation of Royal Mail could take place, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is legally permissible—a point that was picked up by the hon. Member for Argyll and Bute (Mr Reid). Such a pledge provides a reassurance about the marriage between the two, which is essential to maintaining the post office network that we all feel so strongly about. This is done not for sentimental reasons, but because it makes good commercial sense. The post office network has an unparalleled reach and a very strong brand. As my hon. Friend the Member for Newton Abbot (Anne Marie Morris) said, we can be optimistic about the relationship. A stronger Royal Mail is more likely to secure the future of many more post offices. If we do not take the necessary radical steps to support and invest in Royal Mail, post offices will be at risk. That is something that we can look to with confidence, based on the belief that post offices not only provide important services, but are at the hub of local communities. The post office in my own village of Moulton, which is run by Gary and Jane, does an excellent job not just providing postal services but as a centre for all kinds of activities in the village. It is a shop, too, and provides a valuable local service.

As a representative of a rural constituency, I understand some of the concerns expressed by other rural colleagues. We heard from the hon. Member for North Ayrshire and Arran that there are concerns about the spread of the network—the universality. Let me make it clear that in terms of universality, the Bill will create a fundamental duty at the heart of the legislation for a six-day per week collection and delivery of letters at uniform and affordable prices. To do that, we need a service that is spread across the whole nation and not a partial service; we are committed to that and I personally feel very strongly about it.

It is important to say that the future success of the post office network will depend on its providing a fuller and wider range of services. I hear what my hon. Friend the Member for Warrington South (David Mowat) says about cost and subsidy. We can deal with that by allowing post offices to do more, thus ensuring that they can be profitable businesses. We are looking at a range of additional services—both local government and national Government services—that post offices can provide. Post offices can act as a front line for those clients or users that need to do things in their community in a way that is accessible and convenient. We are piloting a range of services that post offices can provide and, as a result of this debate, we will look at other things that Government can do to make the post office network more viable, commercial and profitable. I know that my hon. Friend is anxious about that and I understand why.

However, there will always be small rural post offices, perhaps in more remote communities, that will find it very hard to operate without subsidy. I do not have a problem with that. Post offices are so culturally and socially important that we need to take that on board. Certainly, all those that can be profitable should be profitable.

[David Mowat]

After the modernisation programme, how many post offices does the Minister think will be self-sufficient?

[Mr Hayes]

As part of the recent £1.34 billion funding package, there is a legally binding commitment to a minimum number of post offices—the Post Office is required to provide a network of at least 11,500 branches. As I have said, there will be no closure programme under this Government. I am confident that many more post offices can be made profitable, but I will not speculate on which post offices will take up which services in which locations; my hon. Friend can hardly expect me to do that.

I have just time to say a word about demutualisation, which was raised by the hon. Member for Edinburgh East (Sheila Gilmore). Demutualisation is not something that we see happening; indeed it will be specifically prohibited.

A better future for Royal Mail means a brighter future for post offices. This Government seek that brighter future and will deliver it; nothing less will do.

[Mr Philip Hollobone (in the Chair)]

Order. I thank all the Members who took part in that most interesting debate and ask all those who are leaving to do so quickly and quietly.