Postal Services Bill
Lord Young of Norwood Green
My Lords, the Government propose to sell off 100 per cent of Royal Mail, which may be regarded as one of our oldest public services, dating back to the 17th century. It will be the sale of one of our greatest and most cherished national institutions. It has a noble history in the development of the culture, social cohesion and economic strength of this nation, and today it still provides a vital public service. Richard Hooper has described the sale as a momentous step by any standard, as I am sure the whole House appreciates, whether or not they support the move.
We and fellow Peers of several and no party affiliations have submitted amendments which seek to ensure that, if the sale of Royal Mail goes ahead, it meets four main objectives: first, that it is done in a timely fashion that does not present the prospect of an endless cloud of doubt hanging over the future of the company; secondly, that proper measures are taken to ensure that value for money is gained for the taxpayer and that the company is not sold at too low a price; thirdly, that there is greater clarity and greater accountability than the Bill currently provides; and, fourthly, that a privatised Royal Mail is put on a secure footing and is not subject to the ravages of asset-stripping and disintegration or doomed to failure because of the circumstances that the Bill creates.
The amendment to make provision for a sunset clause aims to meet the first of those objectives, ensuring that any sale takes place in a timely fashion without a long-lasting aura of uncertainty besetting the company. Sunset clauses are well recognised. Indeed, Members, regardless of party affiliation, have argued for them in the past in various pieces of legislation, as I well remember. In fact, the Minister for Culture, Communications and Creative Industries, Ed Vaizey, stated in another place in June 2009:
“I also welcome the fact that there is a sunset clause. As other hon. Members have pointed out, sunset clauses are, in principle, a very good thing to include in any legislation”.—[Official Report, Commons, Holocaust (Stolen Art) Restitution Public Bill Committee, 10/06/09; col. 13.]
If the Government had provided for a sunset clause in the Bill, there would be no need to debate this amendment. As they have not, perhaps a few examples of sunset clauses and their use would help the Committee. In 2009, interestingly, the Conservatives in Scotland argued that sunset clauses should be added to all Scottish legislation. I am sure that Conservative Members of this House will support that position, given that it was stated in their party’s manifesto in 2007. The debt relief Act 2010 has a sunset clause which expires on 7 June 2011, which neither of the coalition parties voted against. In the Budget of June last year, regulatory sunset clauses were announced—a well tried and recognised tool for Parliament and, indeed, the Government to use.
How would the amendment assist in the progress of this Bill? The answer is fairly straightforward: it would add clarity. The Labour Party’s position on 100 per cent privatisation of Royal Mail has been made clear. However, if the Government’s proposals to privatise Royal Mail completely were approved by this House and the other place, the amendment would put a time limit on the Government’s ability to sell off Royal Mail. Setting a relevant date would add certainty for the business and, indeed, for the workforce—certainty that is currently lacking in the Bill.
As it stands, the Bill empowers not only this Government but future Governments to sell off Royal Mail. That process could go on and on. The Minister in the other place has made it clear that he would not intend to sell Royal Mail however low the price. That is a sound position and one with which we would agree. The Bill permits a period of uncertainty to continue not just into next year but possibly into the year after and even longer. That would be an intolerable position for Royal Mail, its management and its workforce. It would place the chief executive of the company in a perilous and uncertain position, which perhaps could be compared with that of a modern-day Premier League football manager at certain clubs, where team continuity has little value. It would damage the morale among the workforce too.
If the amendment were passed, it would not, of course, rule out a future disposal of some or all of the company; but it would require the Government to return to the House if they failed to dispose of Royal Mail by 31 December 2012. We deliberately selected a date which we felt is achievable and viable, rather than a date that could lead to this being characterised as a wrecking amendment.
As we proceed we shall put to the Minister other proposals that outline other areas where we would want them to come back to the House in order to do certain things. This amendment would not prevent the Government selling Royal Mail at another point in the future provided that the sunset clause is repealed. However, the Government have given no indication of a timetable for the sell-off. These amendments—one of which I hope the Government will accept—would enable this Government or a future Government to sell off Royal Mail and also ensure that the matter is not drawn out over many years. Without a sunset clause, the business, the employees, the partners in the Post Office, not to mention its business customers and the public, would be left in a strange limbo-land with no conclusion in sight. That would create massive uncertainty for the business. That could not be seen as an attraction to potential employees and customers, who could be driven away from the business by such massive uncertainty.
An unrestricted time limit could also act as a mechanism to drive down the price of the business. We are told that letter volumes will continue to fall and that the business can modernise only with private investment—so how would a long delay be helpful? The Minister needs to address that issue. Market conditions would likely get worse, and a period of uncertainty would surely make it very difficult to succeed in modernisation or to make proper investment decisions. Can the Minister tell us what impact an extended period of uncertainty would have on the value of the business, and therefore on the value for taxpayers? What will be the impact on employees of the falling value of the share participation scheme, if the legislation is approved?
As for the counterargument that a sunset clause would lead the Government to go for a fire sale of Royal Mail to get ahead of the time limit, the Government have already said that they will not sell Royal Mail at “any price”. As I said, that is a sound position. It would show very little faith in the current Government to think that they would put making an expedient sale before gaining best value for money.
This amendment is reasonable and necessary. It is called holding the Government to account. The legislation timetable is in the Government’s control. If the Government have the will, we will encourage and support the Minister—as we expect her to support our amendments. We will support her in bringing matters to the House and dealing with them as quickly as possible.
The Bill currently provides for the creation of a situation which is similar to the perpetual “sales” at retail outlets. As we all know, there is no rush to get to Currys, Dixons or wherever to buy new electrical goods because the “sale” does not really exist—it is perpetual. A perpetual sale drives down the price. Nothing in the Bill seems to prevent Royal Mail being sold off piecemeal over an extended period, as I said. Even the Minister must agree that that cannot be an acceptable solution. If the Government cannot complete a sale by one of the dates stipulated in the amendments, my honourable friends and I think it right and proper for the sunset clause to be enacted.
The amendments would impose on the Government a requirement to focus on their ambitions—which, as I said, are contrary to mine and those of my honourable friends. The alternative of death by a thousand cuts would wreck the Royal Mail and the improvements made recently, which even Richard Hooper could not envisage happening in 2008, at the time of his first report. The second Hooper report showed that good progress can be made with public ownership of the Royal Mail. It is vital that that is not unpicked and allowed to fall into disarray. The Bill, however, creates the opportunity for that kind of uncertainty. If the Minister and the Government are so sure that selling it off is a good thing, they should tell the Committee about the dangers of an extended period of sale. Indeed, it could be said that an extended sale period for Royal Mail might lead to a Dutch auction of sorts, which may suit some potential buyers more than others.
Lord Hunt of Wirral
My Lords, what a remarkable performance. I enjoyed the 14-minute speech by the noble Lord, Lord Young of Norwood Green, for a number of reasons, but first, I join him in paying tribute to Richard Hooper and say what a remarkable job he has done for Royal Mail. We were all thrilled when he was present at the Oscar ceremony when his son Tom won the best director award, one of the many awards for “The King’s Speech”.
The noble Lord made a remarkable presentation arguing in favour of a sunset clause when, thanks to the noble Lord when he was in Government, we are still awaiting sunrise. The great period of massive uncertainty that he described is wholly as a result of the previous Government’s inability to take the previous Bill through the other place after we had spent many hours improving it. I also heard him say that we must not have the Royal Mail engaging in some strange limbo-land. All I will say is that that is exactly what we had. The great thing now is that we have a Government determined to realise the ambitions of all those of us who care deeply about the Royal Mail and make it a great success. I share the noble Lord’s four principles, but I say to him that when he makes the first principle “timely”, I wish that he might have expressed some regret about the fact that the previous Bill did not proceed any further when it should have done. Of course he is right to say that we have to look for value for money, clarity and a secure footing. The great thing I have learnt from that remarkable lady, Moya Greene, is that she is determined to make Royal Mail the most respected institution in the UK. That is something she achieved with Canada Post, and I am a great admirer. Please, whatever the arguments for or against sunset clauses, let us have sunrise, let us get on with it.
Lord Hoyle
I was not going to rise, but I am going to rise and there may be other occasions when I rise when we hear the eloquence of the noble Lord opposite. I notice that he did not reply to the argument being put forward here about the uncertainty that would rest with Royal Mail unless there is a conclusion date. The question that was being asked was, “Are they going to give it away?”. I know that the Minister is a more reasonable person, and I expect that she will deal with the arguments rather than going round the periphery and talking about what might or might not have been. The pair of us had a little discussion. We did not always agree, although on other subjects in the past we have agreed, so we have something in common, but not on this. I hope the noble Lord will not rise again unless he is going to deal with the arguments in a constructive way and say why we should not have it. The reason is that we cannot allow uncertainty to continue. That will happen. How can management plan ahead if it has to keep asking itself: When will we be selling it off? How will we sell it off? Where are we going to go? No planning can take place in such circumstances. It not only affects the Royal Mail; it affects the Post Office network as well. We need to know what the Government are thinking. They have said, and I completely agree with them, that it will not be a giveaway. They are trying to get the right price with the right company that will serve the interest. I, of course, am totally against that, as is known. The point is that we are where we are in discussing this Bill, and it is reasonable to put a limit on this. After all, we are only at the beginning of 2011 and we are talking about the end of 2012. What is wrong with that? I do hope that we get a more constructive reply from the Minister.
Baroness Kramer
My Lords, I should, I suppose, confess to something of a wicked past. Back when I was a banker in the United States, part of my work was advising companies that were making purchases and selling off subsidiaries. If I was advising a potential buyer of Royal Mail, I would be hoping very much that this amendment would pass, because, frankly, nothing would give more leverage to a potential purchaser than what in effect is being described here as a drop-dead date.
We have seen government in the past sell assets at far below their appropriate value. I was very involved from the other side when I was on the board of Transport for London and the Government insisted on the Tube public/private partnership. TfL set itself internal deadlines. I do not believe that they were externally set, although I would have to check that. The ability to negotiate in effect collapsed in the final days as those deadlines approached and were very much exploited by the private partners and the banks on the other side, so I beg this House not to fall back into that trap.
The noble Lord discussed uncertainty, but what greater uncertainty could there be than the knowledge that the Government might find themselves coming back to this House at the time of a sunset clause for leave to continue with a sales programme. That maximises uncertainty for Royal Mail and for the other parts of the group that will, we hope, go on to their new future.
Lord Jones of Birmingham
My Lords, I concur with the noble Baroness. If this amendment was passed, there would be no activity whatever until about November 2012. As noble Lords will know, I spend a lot of my time in the corporate private sector, and I can tell the House that a lot of companies would just wait. There would then be a lot of activity in December 2012, and the Government would find themselves selling this at a price that none of us would want.
Lord Skelmersdale
My Lords, I must be the only person in this Committee, certainly in the House, who regrets not having spoken on this Bill at Second Reading. I did not do so because I was pursuing my day job as a director of a mail-order company. There is a temptation on these occasions to give a Second Reading speech, but I have no intention whatever of doing that. On this amendment, however, I agree with both my noble friend and the noble Lord, Lord Jones, that putting a final date into this legislation would make things even more difficult for the Post Office management. I have been advised that the point that I really want to make about Clause 1, and would have made on Clause 1 stand part, is deprecated by Standing Orders. Therefore, I am sorry to disappoint the noble Lord, Lord Hoyle, but I will speak no more about my reactions to this amendment.
I bring to the House’s attention Clause 1(2), which is gratuitous. The nuts and bolts of this Bill are contained in Clauses 1 and 4. Clause 1(1) removes from the statute book Sections 65 and 67 of the Postal Services Act 2000, and Clause 4 replaces them with a new formulation. My contention is that it would be far better drafting of this legislation if those two clauses were combined and we therefore left out Clause 1(2).
Over many years, I have been interested in the size and length of the statute book. Anything we can do to reduce the number of words or even the number of pages we should certainly do. I do not expect an answer on this conundrum that I have set myself from the Minister today. She has already instructed officials to give me some sort of answer, which I do not find particularly convincing. I would be happy to have discussions with her and them between now and the next stage of the Bill.
Lord Borrie
Like the noble Lord, Lord Skelmersdale, I have been interested to read Clause 1(2). It seems to be inelegantly worded, confusing and surplus to requirements. Why is it inelegant? Does one normally have the words “But see” another clause? It seems more like a text message or an e-mail rather than a provision in a Bill. Why is it confusing? Its position is confusing because essentially the first three clauses deal with Royal Mail. Clause 4 deals with the Post Office network. The Government properly have a different attitude from one to the other and so, I am sure, does my own Front Bench. Subsequent clauses deal with the network and there is no need for this cross-reference inelegantly expressed in Clause 1(2). I share the noble Lord’s view about that.
Viscount Eccles
My Lords, I, too, apologise for not having been present at Second Reading, but I support my noble friend Lady Kramer and the noble Lord, Lord Jones, on the Cross Benches. This amendment may be based on a misunderstanding. If there is to be a successful deal to move Royal Mail on and to bring in private capital, that deal will need to be set up by the board of Royal Mail and the chief executive of Royal Mail. It will not be set up by the Secretary of State, who I hope will stay right out of any negotiations that might take place to achieve that deal. The noble Lord, Lord Young of Norwood Green, seemed to expect the Secretary of State to play an active role, which is completely mistaken.
Lord Christopher
I was not going to speak on this amendment, but I have been provoked. I hope that the Minister will answer directly the question just asked from behind her on whether the Government will have some say on the sale or whether it will be left exclusively to the board of Royal Mail. I do not think that it should. One issue has not been mentioned in this discussion. While there may be much anxiety about the hope that by Christmas 2012 we can all go back to where we were, underlying this is another issue—on this matter I hope that the noble Baroness will have something to say. As I said at Second Reading, it is easier to say to whom you would not wish to sell Royal Mail than it is to say to whom you would. There is such a lack of clarity on this that the Government need to give reassurance. Would we, for example, be prepared to see it sold to a hedge fund? Would we be prepared to see it sold to a private equity fund? Would we be prepared to see it sold to a sovereign wealth fund? If so, would that be to all, to none or to some?
I have one final point on this issue. Would we sell it to any buyer with a reputation for asset stripping? I hope to come to this point on a later amendment, but I believe that unless we get the price right, there are assets in Royal Mail which could easily be sold at a very significant profit.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I wonder whether it would be okay with your Lordships if I deal with the question put by my noble friend Lord Skelmersdale and supported by the noble Lord, Lord Borrie, before moving on to the amendment. Clause 1(2) ensures that the two major issues under Part 1, the ownership of Royal Mail and the ownership of Post Office Ltd, are addressed in the very first clause. We believe that, given their importance, this is appropriate. The purpose of subsection (2) is to assist the reader in understanding the full implications of the Bill. It is intended to highlight the relevant provisions that appear further on in the Bill and of which the reader might not yet be aware. Without subsection (2), the clause may read as lifting the restrictions on ownership of Post Office Ltd with no indication that new restrictions have been put in place further on in the Bill.
While the majority of readers will look at the full Bill and draw up relevant connections, we believe it is important to consider how to make the Bill accessible to those who may be unfamiliar with legislative text or to those with an interest in one particular aspect of the policy. It is these readers who may look at what they believe are the relevant provisions and then fail to see the other relevant provisions further on. Provisions such as Clause 1(2) are designed to assist readers by making explicit any interdependencies between clauses. Furthermore, subsection (2) ensures that the two major issues in Part 1—ownership of Royal Mail and ownership of Post Office Ltd—are addressed in the very first clause, thus reflecting their importance. I hope that this explanation addresses the concerns of noble Lords, but I am sure that they will come back for further clarification if they feel that we have not been able to cover the point at this stage.
Lord Lea of Crondall
As someone who is not directly involved in this, perhaps I may make an observation. It is plain common sense for the noble Baroness to say, in the light of the remarks made by the noble Lord, Lord Skelmersdale, and my noble friend Lord Borrie, that it is no big deal, but this is not language appropriate to an Act of Parliament. Quite simply, will she agree to think about some answers on the back of a postcard before we move on to the next stage of the Bill?
Lord Skelmersdale
My Lords, I would not put it quite as rudely or as crudely as the noble Lord opposite has just done. However, I did suggest in my few words that the draftsmen ought to look at combining Clause 1(1) with Clause 4 and then putting that at the very beginning of the Bill. I noted that my noble friend did not respond to the suggestion, but as I said, I do not expect her to do so now. I am sure she has many more important things to do, such as responding to the amendment moved by the noble Lord, Lord Young of Norwood Green, which I am sure she will do in her usual adequate fashion. All I am asking for is future discussions, and from what my noble friend has just said, I am sure that she would find that acceptable.
Baroness Wilcox
I thank my noble friend and of course I will be happy to speak to him afterwards, at any time that is convenient to him. I should now turn to the amendment tabled by the noble Lord, Lord Young, otherwise we may be here for much longer than we anticipated.
I believe that Clause 1 exposes the real difference between the previous Government’s approach as set out in their 2009 Bill to the fundamental problems facing Royal Mail, and the approach that this Government are taking to secure the company’s future. Setting aside the ownership issue for a moment, I think it is clear to everyone that the powers in the Bill to tackle the pension deficit and regulation are either the same as or very similar to those provided in the 2009 Bill. This is perhaps not surprising as we have based our Bill on the same evidence, that of the Hooper report, as the previous Government. However, we have not simply produced a cut-and-paste Bill. As we will discuss during this Committee stage, we have included new regulatory measures to safeguard the universal postal service and introduced fresh ideas on employee ownership and the potential of a mutual ownership structure for the post office network.
All sides of the House agreed with the analysis contained in Richard Hooper’s 2008 report. We all agreed that the current framework was untenable and that urgent action needed to be taken if we were to secure the universal postal service for the benefit of all postal service users, both business and social.
Richard Hooper’s recent update showed that the situation is now much worse than it was in 2008. In fact, he described the Royal Mail’s current position as being “even more precarious”. The noble Lord, Lord Young, asked about the effect on the value of Royal Mail of prolonged uncertainty. I would say to him that it was the failure of the previous Government’s Bill that has caused prolonged uncertainty for Royal Mail and all other postal operators. That is what is putting the universal postal service at risk.
The Bill addresses those problems and creates a framework that will help to secure the future of Royal Mail and maintain the universal postal service. Part 1 sets out provisions relating to the restructuring of the Royal Mail group of companies. The Government committed in the coalition agreement to injecting private sector capital into Royal Mail, including opportunities for employee ownership. We also said that we would retain Post Office Ltd in public ownership, on which the noble Lord, Lord Young, raised a number of points. We will have plenty of opportunity to discuss the Post Office when we debate those clauses dealing specifically with it.
I turn to Amendment 1. The disposal of shares in Royal Mail will be a commercial transaction. The Government’s objective is to ensure that the transaction represents value for money for the taxpayer and secures the future of Royal Mail. In doing so, our overriding objective is to secure the future of the universal postal service. I cannot understand, therefore, why the noble Lords have brought forward this amendment, the substance of which was fully debated in the other place.
By setting a deadline for a disposal, all the commercial advantage would be given to the buyer if we were selling the business by auction. The buyer would know that the Government were up against a deadline, giving him the whip hand in any negotiation, and all sorts of demands could be made as the deadline approached. The amendment would not therefore allow the Government to ensure that they could get value for money from a sale and secure the best future owners for Royal Mail; in our view, it would do the opposite. When I was on the opposition Benches, I was very keen on sunset clauses in legislation and I am not opposed to them now—in fact, in most cases I encourage them—but the proposal set out in this amendment is simply not appropriate to the circumstances.
A failing of the previous Government’s policy on Royal Mail was that it tried to do too much at the same time by running the legislative and the sale processes in parallel. We have decided to take a staged approach; our first priority is passing the Postal Services Bill to allow the framework for action. The Government will then bring into force the new regulatory regime. Only then will we start the process to introduce private sector investment, including the employee share scheme and the pension solution.
The noble Lord, Lord Young, asked what the Government would do if they could not sell Royal Mail before the end of the current modernisation plan. Through this Bill, the Government are taking the preparatory steps necessary to enable Royal Mail to attract the private capital that it needs. As noble Lords will appreciate, the timing will depend on when we can best secure our twin objectives of the best outcome for Royal Mail and the best outcome for the taxpayer. The Government are focused on ensuring that Royal Mail can attract private investment, not on putting new obstacles in its way.
An integral aspect of the Bill is that it allows flexibility, because that is what any sensible commercial shareholder would retain for themselves. Such flexibility enables the Government to decide when to conduct a disposal of shares and how to do it, either through a trade sale or a flotation. I agree with my noble friend Lord Hunt, who said, as did the noble Lord, Lord Jones, that we want no artificial deadlines. Although I do not agree with everything that the noble Lord, Lord Hoyle, said, I do agree that we want the right price and the right company, and for that we must wait our time until the right moment. I thank my noble friends Lady Kramer and Lord Eccles for their support.
I say to the noble Lord, Lord Christopher, that I hope we will be flexible, get a really good deal for the taxpayer and make sure, as always, that we support the universal service. The proposal in the amendment is, I fear, impractical and would risk the future of the very universal postal service that we are all trying to save. I therefore ask the noble Lord, Lord Young, to withdraw his amendment.
Lord Young of Norwood Green
My Lords, I have obviously reflected on the range of answers and it is no surprise that I do not agree with all the analyses. What is past is past but perhaps there will be a new dawn, to paraphrase the noble Lord, Lord Hunt.
I agree with my noble friend Lord Hoyle that the amendment is justified. I was confused by the contribution of the noble Baroness, Lady Kramer. I was not sure whether or not she was supporting the amendment but, at the end, I gathered not because she tended to concur with the noble Lord, Lord Jones, that, apparently, no one is going to do anything at all and they are going to wait until 20 December, or whenever it is. I find that unlikely.
As regards the contributions of the noble Lord, Lord Skelmersdale, and my noble friend Lord Borrie, I quite like the idea of the Bill being drafted by committee. It would take a long time and I doubt whether it would be any more elegant or inelegant than it is currently. From my experience of dealing with parliamentary draftsmen, it is a painful and tortuous process to sort out what is required or what they tell you is required. I wish the Minister the best of luck in sorting out that particular problem.
I agree with my noble friend Lord Christopher; I am sure the Government will be involved in the sale. The Minister pointed out the possibilities and I cannot conceive of a situation where the Government will hand this over lock, stock and barrel to Royal Mail. She did not answer the question posed by my noble friend Lord Christopher about whether it could be sold to a hedge fund or a sovereign wealth fund and the dangers of asset-strippers.
I made clear at the outset that this is not intended to be a wrecking amendment; that is why it refers to 31 December 2012. As to whether the situation is much worse, it is challenging but, in one respect, it is better because we have an agreement on Royal Mail transformation with the union and modernisation is going ahead, which is a profound step forward. I will not say that mistakes were not made but there is now a good foundation and a good relationship between management and the union, which is fundamentally important to long-term success.
As to the deadline giving buyers the advantage, that depends on whether you believe that everyone will wait until the end. I find that unlikely.
We will obviously reflect on what has been said by the Minister. However, we would ask her to reflect on whether or not there should be any timescale at all in relation to the projected sale. Nevertheless, in the light of the debate, I will withdraw the amendment.
“Royal Mail companies to be publicly owned
(1) Each Royal Mail company must at all times be publicly owned.
(2) Accordingly—
(a) any issue or transfer of shares in a company will have no effect if it would cause a Royal Mail company to cease to be publicly owned, and(b) any issue or transfer of share rights to a person will have no effect if the acquisition by the person of the shares to which the share rights relate would cause a Royal Mail company to cease to be publicly owned.”
Lord Young of Norwood Green
Under Clause 1, the Government have made it clear that they propose to sell off 100 per cent, albeit with 10 per cent employee shares, of Royal Mail—which may, as I have already said, be regarded as one our of oldest public services. It is the sale of a great public institution; it has a noble history in the development of the culture, social cohesion and economic strength of the nation and still provides a vital public service.
For 350 years, Royal Mail has been, to all intents and purposes, a public service and is seen as a huge and valuable asset run in the national interest. One should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country’s development as the railway or the electricity grid.
Turning to the modern day, I also pay tribute to Richard Hooper, who described the Royal Mail and the service it provides as part of the UK’s “economic and social glue”, binding communities together. That is an elegant and apposite description. Many noble Lords have praised the work of the Royal Mail and the social value of the country’s 11,900 local post offices. Let us also remember that, despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, the Royal Mail still delivers some 70 millions letters a day to the 28 million homes and businesses in the United Kingdom.
The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard, as I am sure all noble Lords appreciate, whether or not they support this move. We on these Benches will ensure that the Bill receives the line-by-line scrutiny at which this House excels in order to gain greater clarity and provide greater assurance for the future.
It is a pity that the noble Lord, Lord Hunt of Wirral, has disappeared from his vantage point because at Second Reading he remarked that the debate seemed to him a little like Groundhog Day. My noble friend behind me has explored the relative merits and demerits of Groundhog Day and I am not going to go through that again. He said the debate had,
“a remarkably similar feel to it to many others that we have had. Of course, we had the Second Reading of a Postal Services Bill on Tuesday 10 March 2009”.—[Official Report, 16/2/11; col. 734.]
Yet perhaps his mind was wandering back to an earlier era because the history of attempts to privatise the Post Office goes back much further than just two years. The noble Lord was a serving member of the previous Conservative Government as Secretary of State for Wales from 1990 to 1993 and then in a number of positions. He earned a great deal of respect across the political spectrum for the way in which he conducted himself during that time but I must remind the noble Lord and the House that, for a good deal of that period, the privatisation of the Post Office was a burning issue of debate, especially between 1992 and 1995.
On 30 July 1992, the Financial Times reported:
“In a departure from previous policy, Mr Michael Heseltine”—
as he was at that time—
“trade and industry secretary, put privatisation of the Post Office on the political agenda”.
Some 18 months later, on 14 December 1993, the Independent newspaper reported under the headline,
“Post Office in ‘crisis’ over Tory delay”,
that,
“the Government came under a barrage of criticism yesterday over the year-long delay in deciding whether to privatise the Post Office”.
Delay and privatisation has an honourable—or dishonourable—history. There have certainly been a number of attempts to resolve this problem.
On 2 February 1994, the Independent reported that full-scale,
“privatisation of the Post Office is still on the political agenda, Michael Heseltine said last night … after it had been shelved by the Cabinet in the face of opposition from ministerial colleagues”.
There is certainly a sense of déjà vu about that.
On 19 May 1994, a Green Paper on postal reform was at long last published. It proposed 100 per cent privatisation of the Royal Mail with a Stock Exchange flotation to the public and employees, and another option of 51 per cent privatisation of Royal Mail. The Post Office network would be kept under the existing arrangements and the Post Office management supported a 100 per cent sale. However, the records show that that met with considerable opposition from much of the public and Back-Bench Conservative MPs. That is an interesting scenario.
In November 1994, a newspaper reported that:
“Michael Heseltine put a last-ditch compromise to leading Tory backbench rebels”.
It certainly was the last ditch; although he did not die in it, the attempt to privatise certainly did. So there are certainly a few echoes in that report.
There was a further twist in the tale. The Cabinet considered the privatisation plan and decided against it. Some members of that Cabinet at the time are Members of this House today. I feel sure that the noble Lord, Lord Hunt, will remember why they concluded that privatising the Royal Mail was a privatisation too far. Maybe these thoughts were in the noble Lord’s mind when he was experiencing his bout of déjà vu and teasing the Opposition Front Bench today.
I make these remarks not only as a mild riposte to the comments of the noble Lord, Lord Hunt, about the 2009 Bill but to illustrate that the future of Royal Mail and the Post Office network is an important issue that has prompted heated debate for many years. What a shame we cannot rewind—but Hansard will reveal all.
The noble Lord reminded us that all the Front Benches were in favour of the Postal Services Bill 2009. Indeed they were, but I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned; that is, they must be in overall public ownership. The previous Bill of 2000, still in force today, permits joint ventures between Royal Mail and private companies. That has been a good thing—for example, in relation to GLS. The 2009 Bill permitted a minority partnership. What neither Bill permitted was 100 per cent privatisation, which the Bill before us proposes. That is the nub of the difference and, I suppose, of this amendment.
Amendment 2 is intended to reinsert the provision of the 2009 Bill that each Royal Mail company must be in overall—I stress “overall”—public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time and indeed the Liberal Democrats supported that proposition.
Perhaps there was a change of heart at the general election. One might find a clue in the manifestos of the two parties that came together to form the Government. If you search for the privatisation proposals contained in the Postal Services Bill in the Conservative or Liberal Democrat manifestos of 2010, though, I am afraid that you will search in vain. The Liberal Democrat manifesto clearly rejected 100 per cent privatisation of Royal Mail. It pledged to:
“Give both Royal Mail and post offices a long-term future, by separating Post Office Ltd from the Royal Mail and retaining Post Office Ltd in full public ownership. 49 per cent of Royal Mail will be sold to create funds for investment. The ownership of the other 51 per cent will be divided between an employee trust and the government”.
No doubt Liberal Democrat Members will tell us that things have changed fundamentally since they wrote that manifesto, as they have done on a whole range of other issues that I will not refer to today.
Perhaps the Conservative manifesto will be more enlightening. It was enticingly entitled Invitation to Join the Government of Britain. Did we miss something? Was it really an exclusive appeal to Liberal Democrat MPs and Peers? One can scour the contents of the Conservative manifesto from start to finish but there is no mention at all of Post Office privatisation.
During debates in 2009, the noble Lord, Lord Hunt, criticised the previous Secretary of State for introducing a Bill with insufficient consultation, but by comparison this Bill is being pressed through with breathtaking speed. The Government carried out no public consultation on their proposal to privatise 100 per cent of Royal Mail. There was no Green Paper or White Paper. Questioned in another place, the Minister for Postal Affairs did not deny this but seemed unapologetic in the extreme. He said,
“We could, of course, consult again on some other idea. We could consult again and keep consulting. We could never take a decision”.—[Official Report, Commons, 16/11/10; col. 222.]
We are not suggesting that the Government should keep consulting but some consultation might have been of value, given the number of times that I remember receiving criticism when we were in government if there was not enough pre-legislative scrutiny or consultation. Our debates on Royal Mail have been usefully informed by Richard Hooper’s panel producing two reports in May and December 2008, and being asked by the current Government, sitting alone this time, to review his work in 2010.
We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year Royal Mail experienced a drop of 7 per cent in letter volumes. Other operators are taking advantage of liberalisation and what are now regarded as generous terms for access to Royal Mail networks. If I am pleased about nothing else about my ministerial contribution, our prominent pledge that we were going to get regulation right is something that I hope will be achieved.
Lord Cotter
This amendment is a direct attack on the fundamental principles of the Bill and, indeed, on the necessity of addressing the serious situation of declining turnover and decline in the use of the mail service. The Bill needs to be effective to attract fresh capital and, as has frequently been said, to achieve the spin-off of securing the post office network at the same time. Surely no one can forget—the public certainly cannot—the continuing programme of closures in the post office network over the past few years. That is what the Bill is needed to address. The important part is for the Bill to bring in capital to address not only the issue of the mail service but the matter of the post offices. The input of private-sector capital is essential and the Bill, as it stands, is vital to secure this for the country.
The noble Lord, Lord Young, said that the Bill is being pushed through with breathtaking speed. He also described the attempts over many years to address the concerns about the mail service. Surely he can see that this is not breathtaking speed. Surely he will agree that we cannot afford to lose any more time. We must proceed to get a solution to our need for a universal mail service in this country.
Lord Skelmersdale
It strikes me that if you juxtapose the first amendment of the noble Lord, Lord Young of Norwood Green, and this amendment, they are diametrically opposed.
Baroness Turner of Camden
I support my noble friend who introduced this amendment. He is quite right: we are talking about a major public institution which—despite what some noble Lords have said—has a great deal of public respect and support. It is always assumed by the present Government that if there is anything wrong you have to privatise. Privatisation is supposed to produce greater efficiency and more investment. That is not always true. I speak as a consumer of several recently privatised services. The first thing that a privatised company does is usually to economise in order to increase the share price for shareholders. That often involves decreasing the number of staff so that when you phone them, instead of talking to a human being, you talk to an automated voice, which says, “If you want this press 1, if you want the other press 2, if you want something else press 3, or hang on to talk to an adviser”. Twenty minutes later, you are still hanging on. That has been my experience of a good many privatised companies. I would not like that to happen to the Royal Mail.
We are talking, as I said, about an organisation that has a lot of public support. I very much hope that the full statement which my noble friend made from the Front Bench will receive intense investigation from the Government, because it is worth considering. This is an important issue and a major one for this Bill.
Lord Hoyle
Does my noble friend not press all the right buttons when she addresses the House? I cannot understand why the Government are going down this road. My noble friend Lord Young remarked on the ability of the new chief executive. She comes with a highly successful track record. Why do we not give her an opportunity to develop the Royal Mail, rather than going down the avenue of selling it off to any Tom, Dick or Harry?
The Government have said that they will try to get an adequate price for Royal Mail. That does not seem to me to be a good reason for what they are doing. Agreement has been reached between the unions and the management on the way forward, and they are willing to co-operate. We do not need to go over the past, as the noble Lord who spoke from the Cross Benches has suggested. We know where we are going. The capital is there. The important difference is that the Government have undertaken to underwrite the pension liability which will lift a great burden from the back of the Post Office.
I come back to the point that we have achieved an awful lot. The capital is available and the unions and management are co-operating. Everybody on both sides admits that we have a new chief executive who is very forward looking and will do all that she can to make the Royal Mail a success, so why are the Government kicking away the ground again? They do not appear to have much idea who will make a bid for Royal Mail. We certainly know that, given the recession, they will not get a good price for it. It seems to me that we are going down the wrong avenue. We on this side certainly support the amendment. My noble friend who spoke from the Front Bench made a very intelligent speech in which he outlined why we want the measure to go ahead. I hope that the Government are listening to what we are saying. I would like them to give the new management of Royal Mail the opportunity to carry out the modernisation. If they do so, I see no reason at all why the privatisation should go ahead.
Lord Lea of Crondall
My Lords, following on the same theme as my noble friend Lord Hoyle, it is pertinent to point out that the Minister did not accept the importance of the question posed by my noble friend Lord Christopher on the previous amendment. We have had a broad sweep of what a marvellous idea private capital is. However, we have no idea about guarantees relating to asset-stripping or about country of ownership, sovereign funds and all the other items on the long list. Does that not dent the picture that we are expected to believe in, given that the picture could be this one, that one or another? Would it not be more relevant to mention the interests of the British people, as we are here to represent the interests of society as a whole? They are interested in such things as the universal service, obviously, and in not selling off public assets. It is said that a big profit will not be made from selling the Royal Mail to private business. Is it not relevant to remind noble Lords that in the great wave of privatisations in the 1980s, the undervaluation of British Airways, British Gas and British Telecom alone on the first day of trading amounted to more than £2 billion? That will happen again prima facie unless the noble Baroness can say how the Bill will ensure that that will not occur.
Baroness Wilcox
Amendment 2 seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009, although it never completed its passage through the other place and on to the statute book.
I reassure the noble Baroness, Lady Turner, that I have great respect for the noble Lord, Lord Young. I take what he says most seriously. I always listen to him and will be doing so throughout the Bill. I say to the noble Lord, Lord Hoyle, that we are listening and will continue to do so.
I should say first that I am pleased that the amendment indicates that the Opposition continue to accept that the sale of shares in Royal Mail is the right way to secure the future of the universal service and that, as Richard Hooper recommended, an injection of private capital into the company is necessary. My noble friend Lord Cotter supported that also.
The noble Lord, Lord Young, suggested that the Government had not consulted appropriately. The Bill actually draws heavily of the year-long independent review of the universal postal service chaired by Richard Hooper, as did the previous Government’s Bill in 2009. The Bill also draws on the subsequent update by Richard Hooper published in September last year, which was commissioned by the Secretary of State. The original review and the update took evidence from hundreds of organisations and individuals with an interest in the future of the postal sector. For the original report, there were some 200 meetings and 70 written submissions. All major stakeholders in the sector made an input into the review. We feel that that constitutes consultation.
However, the difference between the positions of this Government and the previous Government is that we do not believe that it is necessary for government to retain overall ownership of Royal Mail. The noble Lord, Lord Young, argued that there is no public mandate for this privatisation. The Liberal Democrat manifesto was explicit about the need for private-sector investment and employee shares. The coalition agreement also was explicit. It stated:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill is doing exactly what we said we would do.
Indeed, we believe that the Government are the wrong shareholders for Royal Mail, especially at a time when the postal market is undergoing significant change and Royal Mail has to respond to that change. We are not alone in thinking this. Moya Greene, the chief executive officer of Royal Mail, who has been complimented from all sides of the House today, made this clear to the Public Bill Committee in the other place. As I said during the Second Reading of the Bill, public ownership has failed Royal Mail and has not helped it to move with the times and make the changes which it needs to succeed. That is why we need a different approach if we are to safeguard the universal postal service.
Government cannot provide capital fast enough and, as the House knows, every investment that we make has to be cleared by the European Union under state aid rules. With so many competing calls on the public finances, we cannot guarantee that Royal Mail will always have access to the capital that it needs. In addition, we believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. For example, private investors are likely to find it more attractive to invest in Royal Mail if there are no barriers to owning a majority of shares and they can therefore have real control to ensure the future success of the company. I suspect that this was one of the reasons why a buyer could not be found in 2009.
The noble Lord, Lord Lea of Crondall, asked what specific protections against asset-stripping are in the Bill. A number of protections are in place if asset-stripping or other shareholders’ actions become a concern. The protections are contained in the Bill and in other legislation. Ofcom has the power in Clause 35 to imposed designated USP conditions, akin to condition 16 in Royal Mail’s existing licence, that do not allow it to do anything such as asset disposal or make a dividend payment that,
“creates any significant risk that necessary resources will not be available to”,
continue its business. If Royal Mail is found to be breach of its regulatory obligations—
Lord Hoyle
I am listening intently to the Minister, but there is a whining noise and I cannot hear clearly what is being said.
Baroness Wilcox
I think that it was someone's hearing aid that they have now switched off. I will return to the specific protections in the Bill against asset-stripping that could affect the universal service. A number of protections are in place in case asset-stripping or other shareholder actions become a concern. These protections are contained both in the Bill and in other legislation. Ofcom has the power to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. If Royal Mail is found to be in breach of its regulatory obligations, Ofcom could fine it up to 10 per cent of the annual turnover of its postal business. On current turnover, this would be more than £650 million.
Directors of a company must act in the way that they consider most likely to promote the success of the company for the benefit of its members as a whole. If an asset disposal or dividend payment did not meet that test, they would be in breach of that obligation. Royal Mail's debt is secured on its assets, so it is simply not possible to transfer assets away from the business and its debts. The Pensions Regulator may also not allow such behaviour, as it would weaken Royal Mail's covenant to its pensioners. I hope that the noble Lord, Lord Lea of Crondall, will find that helpful.
Lord Christopher
I hear what the noble Baroness says, and I will certainly have another look at the Bill. However, it does not seem that the sale of a particular asset would necessarily interfere one way or the other with the service. For example, if I provide a much cheaper-sited sorting office and sell one that is very valuable for another use, that may not alter the delivery service at all.
Lord Lea of Crondall
Perhaps it would be convenient if I asked for confirmation from the noble Baroness at the same time as she answers the noble Lord, Lord Christopher. We all have the Bill in front of us. If I heard correctly, Clause 35 was drawn to our attention. That does not provide all the requirements that the noble Baroness referred to.
Baroness Wilcox
I am sorry. Ofcom has the power under Clause 35 to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. Is the noble Lord saying that his point is not there?
Lord Lea of Crondall
That point covers the universal service. The question of sovereign funds, and the other questions, are not covered by the clause; that is all I am saying.
Baroness Wilcox
Perhaps I may deal with that when we get to Section 35. I turn to the point of noble Lord, Lord Christopher.
Lord Christopher
I will put it in simple terms. If I owned a big sorting office in Oxford, I could sell the site at a good price to the university and build a sorting office outside Oxford. I would not have interfered with the universal service, but I would have made a nice profit.
Viscount Eccles
Perhaps I might ask the noble Lord whether he would describe that as asset-stripping.
Viscount Eccles
Many of us would describe it as a very sensible piece of business.
Lord Skelmersdale
Not only that, but the Post Office could do the same thing under the current arrangements and no one would complain.
Baroness Kramer
Is it not correct that in negotiating the sale of the shares, the value of property that could be disposed of would be considered as part of the mechanism for valuing the company?
Baroness Wilcox
I am much supported by my noble friends on this side. They have given every answer that I could give at this stage and I am very grateful to them. I return to Amendment 2 and ask the noble Lord to withdraw it. I am sorry that it is such a long time since I made my argument. I hope that he has kindly remembered it.
Lord Young of Norwood Green
My Lords, I shall address a few of the points that were made. The noble Lord, Lord Cotter, and I do not normally find ourselves so diametrically opposed. We do not see this as a fundamental attack; we see it as a different approach and one that we believe is well worth opposing, given the importance of the decision to privatise Royal Mail 100 per cent. We do not think that putting to the Committee an alternative solution, which was almost unanimously approved by this House, is a fundamental attack.
The noble Lord, Lord Skelmersdale, said that I contradicted myself with Amendments 1 and 2. I do not believe that that is the case. We have to take into account a number of eventualities, depending on how the Bill progresses.
My noble friend Lady Turner reminded us that privatisation is not necessarily always beneficial or effective. My noble friend Lord Lea made an interesting point about undervaluations in previous privatisations, and that should be a warning to the Minister about the importance of getting the sale right.
The sale of shares draws heavily on the Hooper report, and I would not disagree with that. We are not proposing that there should not be any external investment, but there is a fundamental difference between that and a 100 per cent sale. As we go through the Bill, I think that it will pose some difficult problems, one of which—the inter-business agreement and the ability to get satisfactory assurances in that area—we will explore in greater detail.
I shall obviously reflect on this debate. I await Report stage with interest, and we shall see whether we return to this subject then. In those circumstances, I beg leave to withdraw the amendment.
“( ) Before making a decision referred to in subsection (1), the Secretary of State shall cause to be laid before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, including an independent overall valuation placed on the business.”
Lord Stevenson of Balmacara
My Lords, I was sorry to hear the Minister say a few moments ago that she was looking forward to debating with my noble friend Lord Young and to listening to what he had to say, because I am going to interpose in that relationship. I hope that that is not to her discomfort or concern. However, we want to give my noble friend a rest and to allow him to come back even more vigorously.
This amendment places a duty on the Secretary of State such that, before making a relevant disposal, the Secretary of State must lay before Parliament a report setting out how the value of shares in the Royal Mail Group has been assessed and, with this, she or he must provide an independent report of the value being placed on the business.
This is a straightforward amendment and it has, perhaps uniquely, the support of such diverse groups as the TaxPayers’ Alliance and the Communication Workers Union. If I may say so, its beauty is in its simplicity, but its logic is derived from the experience of privatisations long past.
Several noble Lords have mentioned the sell-offs of British Gas and British Telecom. The British Gas share issue totalled £9 billion in 1986—at that time, the highest-ever equity sale on the UK stock market. However, within a year the value of those shares, initially at £1.35, had risen significantly. A few years before that, in 1982 in the first of the big privatisations, the share price of British Telecom rose 40p on the day after the shares were sold, making an immediate and tidy profit for investors.
Of course, those were different times, and a privatised Royal Mail is neither British Gas nor British Telecom, but what links these original privatisations to the present day is a worry that, in the rush to get this show on the road, the Government appear to be glossing over the fundamental question which would surely occur to anyone selling anything, whether it is a watch on eBay, a second-hand car or a company the size of Royal Mail. What is it worth?
Valuation is an art. Some of the value can of course be derived from the assets, the stocks and the history of trading. Removing the pension liabilities is a huge start in this case, but it is also worth pointing out that a long-run inter-business agreement with the Post Office and a firm commitment to use the Royal Mail by government departments will be material facts in any calculation of value. Valuation is a two-way process. It is often conceived as a willing-buyer/willing-seller situation, and we hope that that will be the case in this sale. How different would it be if there were a forced sale or no ready buyer and we had to think of other ways to try to get rid of the assets? That would change the way in which the valuation was approached.
Lord Lea of Crondall
My Lords, it is often said that it is a fallacy that the price is much lower than the value soon after privatisation. It is a matter of the scale of the difference. I have some data on the big privatisations that took place under the Conservative Government. In one year, the average share issue premium on major shares issued was 7 per cent. On privatisation issues the average premium on the first day of trading was 77 per cent. That is 10 times more. Is that not prima facie evidence that the public tend not to get a good deal on these big privatisation issues?
Viscount Eccles
My Lords, we are dealing with a very different situation here. Unless and until the Bill becomes an Act and the pension issue is resolved for the time being, it would be a very bold person who said that you could put any value on Royal Mail. In the context of a willing-buyer willing-seller market, I do not think that you will find a willing buyer. Even if the buyer thought that the business was residually worth something, he would not want to enter into the deal. This amendment goes to the same point. In a willing-buyer willing-seller deal, neither the seller nor the buyer wants to know exactly how the sums have been worked out and if they thought that the sums had to be submitted to a third party and debated in this Chamber as a matter of parliamentary interest, I think you would scupper almost any deal.
Lord Christopher
My Lords, I do not understand what has just been said. However it is done, someone somewhere in Government has to decide whether the Royal Mail is worth X. The issue in front of us is how to arrive at X. I am very sceptical about whether Royal Mail knows what it owns.
To take a trite example, there are some valuable stamp collections in this country: Her Majesty has one, the Board of Inland Revenue has another and, I understand, the Post Office has one. The Revenue’s collection used to be displayed in cases as you walked into Somerset House. A representative of Stanley Gibbons walked in to ask the chairman, “Do you know what you have in those glass cases?”—there were three big ones. The answer was that it was worth well over £1 million. I think that the Post Office has a stamp collection, but I am pretty sure that no one there knows what it is worth. The outfit could well be sold lock, stock and barrel and then someone opens a safe one day and finds all those stamps.
There should be a proper valuation of all the assets of Royal Mail and the Post Office, because it will be divided up. Until that is done, we cannot satisfy the British people that we are asking a fair price. I do not complain about a modest discount, but we should have a clear idea of what assets we have. I will use my mythical Oxford sorting office as an example. What is it worth? An acre of land in most parts of the country is worth £5,000. With planning permission, it is worth nearly £1 million. Unless we explore the assets and ensure that we have an objective valuation of what is there, we will never feel that we have sold the Royal Mail properly.
Others have mentioned previous experiences. There have been two relatively recent ones, one by us of a company whose name I can never get my tongue around— QinetiQ—where people have walked away with millions. I have talked to many Members opposite who would never have privatised our railways in the way they did. Over the first two or three years, people walked away with very large sums of money. We have to avoid that. We cannot value the company in the way that companies are generally valued. Price/earnings ratios and so on have no relevance in that context. We must be sure that when we say to the British company, “We are trying to sell this for X”, that X is a reasonable, accurate figure.
Baroness Kramer
My Lords, I fully understand the concern of the noble Lord, Lord Christopher, that Royal Mail fully assesses the value of what it is, what it owns and what it has to offer, so that it understands its full value in the marketplace. That is an important process. I agree that that has not always been done when public entities have been sold. Indeed, there has often been an anxiety to achieve a sale quickly. I think that Governments have sometimes been seduced by investment bankers who would like a cheap, easy deal rather than trying to ensure that they get the maximum for the seller—in this case, the public. I hope that those lessons can be learnt. I agree that internal due diligence is critical.
However, I must say to the noble Lord that, although I care a great deal about transparency and openness, the day that this House or the Government put a value—£700 million or £800 million—on the asset, no bidder will offer a penny more. The art in a negotiation when you are selling a property is to get the buyer on the other side to decide what value he will bring to the table and give up some of that value to the seller. The goal is not just to achieve the value of the assets as they stand in some neutral and abstract form but to extract further value because of the benefits that a particular buyer sees because of their business plan and goals.
All of that disappears the day that the Government come out and publicly say, “This is what it is worth. You will not get X plus a penny, you will only ever get X”. I think that that is unadvisable for the taxpayer.
Lord Christopher
How would the noble Baroness value it? How would she put a price on it?
Baroness Kramer
Internally, due diligence is critical. The specifications and the instructions to the investment bankers, accountants and others engaged in the valuation have to be tough and in the monitoring and examination rigour should be applied to the response that they come back with. However, it still has to be in an internal setting, not a public setting. People will have many opinions across this House, but this will be a highly complex process with a great deal of detail. While this House has the ability to understand all that, there may be a subset of people who might be interested in being part of the consultation process by taking a look at that on behalf of the House. However, to me, it certainly would not be possible to do it in a public setting without giving the buyer the most impossible leverage.
Lord Hoyle
The noble Baroness said that if we value it, we will not get a penny more. In past privatisations, it was not that we got the value for the business, but that we sold it at a loss, at a low price. That is what we are asking her to deal with.
Baroness Kramer
I fully understand what the noble Lord is saying. In the past, privatisations have been naive. We have to use pressure to make sure that the Government do not go through that naive process once again. I suggest that the remedy being proposed here—that the value is discussed in detail out in the public arena—does not achieve the purpose. It simply has the effect of making sure that in the end there is a cap on the sale price and creates another set of problems without necessarily disposing of the first set. We need to be pressing to make sure that the internal work is up to standard, but to my mind—and that is one person’s opinion—bringing it into the public arena does not achieve that.
Lord Brookman
My Lords, I had no intention of making a contribution in this debate but as someone who was involved in going from public to private in the steel industry I shall make one point. Who owns things is quite important. When the British Steel Corporation was formed when I was a young man, it had 267,000 employees. Tata Steel, formerly Corus, now employs between 15,000 and 20,000 people. Put that aside. We are a country that used to take pride in what we had and what we owned. I want to be reassured that if the Post Office or any other publicly owned business is hived off to foreign competition the interest of the British people is safeguarded. I just wanted to make that point.
Lord Brooke of Alverthorpe
My Lords, if the Royal Mail had gone bankrupt as so many people predicted it would, a value would ultimately be placed on it. Administration would see to that, and we would all know what it was worth at the end of the day. I believe that the government shareholder executive, which holds the shares for Royal Mail, will broadly have some idea of what Royal Mail is worth at the moment and of what it would be likely to fetch if it went, for example, to another mail company, such as TNT. If it went to private equity, it could be a different basis entirely because its approach to running the business would be quite different. It is not easy. I freely concede to the noble Baroness, Lady Kramer, that having this out in the public domain is not simple and straightforward. We all speak with one voice when we say that we want to ensure that the British public are not taken for the usual ride that arises on privatisation but get value for money.
I believe that the Liberal Democrat party had the solution to the problem, and so did we. We wanted to retain a stake in Royal Mail so that, regardless of the final valuation when the deal was done, the British public would know what it was, would continue to have a stake in it and would be able to redeem that, if they so chose, at the appropriate time. The Liberal Democrat party went for 49 per cent in its manifesto, which it has now abandoned for reasons that have not been explained, although it recognises that there is a problem, and no easy solution on the way forward is forthcoming from that part of the Government. We presented an amendment today that I freely recognise has some difficulties with it, but I believe that, for reasons that I just described, there are ways in which valuations in a broad sense can be made of government assets. I also believe, in the light of our previous experience, that an attempt should be made this time around, notwithstanding the obstacles to be overcome, and that that should be reported to Parliament.
Baroness Wilcox
My Lords, I thank the noble Lord, Lord Stevenson, for being as succinct as he was in proposing Amendment 3. It seems a long time ago now, but he presented his amendment in three minutes flat, which was very kind of him.
Before I go on, I will put the mind of the noble Lord, Lord Christopher, at rest on at least point today. He was concerned about what will happen to Royal Mail’s valuable collection of stamps, including iconic and historic stamps such as the penny blacks. Collections of such stamps are classified as public records. These are deposited with the British Postal Museum and Archive, and under the Bill they will remain public records. The ownership of Royal Mail’s museum collection, which contains artefacts that are not classified as public records, has been transferred to the BPMA, and as a charitable trust the BPMA cannot sell off this collection—so at least there is a little good news there.
The proposal in Amendment 3, like the one in Amendment 1, does not seem to reflect the fact that the disposal of shares in Royal Mail is a commercial transaction. In particular, if the Government decided to conduct an auction and invite bids from trade buyers, it would make no commercial sense to advertise to bidders our own view of the value of Royal Mail. As my noble friend Lady Kramer has pointed out, that is not exactly the art of negotiation, because all anyone would do would be to bid to that price. We really feel that we will not do that. No trade buyer would bid above the value, and it would therefore reduce the Government’s ability to get the best result for the company and for the taxpayer, because that is what we are about. The Government will, of course, work with their advisers to consider the potential value of Royal Mail so that we can properly assess bids from buyers. However, as my noble friend Lord Eccles clearly said, there is little logic in revealing what we consider the value of the company to be before any sale.
As I have said previously, the Government have not decided how they will dispose of the shares. We wish to retain flexibility, and in this way get the best result for the company and for the taxpayers, but we expect that both the National Audit Office and the Public Accounts Committee in the other place might wish to review the sale process after a sale had been completed. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer.
I have of course listened to what has been said, and it will of course go on the record. I know that there are Members of your Lordships' House who would rather that Royal Mail was not sold at all, and I understand people who have been associated with Royal Mail for many years finding all discussions of this sort very difficult, especially having gone through all this a year ago with the previous Government—a Government of their own. Yet that Government, too, could not successfully find a way out. We need to find the right buyer for Royal Mail who will keep it alive and well. These are very difficult times. No one is writing letters. We have exercised these arguments over and over again, which I am sure everyone in the House knows. We think that this is the best way forward and that flexibility until the very last minute will be needed so that we can get the best price. I therefore ask the noble Lord if he will kindly withdraw his amendment at this stage.
Lord Stevenson of Balmacara
Dash it, I thought that the noble Baroness had forgotten that. I was going to enjoy wondering what to do if she had not asked me to withdraw—clearly, she was supportive. The point that we are trying to get across in this useful and interesting debate is that if there is no valuation process we will have two problems. The public will not necessarily know that we are getting value for money, which they should, and we would lose transparency, which is an important part of any transaction involving public assets. These are important principles to hold in our mind.
I fully accept what has been said, particularly by the noble Baroness, Lady Kramer, that public bodies are not in the normal business of valuing themselves. That is not what they are about. Their job is to provide a utilitarian service that is specified in statute. If they devote time to worrying about whether or not they have caught all the assets that they have acquired while they have been in existence and working out what their market value might be, they would not be focusing on what they should be doing and we do not want much of that.
However, if the Government are selling off the family silver, we should have a full inventory of all the aspects of that before it happens. The Minister is saying that that will happen and I hope that we will have a record. A compromise would not necessarily want to go all down this route, but we would get a much better Domesday Book of what the Royal Mail consists of and, thus, a better sense of what it might be valued at. We would therefore be in a better position to assess whether the bids received subsequently would be appropriate. Therefore, if the pound signs are removed, we would know about what we are talking a bit more at the time of the sale.
My noble friend Lord Christopher is eloquent in his ability to run the market in Oxfordshire—I am not sure why it is Oxfordshire—in terms of the sale he has clearly eyed up for the Post Office service stations there. I think that we would want to help him in ensuring his long retirement on the proceeds. I jest of course.
The second strand that comes through is that the valuation, or at least the lining up, of the assets that we are selling is not the same as disclosing to all and sundry what we want for them. But we can be a bit too coy about that. Clearly, we want to be in a position where we force someone to bid higher than we would have ever dreamed of receiving for the assets that we are putting up for sale. That is what we do all the time in our domestic lives.
I have always been perplexed by why the English do not adopt the Scottish system of selling houses, for example. In that situation, the seller seems to have all the cards. You say that your flat or house is for sale. What it consists of is advertised publicly and you say that you will accept offers in excess of £X where £X is the largest figure that you could possibly think of. Then you sit back and hope. It may have changed since I last sold a house up there, but the three times when I have done it I have been astonished by the braveness of those who have bid for the house and, disclosing no secrets, I have achieved many times more than I thought that I would get every time I have sold. I recommend that to all ye English and perhaps even to the Government in respect of the Royal Mail.
Yes, we want someone to bid more than we are prepared to disclose that we are prepared to accept. But there is a chap called Rupert Murdoch out there who is publicly engaged in bidding for part of his empire, which he only partly holds; yet I read every day about what price people are prepared to accept and what price they think it will be worth. The share prices down to even the last penny are mentioned. I do not think that we should be too worried about where we are going on this. It would not be wrong to say—privately if we want—what we will not accept. In other words, we would expect better bids.
The last thing we want to be part of is a post-hoc analysis of what went wrong in this case. Surely, we have got beyond that. The noble Lord, Lord Lea, made the point absolutely clear. If there is a 7 per cent premium on average sales of new or existing companies and it is 77 per cent on privatisations, there is clearly an issue to be addressed. I am jolly glad to hear that the stamps are being saved for the future, although it is a bit odd that they are going in the archive and not a museum where one would want them to be, but that is how it is.
Whenever one hears of public assets being sold, one has to think of the experience of other countries. It may be to the benefit of English football that this worked well in countries in the East, but we do not want that to be said of here. We want a good and sensible sale that is done in as open and transparent a way as possible. We want to be able to comment on the commerciality of what we are about and to do it so that no one feels that we have in any sense lost out. Those are conditions which I suggest should be taken into consideration of the Bill. We will reflect on what has been said, but at this stage I beg leave to withdraw the amendment.
“( ) A disposal of the Crown’s interest in a Royal Mail company will not be authorised until the Secretary of State has secured a written contract from the proposed purchaser that at least one representative from those directly employed by Royal Mail or its successors will sit on the board of the new body.”
Lord Young of Norwood Green
My Lords, postal workers already have a major stake in the company, and their livelihoods are dependent on its viability. This is more than just an issue of immediate employment, of course. It is the final guarantee of rent or mortgage repayments. Working for Royal Mail is the means whereby their children will be educated and cared for. I make the point because it is sometimes suggested that postal workers lack motivation because they do not identify with Royal Mail. Postal workers may not always see eye to eye with management, but they are acutely aware that a viable and successful Royal Mail is in their own interests.
Through their own organising efforts, postal workers have achieved a high level of unionisation in Royal Mail. They have also, over many years, secured comprehensive negotiating rights on matters of national and local significance. This has meant that members of the workforce have some elements of control in their own working lives. Management, for its part, has learnt to accept and live with the fact that the workforce does have a say in workplace relations. Sometimes there are conflicts, but 99 per cent of those cases are resolved by the usual patterns of industrial relations which have been established in the industry. This is important because those endeavours have been made by postal workers themselves, and they have made the workplace a better, safer, more comfortable and rewarding place. So we should leave aside any suggestion that postal workers are unable to express themselves, unable to organise themselves, or unable to exercise their rights in the workplace.
Recently there has been a much-trailed comparison on rights of representation or share ownership with John Lewis workers, although we believe that that is misunderstood. In comparison, postal workers have many more rights than John Lewis workers, who are not even unionised. That said, if there is to be an employee share scheme, it is only right that it should be introduced with employee involvement and voice, and placing at least one member on the board would be of benefit both to the workforce and the employer. Members of the workforce would see that it had someone who could reflect their experiences and concerns in the most powerful part of management, and the employer would have an immediate expression of the wider concerns of the workforce in the deliberations of the central management team.
In the past, there has been some experience of trade union involvement on the board. Although not a postal worker, my noble friend Lady Prosser, who unfortunately is not in her place, was until recently a widely respected and influential trade union leader before she became a member of the Royal Mail board. Certainly, management believes that it has benefited from her experience in the working of the Royal Mail board. Failure to introduce representation of postal workers on the board would, in my view, risk missing a real opportunity to create trust and confidence. It is widely known that employee representation exists on management boards in other European countries, and surely it is time that this became more general in Britain. I welcome the coalition Government’s espousal of mutualisation in another part of the Bill, and the requirement that we are suggesting here would strike a chord with that principle and approach. I therefore commend the amendment to the Committee. I beg to move.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)
I should inform the Committee that if this amendment is agreed, I cannot call Amendments 5 to 7 inclusive by reason of pre-emption.
Lord Lea of Crondall
My Lords, perhaps I may make a point for clarity. The discussion we have just had about the wider public interest and stakeholders around the country suggests to me that what we are looking at is a sort of supervisory board. Does that not frighten the horses so far as the Minister is concerned? Does she acknowledge that the maximum number of different stakeholders should be somehow involved in this exercise since that would help to put our worries at rest on a number of other aspects that we have just been taking on board, such as asset-stripping and all the rest of it, and where ambiguities still remain in the Bill?
Baroness Turner of Camden
I support the amendment and have put my name to it. When the Bill was discussed previously, concern was expressed about the state of labour relations at Royal Mail. At Second Reading, I pointed out that the union was in discussion with management about modernisation and that the indications were that poor labour relations had been overcome. The union wants to co-operate, but believes that amendments to the Bill could be useful towards that end. It is for that reason that I have put my name to the amendment. It would be useful for the Bill to make it a requirement that the staff of the company be involved at the very highest level. To that end, it is proposed that a seat be reserved on the company board and that, before a sale takes place, Parliament should be assured that this proviso is a part of the deal.
The Government have already committed to an employee interest as Clause 3 makes provision for an employee share scheme. The proposal for staff representation at the highest level is in tune with that kind of thinking and helps to confirm employee interest in the well-being of the company and, most importantly, in its service to the public. As I indicated previously, I believe that the public still hold in high esteem the Royal Mail and the staff who work for it. I therefore hope that the Government will be prepared to accept the amendment or that, if they do not like the wording—as has sometimes happened—they will accept the notion and perhaps come back with different wording that incorporates the same idea. We think that it is a very good idea, because it involves the participation of staff in, and their commitment to, the well-being of the company.
Lord Cotter
My Lords, I thank the noble Baroness, Lady Turner, and others for raising an issue whose importance I am aware of from my own experience. I was managing director of a small plastics manufacturing company. It had only 30 employees, but it was important to me to bring those employees with me. Our discussion today is an important part of that approach. That employees will have shareholdings in Royal Mail is to be welcomed. It is disappointing that many other companies, of all sizes, do not recognise the importance of involving their workforce. As the noble Baroness and others said, a welcome improvement in labour relations has been seen within Royal Mail. I know that the Minister will take this issue very seriously and I am sure that she will give adequate answers to the points that have been raised. It is crucial that employees have not only shares but a real voice in one way or the other. Without that, so many companies fail. We want the new conglomerate to succeed, to go forward and to bring its employees with it, as opposed to management and employees being at each other’s throats as has sometimes been the case in the past.
Lord Brooke of Alverthorpe
I, too, support the amendment and agree with the line taken by the noble Lord, Lord Cotter. As the Minister knows I was a partnership director of NATS, where, when the PPP was created, 5 per cent of the shares were allocated to the employees. I acted as the director responsible for that element of the share distribution and had conversations with the staff about it. However, it was not entirely satisfactory; I was still at a distance from them because I was also involved in the management side of the business. While anyone who went on to a board would have to be involved in the management side too, if the Government were to accept the amendment there would certainly be someone there who was better able to speak directly for the feelings of the workforce than someone doing so one removed, in the way that I did.
I have been to a number of meetings recently at which coalition government Ministers have spoken about employee ownership and share involvement and extending it over a wider front. Many have spoken about providing greater opportunities for the workforce to be more directly involved with management of companies, particularly where they have a stake in the shares.
The amendment presents a modest proposal—I would have preferred it to suggest that two places should be allocated—but I am reasonably content today to go along with opening the door through one seat being made available for the employees. I hope there will now be an opportunity for the Minister to display, not only to her noble friend Lord Cotter but to a variety of Ministers who have spoken recently on this at meetings, that extending employee ownership will be put into practice when the opportunity is immediately before the Government.
Lord Myners
My Lords, I add my support to the amendment and endorse the views expressed by my noble friend Lord Brooke and the noble Lord, Lord Cotter, on the Liberal Democrat Benches.
There are two issues involved here. First, in a conventional private sector situation where another company or body of investors has a large shareholding, it is quite customary for it to seek board representation, recognising that when it sits on the board it shares the responsibilities of other directors to the company as a unitary board. I note the presence of the noble Lord, Lord St John of Fawsley, in his place on the government Benches and it immediately reminds me that News International, as a particularly large shareholder, has always had its interests represented on the board of BSkyB. It is entirely logical and consistent with good private sector practice for the workers in the Post Office to have such representation on the board of directors until such time as they cease to be significant shareholders.
However, on my second point, I have regard to the fact that the Minister not only brings considerable business experience to her position but also speaks on issues of corporate governance. There is a bigger issue at heart here: the shareholders in a privatised Post Office—whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors—will nevertheless individually have a very modest interest in the company. If it is bought by a Dutch company and that company is floated, the ultimate shareholders will be institutions spread across the world, few of whom will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money invested in a single share and all their employment in one place of work. It is surely right that people who exhibit such a high conviction to a company should have some voice in the leadership and management of the business. Some of the malfunctioning of companies over recent years might not have happened had there been a voice around the board table reflecting the views, knowledge and insights of the employees of the company, as opposed to executives who sit in executive suites at the top of the tower building or non-executives who turn up for two or three hours a month. There is a broader issue here and I hope that the Minister, given her responsibilities for corporate governance, will speak to that broader issue in addition to giving us some welcoming encouragement on this amendment.
Lord Hoyle
I agree with those who have spoken in support of the amendment, and particularly with the comments of my noble friend Lord Myners. Although some people can walk away from a company if it is not successful, those who are employed there cannot; it is their—and their family’s—livelihood. I know that the Minister will take into account all that we have said when making her reply, and I hope that it will be a positive and constructive reply. I agree with my noble friend Lord Brooke that one representative is a modest request. I would have asked for at least two—but here we are, with a suggestion that everyone who has spoken agrees is both modest and important.
I am glad that it is recognised that employees matter. Speaking of his own, small company, the noble Lord, Lord Cotter, said that he tried wherever possible to take his staff with him. If staff feel that the company they work for is being sold from underneath them, they can have no loyalty to the new group that comes in. Staff have to be won over, and is there a better way of doing that than by making them part of the decision-making? As employees of the company, they will be able to reflect back. Rather than having somebody external—who could do a job for the employers, as my noble friend Lord Brooke said—would it not be better to have these staff representing the company so that they could take the views at the highest level on why certain decisions are being made to achieve what one hopes will be their future prosperity? I totally agree, and repeat again, that this is a modest suggestion.
Viscount Eccles
Employee participation is indeed a big subject, and I have no quarrel or difficulty with many of the views that have been expressed. However, as I read this amendment, it would be satisfied if the successor company asked Moya Greene to sit on the board. She is directly employed by Royal Mail and it is likely that the successor company would want her on the board. After all, she is extremely well qualified to be on the board of any mail company. If noble Lords opposite really wish to pursue this, they might need to do so in a rather different way.
Baroness Wilcox
The Government recognise the important role that employees will play in the modernisation of Royal Mail. The implementation of the business transformation agreement reached in March 2010 is vital to the success of the company. This requires changes in the way in which people work and will impact on everybody employed by the company.
This agreement sets out a new relationship between the management and the union in Royal Mail which seeks to improve industrial relations, which have been so poor in recent years. Progress on the implementation of the agreement has been encouraging, and we encourage both sides of the agreement to build on this promising start. Nobody inside or outside the House wants to see a return to the national strikes that so damaged Royal Mail and the postal market in 2007 and 2009.
The current position is that there is no employee representation on the board of the Royal Mail. My understanding is that there has been no pressure or suggestion that there should be an employee representative on the board. In public ownership the Royal Mail is being run on a commercial basis, so I fail to see that a change in ownership should automatically require that there should be an employer representative on the board, a requirement that the amendment proposes should be written into primary legislation. I have listened to the noble Lord, Lord Lea, and the noble Baroness, Lady Turner of Camden, with her terrific record within the union movement. The noble Lord, Lord Cotter, talked about bringing staff with you; I have done that myself. In a small company, especially, you are all working together very closely and you can really involve the workforce in a way that large companies sometimes cannot.
The noble Lord, Lord Brooke of Alverthorpe, talked about shares and NATS. I know how well he did there. On the point made by the noble Lord, Lord Myners, with his corporate governance, and the noble Lord, Lord Hoyle, on employee participation, a seat on the board is not the only way to actively encourage employee participation. For example, the concept of world-class mail at Gatwick and elsewhere has shown what increased engagement can achieve. We hope that there will be increased engagement. That is one of the reasons for making sure that shares are passed in such a large number to employees of the company.
I am not at all clear how such an arrangement as proposed in the amendment would work in practice. For example, how does it link up with the CWU and Unite’s representation of the workforce and their roles in collective bargaining?
I should say that the Government are not saying that there should never be an employee representative on the board. Royal Mail may decide in future that there are advantages to doing exactly that. I refer us back to my noble friend Lord Eccles, who suggested that Moya Greene might be a wonderful example of someone who could be brought on to the board to the benefit of the company, as she is at the moment the chief executive. However, I do not believe that it is appropriate to impose such a requirement through legislation.
Issues relating to board composition are properly issues for the company and its shareholders who, thanks to the Bill, will include its employees. I therefore ask the noble Lord to withdraw his amendment.
Lord Myners
The Minister started her answer by saying that as things were as they are, and there was no good reason for changing that, they should remain as they are. Surely, however, the Government are making changes, and that is the appropriate trigger for consideration of this factor. From these Benches we are urging that it is essential that the workers in this company, which has always been a very delicate organisation, who have served it loyally over many decades, are entitled to believe—almost as part of the concept of the “big society”—that the Government recognise that there is a degree of mutualisation. After all, that is why the Government are gifting shares to the workforce. So why go only halfway? Why stop at the point of gifting shares and not empower those shareholders to give voice and expression around the board table?
Baroness Wilcox
I can only repeat that, as we all know, the previous Bill failed. We hope that this Bill will succeed. We want as much flexibility as possible when it comes to selling Royal Mail. We have faith in the fact that the people who have worked for this company for so long should be offered the best possible opportunity. We are offering the biggest ever issue of shares to the employees of the company—over 10 per cent. That is a wonderful voice that they will have. No one is saying that no one will finish up on the board. We are saying that we cannot put this in legislation. We need to keep this as flexible as possible to get the best possible price and the best possible deal. The noble Lord, Lord Myners, of all people, City man that he is, knows what I am talking about. I ask that the noble Lord, Lord Young, withdraw his amendment.
Lord Young of Norwood Green
My Lords, it has been a fascinating debate; I did not expect quite as much of a debate as this. This is an important issue. I agree with my noble friend Lady Turner about the value of employee involvement. It is nice to return to agreeing with the noble Lord, Lord Cotter, in his evaluation of the importance of involving the workforce; I wholeheartedly endorse that. My noble friend Lord Brooke demonstrated the value of his experience as a partnership director in NATS.
Several times in this debate people have talked about there being only one representative. The Minister had trouble dealing with that. In fact, I remind the House that the amendment says “at least one”.
My noble friend Lord Myners made a fascinating contribution. I am glad that he told me what a high-conviction portfolio was; I would have thought it was someone being detained at Her Majesty’s pleasure if he had not explained that. His argument was valid when he talked about the question of risk and the way that other shareholders may be able to diversify their risk, but in many cases those employees are pledging all their working life to the company.
The noble Viscount, Lord Eccles, pointed out that there might be a flaw in the amendment, but I remind him that it says “at least one”.
I must admit that I was somewhat disappointed in the Minister’s response. The only argument that she could give us was the need to retain flexibility. Are we really saying that one employee representative—if indeed it were one—would wreck that flexibility? If that were the case, if you wanted ultimate flexibility, then why has she boasted about the 10 per cent employee shareholding? I do not believe that that was a valid argument against the very reasonable suggestion in this amendment.
Having reflected on the debate, I will withdraw the amendment at this stage. We were somewhat puzzled by the pre-emption, but as we are not going to invoke that we can have that argument outside the Chamber. We will certainly return to this subject, probably on Report. In the circumstances, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I am sure that a number of amendments to the Bill will come from all sides of the House as we progress. I am seeking more information about the Government’s plans for postal services in the UK. The purpose of the amendment would be to ensure that the Secretary of State reported back to Parliament on the disposal of Royal Mail. The Secretary of State would have to deliver an Oral Statement and lay an order subject to the affirmative procedure.
There are real concerns about what the Bill will mean for people who live in rural areas, for small businesses, for those who receive specialist services for the blind, for the taxpayer and for the employees and agents of Royal Mail and Post Office Ltd. Rarely can a government Bill have given rise to as many questions as it seeks to answer.
Noble Lords have argued eloquently that it is essential for Parliament to receive more detail about the financial value of Royal Mail, the future of universal and affordable postal services and the impact of privatisation on services in the devolved Administrations. The Government are urged to respond to these concerns with written and oral reports to the House at the time when Ministers decide to dispose of some or all of the Government’s shares in Royal Mail. Only the Government appear to suggest that these concerns are not legitimate, otherwise they would happily accept these amendments and the Minister would produce the reports requested in advance of the sale.
At times the Government appear to be in an unseemly haste to complete all the stages of the Bill. The danger is that, if the Bill is not itself flawed, then there are significant gaps in it that need filling. There are simply too many questions unanswered, too many concerns about the Government’s intentions and too little of substance in the way that the Government have responded to these concerns for Parliament simply to give its assent to this measure and then depart the field. It is the firm belief of the Opposition that the lack of a fully worked-out proposal, linked to a wait of possibly two, three or four years before a disposal takes place, necessitates Parliament being able to review this matter once again.
As the Bill stands, the Secretary of State will make a decision about a full or partial disposal of Royal Mail and then make a report to Parliament. There is no requirement even for the report to be accompanied by an Oral Statement; there is no commitment that Oral Questions should be able to be put to Ministers; and there is no commitment for Parliament to have a vote of any kind. Moreover, the report will be made after the Secretary of State has made the decision. That is, I am sure many in this House would agree, simply not adequate. As I said earlier, it is interesting how often, in dealing with other Bills when we were in government, the affirmative procedure was required and demanded.
The current Postal Services Bill has a number of similarities to the 2009 Postal Services Bill, but the fact that this Bill seeks to privatise Royal Mail in its entirety makes it distinct from the 2009 Bill. One of our difficulties is in trying to grasp the detail to discover exactly what information is in the Bill about whether there will be an initial public offering or a trade sale at auction. The Government have not set a clear timetable. They have not explained whether there will be a general sale of shares to the public, an IPO, a restricted sale to certain categories of buyer or a trade sale by auction to a single buyer, such as a private equity firm or a postal competitor, which might raise competition issues.
Nor have the Government explained any measures to ensure value for money for the taxpayer. They have not explained whether they would sell the whole company all at once—with all the risk involved of selling cheaply, as has been mentioned—or whether they would be prepared to sell in tranches. They have not been clear about how valuable public assets will be allocated among Post Office Ltd, the pension funds and Royal Mail—and thus find their way into private hands. They have not indicated how the board might be consulted. They have not ruled out dismantling the Royal Mail and cherry-picking the most profitable parts, such as Royal Mail’s successful European parcels service GLS and Parcelforce. They have not indicated how they will guard against a buyer with a short-term horizon that seeks to squeeze costs and cherry-pick the assets.
Before any sale takes places, this House will want to be assured about the future of the universal service, the exact regulatory regime and the future of the post office network. What state has been reached in obtaining state aid clearance from the Commission? What is the expected timetable for that state aid clearance?
The other amendments in this group seek to require a further Bill or a super-affirmative procedure to allow Parliament properly to scrutinise and have a say about the method of sale and the sort of Royal Mail that will emerge in the private sector; our amendment provides for a less stringent parliamentary test, but I feel that it is the very minimum that is owed in the name of proper parliamentary scrutiny. Of course there is no wish to constrain the Government unreasonably in carrying out a sale if the Bill is passed with Clause 1 intact. The House will of course recognise the reasonable constraints of commercial confidentiality, but for such a momentous decision as this to be carried to its conclusion without further reference to Parliament, in a way that gives Parliament a proper say, would be highly regrettable.
If the Government are not willing to report back to Parliament on the specific concerns set out in other amendments, they should accept our amendment and agree to allow a general scrutiny of the disposal of Royal Mail at the point that that takes place. They should do so under the affirmative procedure, so that there is a genuine opportunity to consider and debate the sale.
There is genuine, non-partisan, cross-party concern about this measure, so it is right that Parliament is given the opportunity to debate the matter again when the Government are in a better position to answer the questions that they have so far failed to answer. I hope that the Minister will take this opportunity to improve the Bill by accepting a more accountable route for parliamentary accountability, which would involve not just an ex post facto report after the decision has been taken. I beg to move.
The Deputy Chairman of Committees
I should tell the Committee that, if Amendment 5 is agreed to, I shall not be able to call Amendments 6 or 7 by reason of pre-emption.
Baroness Drake
My Lords, I wish to speak to Amendments 6 and 17 in this group, which stand in my name.
As currently drafted, Clause 2 requires the Secretary of State to make a report to Parliament only when a decision has been made to dispose of shares or share rights in Royal Mail. That report is to include both the type and the timing of any disposal. Amendment 6 seeks to ensure both that the Secretary of State is more fully accountable to Parliament for any decision that he or she may take regarding the sale of Royal Mail and that the decision is consistent with best practice and legislation governing regulatory reform.
Amendment 6 seeks to do that by means of a super-affirmative order and an explanatory document accompanying the proposed disposal order that are to be laid at the point of a decision on a sale. The amendment would not undermine the Bill’s three main proposals, which are to allow the unrestricted sale of shares in Royal Mail, to introduce a new regulatory regime and to provide for the transfer of pension liabilities. Rather, because of the implications that would flow from an unrestricted sale, I believe that the super-affirmative procedure is appropriate.
Many noble Lords are concerned at the haste with which the Government have sought to complete the passage of the Bill, and one is left anxious about the scrutiny of matters that will arise from the implementation of the Bill potentially at some point significantly in the future. Amendment 6 would require the Secretary of State to return to Parliament to seek approval when a decision is taken on a specific disposal of Royal Mail—a decision that may not occur for, say, another three years. That is very important. The Bill is significant, given that its provisions will have a major impact on business and personal users of the service, on citizens’ interests and on the employees and agents of Royal Mail and Post Office Ltd. It will also have a significant impact on the Exchequer. Such a decision deserves close scrutiny.
The super-affirmative resolution procedure would allow Parliament the right fully to consider the proposals for the sale in a way that is provided for in the Legislative and Regulatory Reform Act 2006. Under that Act, Ministers have wide-ranging powers to amend primary legislation by order and the Act makes provision for determining the parliamentary procedures for such orders. If noble Lords would indulge me—as a new Member of the House, I am all too conscious of the paucity of my knowledge of parliamentary procedures compared to the depth of knowledge held by so many noble Lords—sometimes one feels that a matter is of such significance that one must split an infinitive and be prepared to boldly go. I am advised that there is no simple definition of the super-affirmative procedure, so it is necessary to lay it out fully in the Bill; hence the tabling of Amendment 17, which seeks to do precisely that.
I shall give the briefest of summaries. Under the super-affirmative resolution procedure, during a 60-day period when the draft order is laid the Minister must have regard to any representations received, any resolution of either House and any recommendations made by a scrutiny committee of either House. At the end of the 60-day period, the Minister can decide to proceed with the draft or lay a revised draft with, in either instance, a statement about any representations made and revisions proposed. In each case, the order then proceeds as a normal affirmative order. However, if a scrutiny committee of either House recommends, after the laying of the statement or of the revised draft order and statement, that the order should not proceed, then the order may not proceed unless the House concerned rejects the recommendation.
In the circumstances of this important Bill, the merit of the super-affirmative procedure is that the process would take place over a 60-day period and it would allow the Minister to amend any draft order, if Parliament decides it appropriate, but that decision would not undermine the whole basis of the proposal. Such an approach would have three key benefits: it would allow effective scrutiny at the time that it matters—at the point of sale—which may be some few years hence; it would ensure that the impact of the terms of sale could be understood; and it would ensure democratic accountability on matters flowing from an enabling Bill. In this instance the super-affirmative procedure would be good for users and the taxpayer, who will benefit from Parliament scrutinising a Royal Mail disposal at the precise time that the Government make their decision.
I turn to the explanatory document. Parliament is being asked to consider the Bill one, two, three or maybe even four years prior to the sale of Royal Mail. By adopting the super-affirmative procedure, together with requiring an explanatory document when a disposal order is laid, Parliament has the opportunity to scrutinise the decision of the Secretary of State at the very point at which the sale is due to take place. This scrutiny will also allow more transparency on the valuing of Royal Mail in relation to the proposed sale price. That applies to a post-final-bid situation, about which the noble Baroness, Lady Kramer, was so concerned. Having that transparency prior to the bidding process would undermine the Government’s ability to leverage the price that they could secure. Such an explanatory document would give transparency, but only in a post-final-bid situation.
Amendment 6 sets out what the explanatory document should cover. The terms of agreement for the sale of Royal Mail will be highly significant but they are not yet known. A buyer has to be found and negotiations have to take place. No one at this point knows what the terms will definitely contain but their impact is of public interest. An explanatory document should provide a report on consultations and representations received, which should include those from user groups, bodies representing rural communities, pensioners, those with disabilities, businesses including small businesses, other operators, employee representatives and the devolved Administrations. The amendment provides for certain persons making representations to be afforded confidentiality. I understand that this is consistent with the provisions in the 2006 Act. One can also understand that there may be matters of commercial confidentiality, including some from the bidder and other private carriers, which would require this. The report would also provide a detailed regulatory impact assessment and such other information as the Minister considers would be of assistance to Parliament in considering the proposed disposal.
A number of concerns about the Bill necessitate the Minister returning to Parliament with the proposed disposal order and an explanatory document at the point of sale. These concerns have been reflected in the amendments tabled to the Bill, both here and in the other place, and in contributions by noble Lords from all sides of the House. The central part of the Bill enables legislation; it enables the Government to privatise Royal Mail. However, that is not the end of the story. As the Minister said in replying to Amendment 4, the Government are looking for maximum flexibility in this Bill. There is much detail yet to crystallise. Royal Mail needs capital investment and a buyer will want to see a business case. Therefore, the highest price, or even an acceptable price, may come from giving the buyer the greatest freedom to be profitable. A Government keen to secure a buyer will be under pressure to maximise freedom for the purchaser. There is a great deal left to regulations. Many uncertainties still exist and will require parliamentary scrutiny.
I will recap some of those concerns and uncertainties. While I acknowledge the merits of the transition to Ofcom as the regulator, there is still uncertainty about the regulatory regime, including how the move from licensing to regulatory authorisation will impact on the maintenance of the minimum universal service requirements over time and the robustness of any universal postal service obligation placed on a universal service provider. It is important that the terms of any sale or disposal do not pre-empt the setting or delivery of those obligations in any way that would be detrimental to users’ needs, business needs and citizens’ social and economic interests. We do not know the terms of the sale—no one can know them prior to negotiation or the detail being settled—so there could be a tension between the terms of sale and the regulatory principles in the Bill.
There will be a need for reassurance that the terms of the sale do not qualify or pre-empt the ability of Ofcom to discharge its duties under, for example, Clause 28 on such matters as access points, universal service and financial sustainability; Clause 42 and the financial obligations that could be placed on a universal provider; or Clause 35, to which the Minister referred, and Clause 37 on the universal service provider’s network access and universal service conditions. Ofcom is unlikely to be able to override the terms of any sale agreed by the Government when Ofcom seeks to set or impose regulatory requirements on universal service provision.
A further area of uncertainty is the future of the post office network and the commercial relationship between the Royal Mail and Post Office Ltd. The Government are anxious to suggest that the Bill is not about the post office network. However, one cannot entirely divorce Post Office Counters from this Bill. Parliament has been assured that a commercial relationship between these two businesses will be sustained. The key test here, however, is of whether it is sustained at current levels or is slowly eroded by Royal Mail to the detriment of the nationwide network of post offices. No one can truly answer the question of how the terms of sale with any bidder will impact on those assurances at the moment. Once privatisation has taken place, it will be difficult for a Government to influence an inter-business agreement between a privatised Royal Mail and Post Office Ltd. The Government have not specified to date a minimum number of outlets across the UK where counter services must be provided, notwithstanding that in other countries legislation does so specify.
A primary driver for full privatisation of Royal Mail is the need to secure private capital investment. Securing that investment will be heavily influenced by the viability of the business model captured by the terms of sale. This will not be solely a matter of asset price or of how much the Oxford sorting office can be sold for, but will be about the extent of regulation and commercial freedom and network access conditions. Market conditions for postal service operators are challenging because of the growth of e-substitution and the digital media. Any potential buyer will know this. Any analyst will look at the regulatory framework within which a privatised Post Office will have to operate.
These are weighty issues, which will determine how a future privatised Royal Mail will continue to perform its functions as a provider of affordable, non-discriminatory, universal postal services. Currently no one can truly assert what the full terms of any sale to a purchaser will be because those negotiations have not taken place. That is precisely why scrutiny at the level of a super-affirmative procedure, accompanied by an order with an explanatory document, is appropriate. I accept that Parliament cannot micromanage postal services. However, it should try its hardest, given that the sale may not take place for some years, to ensure that the interests of the user, the citizen, the taxpayer and the Exchequer are protected by directing the Secretary of State to return to Parliament with a proposed disposal order and an explanatory document at the point of the disposal that will be the subject of a super-affirmative order.
Viscount Eccles
My Lords, we can only admire the way in which the noble Baroness, Lady Drake, put forward her amendments. She has carried out a lot of due diligence and her speech was wholly admirable. However, my problem with it is—noble Lords will guess that I have a problem with it—that I do not see any way of removing uncertainty now or in the medium term or, as she suggested, in three or four years. I hope that that pessimistic estimate turns out to be wrong and that this matter is resolved in a lot less time than four years.
The uncertainty arises primarily from the behaviour of the market. We have talked a bit about other privatisations. The steel industry was mentioned. That industry was in decline when it was privatised. However, the opposite was the case with British Telecom. A lot of our experience of privatisations is highly coloured by the market conditions prevailing at the time. If what I have picked up turns out to be true, one of the issues which faces a mail operator is to find new streams of business and not to rely just on the mail and the universal obligation to deliver it at the same price to every household in the country. That brings me to one of the uncertainties about any deal that might be proposed by the Royal Mail to the Secretary of State as being a deal that he or she might wish to approve. I think that I have mentioned this before. There could be two bidders—there might even be three—with very different solutions. It is not a question of there being one deal. In a negotiation you may well find that not only is there more than one bidder but their bids are so different that you have to have two completely separate sets of due diligence to make sense of them and to make a recommendation to the Secretary of State. As I see it, that is the way that this matter will go forward.
In those circumstances I am very doubtful about the role of Parliament except in an ex-post involvement through the National Audit Office and the Public Accounts Committee, as my noble friend on the Front Bench said earlier. Then Parliament will have its opportunity to say whether it thinks that the Secretary of State made a good or bad decision in backing one of the recommendations made to him or her. Parliament will have to be satisfied with an ex-post role.
As regards the super-affirmative procedure and the 60 day period, 60 days is a long time for a bid to remain open without being reneged on or altered. In my opinion it simply is not practical to think that any bidder will be willing to go through this process. Given my past experience of buying and selling businesses, if I was faced with these amendments in the Bill, I think that I would say, “Please will you assure me that this part of the Bill is not going to be triggered because if it is my bid is withdrawn?” or I would not enter the negotiation in the first place. The intentions behind these amendments are absolutely clear to all of us and if the circumstances of the Royal Mail and the mail market were entirely different we might be able to live with such a procedure. However, I do not think that we can live with it in these circumstances.
Baroness Wilcox
My Lords, this group of amendments seeks to add to the Bill a requirement for the Secretary of State to make an Oral Statement and obtain additional parliamentary approval before there can be a relevant disposal of shares in a Royal Mail company.
Amendment 5 of the noble Lord, Lord Young, proposes that an order on the disposal should be subject to the affirmative procedure. The noble Baroness’s Amendments 6 and 17 seek to insert into the Bill a requirement for a super-affirmative procedure before there can be a disposal of shares. Like my noble friend Lord Eccles, I congratulate her on the thoroughness of these amendments which set out clearly the process that is required under the super-affirmative procedure. The noble Baroness may be new to your Lordships’ House but from these amendments it is clear that her knowledge and attention to detail will ensure that its business receives proper and close scrutiny in the years to come. I congratulate her on that. From my noble friend Lord Eccles we received a master class in how to buy and sell businesses. I suspect that I shall lean on him heavily as this Bill goes through to make speeches like that again.
I do not believe that further parliamentary procedures should be required before there can be a disposal of shares in Royal Mail. A committee in the other place has fully debated the disposal of shares as set out in this Bill and this Committee of the Whole House is now debating the issue. The disposal of shares to enable an injection of private capital into Royal Mail is part of a package of measures set out in this Bill which should be scrutinised as a package. The disposal of shares should not be looked at in isolation but alongside the other two essential parts of the package—tackling the pension deficit and reforming the regulatory regime. Richard Hooper emphasised the importance of this package when he gave evidence to the committee in the other place. The noble Lord, Lord Young, asked about the timetable for state aid clearance. We have not at this stage notified the European Commission of the proposed aid but we will do so as soon as we are ready. As I said earlier, this Government have learnt the lessons of 2009. We will take a staged approach to all the steps we need to take before a sale can be completed.
The Opposition’s Postal Services Bill in 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As noble Lords opposite themselves said in 2009, additional parliamentary procedures would be unwelcome because they would create uncertainty for potential investors. During the passage of that Bill, noble Lords representing the then Government suggested that noble Lords would agree that the appropriate place for commercial negotiations to take place was not on the Floor of the House.
Noble Lords opposite have expressed interest in the value of Royal Mail. The uncertainty that would exist if a disposal is subject to voting in Parliament would only further reduce the value of the business. This would damage the chances of achieving the best deal for the taxpayer and the company from any future disposal. I fail to see how this amendment fits with other amendments tabled by noble Lords where there has been an emphasis to take forward a sale of shares quickly. These amendments would insert time-consuming mechanisms that would add delay to a disposal.
With regard to legislative provision for the Secretary of State to make an Oral Statement, we do not think that is necessary whenever there is a sale of shares. The Bill is setting the minimum requirements for government action. What is important is the principle that information on this sale should be provided to Parliament. The requirement for a report in Clause 2 applies not only to the first sale of shares but any subsequent sale of shares. I fully accept that an Oral Statement might, of course, be appropriate for the first sale of shares, but would it also be a good use of time if, for instance, five years later Ministers decided to put an extra 100 shares into the employee share scheme? We are committing in Clause 2 that there should be a report to Parliament every time the Government reduce their stake in Royal Mail. We will, of course, discuss with the House authorities the appropriate format for such reports at the relevant times, including whether or not an Oral Statement is appropriate.
Finally, the noble Baroness, Lady Drake, asks in her amendments for evidence of consultation and an impact assessment. I point the noble Baroness to the extensive consultation carried out by Richard Hooper in his two independent reviews on the future of the Royal Mail and the impact assessment published alongside the Bill. On this basis, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I thank the Minister for her response to the contributions. It was another interesting debate. I feel that I have been trumped by my noble friend Lady Drake in her forensic analysis of the super-affirmative procedure. She certainly demonstrated her knowledge of it and her diligence.
This issue is a matter of judgment. I did not expect the noble Viscount, Lord Eccles, to leap to his feet and say, “Yes, I agree with this”. He referred to the behaviour of the market and the introduction of more uncertainty. We balance that against accountability and the ability of Parliament to scrutinise but not negotiate. I look forward to hearing from the Minister when she notifies the European Commission, because that is an important point. She rightly pointed out that there was no provision for an affirmative procedure in the 2009 Bill. However, we were not going for a 100 per cent disposal. As the Bill is further scrutinised, we will analyse the issue of whether Oral Statements are required for a range of future share sales.
I will reflect on the nature of this debate and the Minister’s response. I warn that I may well return to this matter on Report but, in the circumstances, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, Clause 2 relates to the Government reporting on their decision to dispose of shares in a Royal Mail company. As the Bill stands, the Secretary of State must, as soon as reasonably practicable after making a decision about arrangements for the sale of Royal Mail, lay a report before Parliament on the detail of those arrangements. The report will be made after the decision has been taken. It can also be made after that decision has begun to be enacted. The report must state the kind of relevant disposal that the Secretary of State intends to make and the expected timescale for undertaking it.
As currently drafted, there is nothing in the Bill to prevent the Secretary of State proceeding with a disposal of shares in all or part of Royal Mail before a report is laid before Parliament. The Bill requires only that the report is laid before Parliament as soon as is reasonably practicable. This is a cause for significant concern. Opportunities for proper accountability and oversight are potentially compromised by this arrangement. It does not allow for suitable scrutiny of the proposals. The Government must be accountable to Parliament for their actions. Parliament must have oversight of such important policy before it is enacted.
The amendment provides simply for greater accountability and transparency in the Government’s plans. It does not prevent a sale but restricts it to after such a time as Parliament has had an opportunity to be fully informed of the Secretary of State’s plans. Royal Mail is an incredibly important and valuable asset. It touches the lives of everyone in this country, employs 160,000 of them and has an annual turnover of more than £9 billion.
Royal Mail has struggled with a tumultuous history in recent years. Post Office closures and the impact of competition and regulation have taken their toll on the business and the public’s experience of engaging with the company. It is important that any further change is right for Royal Mail and is implemented correctly. A key way to ensure that this happens is to allow for an adequate level of parliamentary scrutiny of the Government’s plans. It is essential that Parliament follows the detail of the share disposal and ensures that the Government seek to maximise their return on the value of this asset and secure a sustainable future for Royal Mail and the UK postal industry.
I therefore urge support for the amendment, which requires the Secretary of State to lay his report on the detail of his decision regarding the sale of Royal Mail before any such sale takes place. I beg to move.
Lord Hoyle
I am sure that the Minister will accept the amendment because it makes sense to have a report before any sale takes place. What is the point of reporting to us if the sale has already been completed? There is no point whatever to that. I am certain that she will agree to the amendment with a view to the application of democracy. It might be the first success that we have had this Session. I notice the noble Lord, Lord Hunt, shaking his head behind her. I know that he is the Minister’s mentor, but I ask her to disregard him. Why not be a democrat and accept this?
Viscount Eccles
I must say that the noble Lord, Lord Hoyle, said that with great charm. However, what will we do in Parliament if the bidder says that he will not make his bid unconditional if the matter is to be submitted to Parliament?
Baroness Wilcox
My Lords, the amendment seeks to ensure that the Secretary of State lays a report before Parliament before there is a sale of shares. I shall talk quickly, because I am worried about the blandishments of the noble Lord, Lord Hoyle, influencing me before I reach the end. I believe that the drafting of the clause makes it clear that the report should be laid before a disposal of shares is made. The clause requires the Secretary of State to lay a report as soon as reasonably practicable after a decision has been made to undertake a sale of shares.
The arrangements needed to organise a disposal of shares in Royal Mail to a trade buyer through a competition or to conduct a public flotation would take several months. It would not be the case that the Secretary of State would decide over breakfast to sell shares in Royal Mail and then complete the sale by the time we in this House enjoy our evening dinner. It simply would not happen that way. The starting gun for work on the specific arrangements for a sale would be a decision by the Secretary of State to undertake a sale. Under the Bill, the Secretary of State has to lay a report before Parliament as soon as reasonably practicable after a decision is taken to dispose of shares. This would be before a sale of shares. I therefore kindly ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her response. I must admit that had I known that the blandishments of the noble Lord, Lord Hoyle, would be that effective I would deploy him more regularly and more often. That way, we might achieve acceptance of at least one amendment. We have gone from considering affirmative and super-affirmative procedures to a report. Blandishments from me or the noble Lord, Lord Hoyle, seem to be of no use whatever. Nevertheless, we still believe that this is a reasonable request. It is part of what we would describe as accountability and scrutiny. For the time being, I beg leave to withdraw the amendment—again, on the understanding that I may well return to this matter on Report.