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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)
It is a pleasure to serve under your chairmanship, Mr Gapes. I congratulate the hon. Member for Dulwich and West Norwood (Helen Hayes) on securing today’s important debate at which some crucial issues facing the Royal Mail and the public that it serves have been raised. The Government recognise the crucial role that postal services play in communities across the country. The relocation and closure process that is the subject of the debate has dominated discussion. I would like to respond to some of the points made.
There are very good drivers for running an efficient and effective delivery service. Proposed relocations or closures of delivery offices are part of Royal Mail’s ongoing business transformation, which aims to meet changing customer expectations, increase efficiency and, yes, keep costs under control. Royal Mail always engages with its people and the trade unions before any decision to close a delivery office is taken. It also writes to the local MP and issues a press release, to provide an opportunity for wider public engagement, which is taken into account in the final decision-making process. The same goes for the Post Office.
Helen Hayes
It has been my experience in my constituency that the lack of an obligation on Royal Mail itself to consult the public is a huge omission in that process. Royal Mail relies on notifying the local MP and assuming that the news will somehow get out. Of course we make a noise about it, but that is no substitute for the organisation itself consulting and engaging with the public it serves. Will the Minister comment on that?
Margot James
I thank the hon. Lady for her question. I will take that point back to Royal Mail. I have been given the impression that the consultation requirements for changes such as the relocations and closures that we are discussing are the same for Royal Mail as they are for the Post Office. If that has not been the case in her constituency, I will raise that issue directly with Royal Mail.
Many local residents and businesses rely on the convenient facility that Royal Mail offers for the collection of parcels and items of mail. Where closure or relocation is necessary, Royal Mail takes care to ensure that there will be no impact on deliveries to its customers. I recognise from comments that have been made in the debate that there is a strong feeling that that statement does not seem to transmit to Members present or, possibly, to the wider public.
The postmen and women who deliver to the postcode areas covered by a relocated delivery office will continue to serve the local community. Customers do not have to visit a delivery office to collect items of mail if they are unable to do so or are not at home when Royal Mail first attempts delivery. The hon. Member for East Dunbartonshire (Jo Swinson) raised concerns about the alternative methods that are in place, which I will run through before I come to her proposal. Royal Mail has put in place a variety of options to ensure that customers get their deliveries in the most convenient way possible. It will always attempt to leave an item with a neighbour in the first instance, and customers may nominate a neighbour to take in their parcel. It is also possible for customers to arrange a delivery free of charge on a day that is convenient for them, including Saturdays. A further option is to arrange for the item to be delivered to a different address in the same postcode area. Those are several ways in which Royal Mail has attempted to maintain customer service.
The hon. Lady proposed that local networks of delivery points, including post offices, should be considered. There is already an option to redirect mail to a post office —that is a paid-for service, for which I believe the charge is 70p—but I am sure that Royal Mail will be open to that suggestion and others, as it is determined to improve its customer service throughout this change process.
Hugh Gaffney
The Minister mentioned post offices. The whole point of the debate is that post offices are shutting down on the high street and that people are travelling further to collect parcels.
Margot James
The hon. Gentleman is not quite right about that. Post offices are not closing. In fact, the post office network is now sustainable; more outlets are opening for many more hours.
Margot James
If the hon. Gentleman means Crown post offices, I understand his point. Many of those post offices are being franchised to other retail outlets, but some of those outlets are more convenient for customers. That point should not be lost on him.
While I am addressing the Post Office, which is not the subject of this debate, I will take up the point made by the hon. Member for Falkirk (John Mc Nally). I am not aware of the closure at the moment of any Royal Mail distribution centre in Falkirk, so perhaps he will provide the details. As far as I am aware, there is not one closing in Falkirk. He talked about the closure of post offices up and down the country. That simply is not the case. I will send him the statistics for post offices opening, rather than closing, around the country. The total numbers bear out what I am saying.
Jo Swinson
I appreciate the Minister’s giving way, and she is of course right that, as the hon. Member for Falkirk (John Mc Nally) mentioned, there were a significant number of post office closures under the Labour Government. That was halted, but that is exactly why it is a good network. I urge the Minister to ask Royal Mail not to put barriers in the way of people using the network, such as the 70p additional charge for consumers. Surely there must be a solution, given that Royal Mail is trying to save some costs. It is a small amount of money that might go to the post office, and if we save consumers from having to shell out, it would be more of a success.
Margot James
As the hon. Lady knows, I am not responsible for the operational aspects of Royal Mail, but I shall put that to its management. It is appropriate that she has raised the matter of costs, as I was just coming on to that; it is important that we appreciate why business transformation is necessary.
Efficiency is a key component of ensuring the financial sustainability of the universal obligation. Price increases are not a long-term solution, particularly in such a competitive market. We have already heard that the market for letters has declined by 40%. The market for parcels, while buoyant, is highly competitive. At the time of the 2008 Hooper review, Royal Mail was estimated to be 40% less efficient than international comparators. Since the Postal Services Act 2011 Royal Mail has spent more than £1 billion on its transformation programme. In 2010 only 8% of Royal Mail letters were sorted by machine, compared with 85% for leading EU operators. The investment that Royal Mail has made has closed the gap and increased automation of letter sorting to more than 80%. Ofcom has found that those investments have improved efficiency.
Margot James
I was coming to efficiency. Ofcom has found that the investments made by Royal Mail have improved efficiency. Labour productivity in delivery and processing increased by 5.6% between 2011 and 2015. Royal Mail’s transformation programme between 2012 and 2015 produced cumulative savings of £340 million—an average of £110 million per year. In its review of postal services regulation, Ofcom recognised the steps that Royal Mail had taken on transformation but also concluded that it could do even more to improve efficiency. Royal Mail’s approach to the continuous improvement of its efficiency and productivity allows it to be more competitive and helps it to meet changing customer expectations. The closure of some distribution points was because of the new market in packages, for example. Some of the old distribution points were simply not large enough or fit for purpose for the modern requirements for so many packages. The totality adds up to a company better positioned to grow its existing customer relationships and win new business.
A number of colleagues have talked about the privatisation and the financial side of the management of Royal Mail. I just point out that since privatisation Royal Mail has invested £1.4 billion in employee pension schemes. That is a vast amount of money. It has also paid out dividends of £800 million, which it has to do as a publicly quoted company. One of the key reasons for privatisation was to put Royal Mail on a footing where it could borrow on the markets to fund its investment rather than have to compete with schools, hospitals and other Treasury-backed spending obligations. As such, it has managed to raise £500 million in debt and has maintained profitability, as well as growing sales, in a highly competitive market. I do feel that rather than criticising the chief executive, I should put on record my admiration for her in the difficult job that she has had steering Royal Mail through a highly competitive environment. I appreciate that there are other views on the matter, but I must put that on record as my view.
Overall, the service and value provided by Royal Mail to its customers is good and, where it needs to make difficult commercial decisions, it does so in a way that minimises disruption to businesses and consumers. The CWU’s announcement last week of a 48-hour national strike, planned to commence on 19 October, will challenge even Royal Mail’s high delivery standards. We are hopeful that both parties will reach an amicable solution on the matters under discussion and avoid a strike, if at all possible, and the inevitable disruption to the postal service that would follow. If the worst happens, Royal Mail has planned contingency arrangements in place to minimise the impact on delivery services. It is inevitable, however, that some or all delivery offices will be affected during any industrial action.
Ofcom also has a well-established monitoring regime that allows it to track market developments closely and that informs its decisions about the regulatory framework. We hope that both sides will keep talking—I think that is something all hon. Members agree with—and that an amicable solution is found. It is in everyone’s interests to see Royal Mail continue its proud tradition of delivering the UK’s universal postal service in the private sector.
I congratulate the Royal Mail and its hard-working staff. I am sure it will continue to focus on delivering this key mission: connecting companies, customers and communities; making e-commerce happen; and delivering the universal service obligation.