Directors’ Pay

Lord Stevenson of Balmacara Excerpts

Wednesday 20th June 2012 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for repeating the Statement made earlier in another place. In January this year, the Prime Minister said on the Marr programme:

“it’s the excessive growth in payment unrelated to success that’s frankly ripping off the shareholder and the customer and is crony capitalism and is wrong. And it’s also—I think a key point—payments for failure, those big rewards when people fail, I think make people’s blood boil and again is actually taking money from the owners of the company, the shareholders and everyone with a pension in Britain … I think you know what we should be doing here is what are the best market tools to try and correct this market failure and I think transparency is a key tool, so we can all see what’s happening, and then clear votes so you’re empowering the shareholder”.

In March, the Secretary of State for Business, Innovation and Skills announced in a Written Ministerial Statement a public consultation,

“that provides more detail on a model which will give shareholders greater influence on the issue of executive remuneration. The main components of this are … An annual binding vote on future remuneration policy … Increasing the level of support required on votes on future remuneration policy … An annual advisory vote on how remuneration policy has been implemented in the previous year … A binding vote on exit payments over one year’s salary”.

We supported this initiative, building as it does on work done by the previous Government in 2002. So, today, we are happy to confirm our support for much of what is in the Statement, including the binding shareholder vote on exit payments, the measures to simplify pay reports to increase transparency, and an annual advisory vote on how remuneration policy has been implemented in the previous year.

What has happened to the brave new world outlined by the Prime Minister in January and echoed by the Secretary of State in March? In March, an annual binding vote on future remuneration was one of the “main components” of the Secretary of State’s plan to give shareholders greater influence. This has been watered down to one vote every three years, unless during that three years there is a change to the policy. But will that not simply incentivise boards to draft policy as broadly as possible so as to avoid anything more than a triennial vote? Who will be the arbiter as to whether there has been a change of policy in each company—the board or the shareholders? Bureaucracy has been raised as an objection to an annual vote, but given that there will still be annual advisory votes on the implementation of remuneration policy in the previous year alongside other annual votes such as the election of directors, surely that objection simply does not hold water.

Secondly, the Government proposed to increase the majority required for the pay policy to be approved, but in the Statement the Government have reverted to a simple majority. We believe that they should have gone for a 75% threshold; as Dominic Rossi, the chief investment officer of Fidelity Worldwide Investment has said, such a threshold would ensure that companies consult widely with shareholders prior to a vote and give companies a clear mandate, and the need for a clear majority would also encourage all shareholders to express their views. Why did the Government not take heed of this advice?

Thirdly, the Statement says that,

“employee views on pay are important”.

If that is the case, why has the proposal been limited to companies reporting,

“on whether they have taken steps to seek the views of their workforce”?

Will the Minister explain why the Government have not introduced the requirement for employee representatives to sit on board remuneration committees?

In the accompanying Directors’ Pay: Guide to Government Reforms, published today, the Government say:

“Over the last decade, directors’ pay in the UK’s largest listed companies has quadrupled with no clear link to company performance. Business leaders and investors now agree that this is a problem. Key stakeholders have spoken out in favour of action”.

Sir Roger Carr, president of the CBI, is quoted as saying in May 2012:

“In the way we pay ourselves … now is the time to be more transparent, more responsible and more accountable. High pay must be for exceptional performance, not mere attendance”.

Simon Walker, director-general of the IoD, is quoted as saying in March 2012:

“The level of executive pay at the UK’s largest companies has become unjustifiable over the last decade and it’s right that the Government recognises that it is shareholders who have the power to control it”,

and Otto Thoresen, director-general of the ABI, is quoted as saying in April 2012 that,

“the days of gold-plated payouts for failed leaders are coming to an end. We have the chance to agree a new set of rules focused on greater simplicity, greater transparency and genuine reward for performance. It is an opportunity we must take”.

Those are powerful comments, made by key stakeholders, and the Government should take careful heed of what is being said.

I note that the Government are claiming credit for a growth in shareholder activism. Indeed, “success has many fathers”. In the so-called shareholders’ spring, shareholders have been flexing their muscles and exercising their current, albeit restricted, rights with some verve this year. That is very welcome. Change and reform must be shareholder led—it is they who own our businesses—and surely we in Parliament should do what we can to empower and encourage them as much as possible.

There is the whiff of a U-turn in the air. The Government have talked up what they were intending to do in this area, but in the event they have failed to deliver, as the final proposals are, to be frank, a bit limp. They are certainly not the strong package of reforms, but they could become that. As the Statement indicates, this is not the last chance we will have to discuss these topics. We look forward to debating the amendments to the Enterprise and Regulatory Reform Bill, which will give these proposals legislative effect, in your Lordships’ House in the not too distant future.

Parliament Square (Management) Bill [HL]

Lord Stevenson of Balmacara Excerpts

Friday 27th January 2012 Lords Chamber

[Lord Desai]

My Lords, I have spoken at previous stages in the debate on Parliament Square. I welcome the Bill and commend it because the noble Lord, Lord Marlesford, has provided for a committee with the ongoing responsibility, day in, day out, of looking after Parliament Square. I am especially pleased not so much with Clause 2(2), but with subsection (1), which enjoins the committee,

“to facilitate lawful, authorised demonstrations in the controlled area of Parliament Square”.

That is very important. It is as important as cleanliness et cetera. The idea that people should have access to Parliament Square for legitimate activity is also important. I agree with this amendment, which will tidy up, in more senses than one, the entire issue.

[Lord Stevenson of Balmacara]

My Lords, in some senses, we are surprised that we are here. As the noble Lord, Lord Marlesford, explained, we all thought that the fox had been shot—if that is not too rigorous or loud a metaphor—with the passing of the Police Reform and Social Responsibility Act, since that seemed to have caught all the points that he raised. But of course it does not. All we seem to have gained as a result of that is exchanging a few tents, with presumably very serious protestors, for a battered police van which rather destroys the beauty of the square. But no doubt, as we have heard, processes are going ahead and things will get resolved.

So why are we here? If the Government are convinced that their legislation has solved the issue, it is surprising that they have found time for the Bill to come back. However, we welcome it. It is helpful to have a further debate, because things are perhaps not quite as clear-cut as we thought. There still remain in our minds the issues raised particularly at Second Reading when the then Minister, the noble Baroness, Lady Browning, was unable to deal completely with the issues about areas adjacent to Parliament Square, which are still likely to be infiltrated and used by those who wish to protest in a lawful way. The measures that have been put through do not necessarily deal with that. There is still an issue regarding the area immediately outside the Houses of Parliament and adjacent to the Palace and Parliament Square which has not been resolved. Perhaps there is a case for maintaining interest in this Bill, which we could use to clear up some of the other issues. But that is for another day.

As the noble Lord said, this is the Persil amendment—a softer touch to that put forward in the original Bill. It will provide a gentler, more cleansing effect than perhaps the phrasing in the Police Reform and Social Responsibility Act. On that basis, the amendment is totally unexceptional and we support it.

[Lord Campbell of Alloway]

My Lords, I support the amendment, with gratitude to my noble friend for having entered into this difficult problem. The Joint Committee considered the issue for a long time and took a lot of evidence. Its view is recorded, as is the evidence, in a second vast volume. This is an important matter. The noble Lord mentioned human rights. It has been trespassed upon by a misunderstanding or misconception of human rights as they should be applied. There is a recent decision, which is today reported in the Times, where the court has said that in a similar context there would be no question of infringing human rights because the right of expression could be made elsewhere and otherwise. I therefore support the amendment.

Railways: High-speed Rail

Lord Stevenson of Balmacara Excerpts

Tuesday 10th January 2012 Lords Chamber

[Earl Attlee]

My Lords, I am sure that Her Majesty’s Government look at all possible sources of finance.

[Lord Stevenson of Balmacara]

My Lords, I declare an interest as a resident of the Chilterns, and indeed of the village of Little Missenden, which the Minister kindly mentioned a few minutes ago. I am afraid that I cannot join the general celebration of the announcement today. That is not because I feel that the Chilterns are being badly treated—although I think that they are—but because I share some of the points made earlier about the way in which the business case has been made. I shall return to that at some other time. A key concern of many of the residents in this area, and of many others looking at this matter, is the environmental case. Can the Minister explain why that has been delayed and why we have so far not seen anything on it? Can he say when it will be published?

[Earl Attlee]

My Lords, I have to declare a slight interest—not only am I the Earl Attlee; I am also Viscount Prestwood, because my grandfather lived in the village of Prestwood. The noble Lord asked about the environmental impact assessment. As he points out, that will be produced later on. However, it is a very detailed document. There has been some sustainability assessment of the proposed route, but the environmental impact assessment will be very detailed and look at how we will deal with every adverse impact. That will come along with the hybrid Bill.

Postal Services Bill

Lord Stevenson of Balmacara Excerpts

Wednesday 4th May 2011 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

4: Clause 2, page 2, line 1, leave out subsection (2) and insert—
“( ) 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 of employees within Royal Mail or its successors will sit on the board of the new body.”

[Lord Stevenson of Balmacara]

My Lords, we discussed the issue of a representative of employees serving on the board of Royal Mail in Committee and it received support from across the Chamber. The noble Lord, Lord Cotter, from the Liberal Democrat Back Benches, drew on his experience as managing director of a manufacturing company. He said on 8 March at col. 1553 of Hansard:

“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”.

My noble friend Lord Myners pointed out that the shareholders in a privatised Royal Mail,

“—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 … few … 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”.—[Official Report, 8/3/11; cols. 1553-55.]

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, because postal staff invest their livelihoods and pensions in the company. We will suggest later under Clause 3 that they should be able to invest in trust-owned employee shareholdings in the company. Surely it is not too much to ask that they have a seat at the board table for their chosen representatives.

What do we see when we look across the channel? Employee representation is commonplace. In fact, some of the companies that are held up as shining examples of privatised postal services have employee representatives on their boards. The Minister for Postal Services, in Committee in another place, stated:

“I have never been opposed to the idea of employee representatives being on boards, or on board committees”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 325.]

We invite the Minister here to go one step further and make provision in the Bill for this good idea. Failure to introduce representation of postal workers would risk missing a real opportunity to create trust and confidence for the long term. I beg to move.

[The Deputy Speaker (Lord Skelmersdale)]

If the amendment is agreed, I cannot call Amendment 5, by reason of pre-emption.

--- Later in debate ---

The amendments in this group have given us the opportunity to discuss important issues relating to employees of Royal Mail. For the reasons that I have given, it is not necessary to include in the Bill the provisions set out in the amendments. I therefore ask the noble Baroness and noble Lords not to press their amendments.

[Lord Stevenson of Balmacara]

I thank the Minister for his comments. I agree that these debates have allowed us to touch on important issues that affect not just Royal Mail but the wider world of work and how Governments should relate to that. I also thank my noble friends Lady Wall and Lord Clarke for their contributions. The Minister responded positively to their speeches, but unfortunately has not been sufficiently moved to incorporate the amendments in the Bill. Perhaps we can come back to them at a later stage.

The issue raised in Amendment 4 is whether, at the point of transition from its present position as a wholly owned subsidiary of government, Royal Mail should be imbued with many attributes that will allow it to sustain and carry on its work. As I understand it, the Minister is very positive about the need for employees to be engaged at all levels in the work of companies, but believes that the responsibility for that must lie with the company and not the Government. We on this side of the House believe that the change from a wholly owned subsidiary to a 100 per cent private company changes the nature of the debate.

History is with us all the time in this debate. It is important to bear in mind that Royal Mail is a public service. It is a company in all but practical separation from the Government, but it is also a public service, and I think that those who work in it believe that that is what drives their motivation and allows them to engage with the public interest more widely than any ordinary employee would do. It also allows them to have high levels of staff retention and works to ensure that their productivity is high. These are public servants in the true sense of the phrase and the change that the Government wish to make—to sell them and their company to a private sector operation—will of course make that completely different. They may or may not be right; time will tell. However, I think that the Government are missing a great opportunity by not building into the new arrangements something of the past and the history of the public service which it represents.

I believe, and I think that many noble Lords on this side would support the view, that company law has perhaps not kept up with the needs of the modern employment world. It does not play well to the idea to which the Minister referred in terms of how companies operate in relation to staff, and it is perhaps not the right place to look for better employee engagement on this. The Government have the option of leaving a mark on the new, privatised Royal Mail. They could do so by a simple amendment—accepting what we have said in this amendment—but they have not done so. The warm words which we have heard are encouraging to those who will read them but they do not lead us to permanent change. I therefore think that we should test the opinion of the House.

--- Later in debate ---

[Lord Low of Dalston]

If it is truth that we are concerned with, as a serious House concerned about its reputation, it is not correct to say that it is more expensive to deliver to Norwood Green and Hampstead than to the Orkneys and Shetland.

[Lord Stevenson of Balmacara]

I hesitate to interfere in what is obviously an important battle of words; perhaps the Minister will take on the mantle of responding to ensure that we have equity at the end of this debate.

I shall speak to the substance of the amendments in the names of the noble Lords, Lord Low and Lord Rogan. The sale of Royal Mail and the separation of the post office network is a momentous event and is bound to cause concern and have genuine repercussions on the universal service and on the post office network, as we have heard and will continue to hear during debates on Report. We are very pleased by the stress that the Government are placing on retaining the universal service. There has not been a sitting in which we have discussed the Bill without that provision being at the heart of the remarks that have been made; we welcome that.

I pay tribute to the noble Lord, Lord Low, whose representations led the then Government to incorporate a service to blind and partially sighted customers into the universal service minimum requirement and to put it in the 2009 Bill. Nine million items a year are sent free of charge through the Articles for the Blind service, and the Bill carries through that decision, a move which will be welcomed on all sides of the House.

That experience illustrates the value of proper consultation to improve results and help people to feel part of the decision rather than the victims of one. It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups, but the amendments would require—just at the time it is needed—proper consultation with user groups, including small business, pensioners, people with disabilities and people in rural areas. People with a disability are more likely to use mail services as a means of communication. Disabled people visit the post office to post mail more than the average. Equally, other groups who I mentioned in that list need to be consulted, and the amendments would ensure that.

The other amendment deals with concerns in those parts of the UK which would be most vulnerable to any reduction in the USO or the post office network. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK.

I am not sure whether Ministers have had the chance to read the current edition of the London Review of Books and, in particular, the article by James Meek entitled “In the Sorting Office”. It is an extremely good tour d’horizon of some of the problems facing modern post services. He spends some time describing his experiences visiting the Netherlands and the operations being carried on there, some of which were mentioned by my noble friend Lord Christopher.

In particular, I draw attention to the points Mr Meek made in the article about when he visited rural parts of the United Kingdom. Muck is a Scottish island two and a half miles south of Skye. The article states:

“There are 12 households on Muck, and they get mail when and if the ferry arrives from Mallaig … Bad weather can cut the ferries down to one a week in winter. There have also been times—it happened the other day”—

when one puts a first-class letter on the early ferry and it reaches London the next morning. So they get a very variable service. The problem is that Muck now has a satellite dish for broadband internet. You can even, if you are lucky, catch a mobile signal in some parts of the island, if the wind is in the right direction—I added that last bit, but it is true.

“Nowadays email’s so important for communication that the post is getting less and less important”,

says one islander:

“I'm afraid the Royal Mail's in a losing battle”.

The article goes on to draw something to the wider public's attention which I had not known, which is that Jersey,

“has just announced it is abandoning Saturday deliveries in an attempt to staunch the flow of red on its balance sheet”.

I think that Jersey is still a part of the United Kingdom, although it is obviously a separate entity, so we are in danger of some dilution of the USO.

We will return to the question of the USO and how we will protect it. We know that the Government are on our side, but I think that there are measures that might strengthen that protection. The amendments are about consultation to make sure that user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas, are consulted, and I urge the Government to accept them.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

16: Clause 3, page 2, line 25, leave out from “reduced” to end of line 35 and insert “from 100%, the proportion of the company owned by or on behalf of the employee share scheme shall be at least 15% of the proportion of the company that is now owned by the Crown”

[Lord Stevenson of Balmacara]

My Lords, the amendments make the case for employee shares being held as a trust and for employees to have a voice on the board in the light of the employee share scheme being established. We agree that that should be in the Bill because we have heard a lot of Ministers’ warm words for employees, but we need more assurances.

The benefits of employee share schemes, which were rehearsed to some extent in Committee, are widely recognised. They can include motivating employees to become more productive, helping to align employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do that on their own. They have to be part of a wider approach to good industrial relations. Employee shares will not be welcomed if they are felt to be a sop, to be at the expense of pay or a substitute for the usual channels of interaction between management, unions and staff.

However, given the more generalised benefits of such schemes and the very significant efforts made by current employees to implement the modernisation programme within Royal Mail, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. Carole Leslie of the Employee Ownership Association spoke of the benefits of such a scheme in evidence to the Public Bill Committee in another place. She said:

“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding … the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 76.]

If we accept the principle of employee shares, we are still short of detail. The Government have said that there will be a scheme but they have not said exactly what it will be. Having said that, we welcome two important concessions that the Government have made. First, we have pressed for greater detail about the scheme and are therefore pleased that the Government have brought forward an amendment so that, before the disposal of Royal Mail takes place, there will be a report to Parliament setting out the detail of the proposals for an employee share scheme.

Secondly, in Committee we pointed out that the Bill as it stands requires employee shares to be offered only when the last Crown share in Royal Mail has been sold. We argued the case for a trigger that kicks in when the first shares are sold. I think I heard the Minister suggest that that might indeed be acceptable to the Government, in which case we welcome that as well. However, whenever it is, we think that the Government should make some employee shares available when the first disposal is made.

The amendment proposes that shares should be held in trust for the benefit of employees, as we think that that is the right way to settle this matter. We now understand that this would be difficult for some employees to accept, as they would expect to be able to cash in the shares if they were taking them up, but we do not think that that is the right way forward to build in long-term value in the company. We believe that, for example, on leaving employment, shares held by employees should be disposed of only by way of transfer for consideration through the trust. It is obviously fair that employees who leave employment and leave a scheme should be able to capitalise on their shareholding, particularly if there has been capital growth. That is a scheme incentive. However, to maintain the integrity of the scheme as a whole, the disposals should go back into the scheme.

The amendment also calls for representation on the board for the employee share scheme once it is established. I have already made the arguments in favour of generalised employee representation but I think that they acquire additional merit when it is seen that some 15 per cent, we hope—but certainly 10 per cent under the Government’s proposals—of the shares will be available to be held by the employees of Royal Mail. This means that they should as of right have a chance to have a collective voice at the highest level, and we think that that should be stated in the Bill. I beg to move.

[Lord Razzall]

My Lords, having sat through what I would describe as “Lord Mandelson’s Bill” under the previous Government, I am absolutely delighted at the Labour Party’s conversion on the road to Damascus regarding their commitment to employee participation here. The noble Baroness would not be surprised if I indicated that, were the Government minded to go from 10 to 15 per cent, I could not be more delighted. However, whether she can persuade the Treasury of that, I have my doubts.

--- Later in debate ---

[Lord De Mauley]

My Lords, I again say that I am grateful to noble Lords on the opposition Front Bench who agree with us on the establishment of an employee share scheme. I think that we all agree that this is a key feature of the Bill and will help improve employee engagement and the culture of the company.

However, we should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and secure the future of Royal Mail. A key means of doing that is enabling the introduction of private capital. In a previous debate, the noble Lord, Lord Tunnicliffe, stated that the Government should strike the right balance between employee shares and attracting private capital. He also said that we should learn lessons from previous privatisations. Yet, through their Amendments 16 and 17, noble Lords seem to suggest that we have not gone far enough.

So let me put in context the commitment we are already making through Clause 3. The minimum 10 per cent share requirement in this Bill is the largest statutory employee share scheme of any major privatisation. There is no doubt that it is a meaningful share, but one which, in our judgment, will not harm our ability to attract private capital. As I have said previously, most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the eventual share schemes in those past privatisations offered generally smaller stakes—5 per cent in the case of BT and British Gas and less than that for the other utilities of electricity and water. Only Rolls-Royce and BA came close, at 10 per cent and 9.5 per cent respectively, but I reiterate that we are committed to at least 10 per cent. The noble Lord, Lord Brooke, referred to the bus companies. We of course looked at them, but they were generally very much smaller companies. We consider that a stake of at least 10 per cent already strikes the right balance between a meaningful stake and attracting private capital.

Amendment 16 would also require that the shares be allocated to employees on a pro-rated basis in line with the reduction of the Government’s shareholding. The Bill already allows for that and, as the noble Lord, Lord Stevenson, mentioned, the Government have committed to place shares into the scheme simultaneously with the first sale of its shares.

In Amendment 18, noble Lords have sought to specify the design of the scheme such that it is structured as a share trust. As I said during our debate in Committee on a similar amendment in the name of the noble Baroness, Lady Dean—ably spoken to by the noble Lord, Lord Brooke of Alverthorpe, in her absence—an employee share trust certainly has its attractions, particularly its ability to deliver the Government’s objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services, too, has been clear that he sees many attractions to establishing such a trust. However, it is important to keep options open on the design of the scheme at this stage. Individual share ownership also has its merits, giving employees a very real sense of ownership through their share certificates.

The design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be appropriate if Royal Mail were floated on a stock market. There are circumstances where it could also make sense to have some combination of a trust and individually held shares. The noble Lord, Lord Tunnicliffe, suggested in our debates in Committee that perhaps some shares could be used for training or bursaries. Again, there could be merits in such ideas. However, until we have reached a firm decision on the form of a transaction, it would be unwise to set in stone the form of the employee share scheme. However, I remind your Lordships that government Amendment 6, which we debated a little while ago and your Lordships accepted, requiring us to give details of the scheme when we put shares into it for the first time, will provide the House with further assurance about its proposed design at the appropriate time.

Finally, Amendment 18 returns to the issue of having an employee representative on the board. As my noble friend said when responding to Amendment 10, while the idea may well have some merits, it is for Royal Mail and its shareholders to determine whether the board should include an employee representative. Thanks to this Bill, Royal Mail’s shareholders will of course include its employees in the future.

The future ownership of Royal Mail, by both private investors and its employees, inextricably links them. Within the important boundaries set by Clause 3, the exact size and form of the scheme should therefore be informed by the type of transaction and the circumstances at the time of sale. I ask noble Lords to accept that it is imperative that we keep our options open. I therefore ask them not to press their respective amendments.

[Lord Stevenson of Balmacara]

My Lords, I thank the noble Lord, Lord Razzall, for his support for the amendment, and my noble friend Lord Brooke for sharing again his experience of working in this operation. We can laugh about it even if we cannot always agree on the absolute detail of what the figures mean. My noble friend Lord Brooke said that this was an opportunity for the Government to show themselves to be progressive in these matters, a theme which has run through most of our debate today. I am grateful to have had confirmation that the Government feel that the employee share scheme should be pushed forward and supported. We are pleased to have had confirmation that shares will be available from the first tranche.

The Minister said that the Government were minded to go for a trust but were not quite sure. There will be a point where they have to come down on one side of the fence or the other. We can see the argument for keeping options open—we are not so daft as not to—but what the purchaser is going to get needs to be clear. I would have thought that any purchaser who wanted to put a very large stake into Royal Mail would want to know that it is a well run and productive corporation and will do the job in which they are investing. That must require them to have good employee relationships, and we have argued—I think that the Minister agrees—that there is a case for ensuring that the employees’ involvement is proper, appropriate and at the level which will mean that we will get a well run and productive firm.

We have argued for greater than 10 per cent—I got a sense of some support from the noble Lord, Lord Razzall, on that. I do not think that the Minister is minded to go that way and he produced a long list of previous privatisations. But it is the future. Why not boldly go where others have not gone and take it up to 15 per cent, and then reflect on that? However, I shall withdraw the amendment.

Amendment 16 withdrawn.

Postal Services Bill

Lord Stevenson of Balmacara Excerpts

Wednesday 4th May 2011 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I shall speak also to Amendments 22, 24, 28, 29, 31 and 32 in order to reflect their purpose in its entirety. I shall also address Amendments 21, 23, 25, 26, 33, 34 and 35 in the names of the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, as well as Amendments 20, 27 and 30 in the name of the noble Lord, Lord Kennedy. This is a large group of amendments but it covers ground with which we will all be familiar from earlier stages. I shall try, therefore, to be as brief as I can while still, I hope, addressing the concerns of noble Lords. I hope that the government amendments will help to ease the noble Lords’ concerns as well as the concerns raised in Committee by the noble Lord, Lord Whitty.

All sought to increase the parliamentary scrutiny around the transfer of Post Office Ltd to a mutual ownership structure. The Government believe strongly that a mutual structure should not be imposed on Post Office Ltd from the top down, and this has not changed. We are still of the opinion that Parliament should not dictate the structure of a mutual Post Office Ltd or the make-up of its board. When the company is mutualised these details must be agreed by all of the interested parties and the interests of stakeholders such as sub-postmasters and employees must come first.

As I have said before, the Government have asked Co-operatives UK to report on recommendations for a move to a mutual model. This report will be presented to Ministers shortly and we will of course make it public. Should your Lordships wish, I shall also ensure that a copy of it is placed in the House Library. I hope the report will provide more detail of what a mutual Post Office Ltd might look like in practice. The Government plan to launch a public consultation later in the year, which will develop further details of how a mutual Post Office Ltd might work.

Your Lordships will understand that the suitable model for a mutual Post Office has yet to be designed and that we cannot know its governance structure. As I said in Committee, it is by no means clear at this early stage that the selection of both sub-postmaster and employee representatives to the board would necessarily be the best option. Enshrining governance arrangements in legislation goes completely against our commitment to ensuring that the mutual is developed by the people who know it best. The Government do not, therefore, agree with Amendments 34 and 35 in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe.

I understand the desire of both Houses to be able to exercise further scrutiny over a move to a mutual. Until we have fully consulted, we will be unable to define specifically what the Post Office mutual will look like and we recognise that, in order for Post Office Ltd to transfer to mutual ownership, it must have become commercially self-sustaining. Indeed, the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, recognise this too in their Amendments 21, 23 and 33. We are confident that the strategy mapped out by Post Office Ltd, backed by the Government’s £1.34 billion funding package, will deliver a commercially self-sustaining business.

There are a number of elements to this, as set out in detail in the Government’s policy statement published last November, particularly the aspiration that the Post Office should become a front office for both central and local government. There are great opportunities for the Post Office to develop this ambition and a number of pilots for new services have already been agreed. For example, the Department for Work and Pensions has recently announced plans for three pilots, including document verification for pensioners and support for jobseekers in more rural areas. The DWP has also confirmed that it will work with the Post Office to explore its role in supporting new ways of delivering welfare, including universal credit. Post Offices are also of course a trusted and natural place for people to access face-to-face government services such as identity verification services. Currently, the ambition to be a front office for government builds on existing capabilities and strengths.

As Paula Vennells, the Post Office’s managing director, explained to a number of us at the briefing meeting last week, the Post Office is working closely with the Cabinet Office to explore the services it could offer the Government to help them to make the savings that this demanding fiscal environment requires. Paula has also been working with Martha Lane Fox to ensure that the Post Office can have a sustainable role as services are increasingly delivered digitally—a trend which is set to continue. This could include supporting those who are unable or unwilling to access services in this way.

As Paula Vennells also emphasised last week, the front office for government strategy must not be considered in isolation. The Post Office must continually improve, with quicker transactions, shorter queues and longer opening hours. The better the Post Office’s customer-service offering, the more attractive it will be as a channel for government departments. That is why the Post Office’s network strategy—the introduction of 4,000 main post offices and 2,000 Post Office Locals across a network that remains above a total of 11,500 outlets—is so important. That is why the Government’s investment of £1.34 billion and their commitment that there will be no programme of Post Office closures are also so important. We will no doubt discuss that network strategy in more detail when we come to Clause 11.

On the question of a post bank, I reiterate what I said in Committee. The Government have already looked carefully at the options and arguments for establishing a standalone post bank. Regrettably, our conclusion is that it is just not a viable option, particularly in the current fiscal environment. Setting up and capitalising a post bank would be prohibitively expensive as well as creating a much more volatile and risky balance sheet for the company. Yet it is important to remind noble Lords quite how extensive the Post Office’s existing financial services business already is. For example, the Post Office offers savings accounts, ISAs, mortgages and credit cards and, following the recent agreement with RBS, it will provide access for more than 80 per cent of all UK current account holders. That is in addition to the wide range of basic bank accounts available to those who do not use conventional current accounts. As I said in Committee, from this strong base financial services have significant potential for growth.

These are some of the key strands of the strategy which we are confident will put the Post Office on a commercially sustainable footing. We have been clear that this is not an overnight solution. It will take a few years, and possibly more than the two years allowed under the amendments of the noble Lord, Lord Kennedy, for Post Office Ltd to become self-sustaining—that is, Amendments 20 and 30. The process of moving to a mutual model should not be rushed through and the Government have no intention of setting deadlines which Post Office Ltd and its stakeholders must meet in order to speed up this process. We recognise that some time will pass between the debates we are having now and any subsequent move to a mutual model. As such, Parliament should be given the opportunity, nearer the time of a proposed mutualisation, to scrutinise those proposals in more detail.

The amendments in my name in this group ensure that both Houses will need to approve a move to a mutual through the affirmative resolution procedure before it can proceed. They also ensure that a report giving details of the proposed move to a mutual will be laid before Parliament before any order is made. We hope that this addresses the concerns raised by the noble Lord, Lord Kennedy, and other noble Lords, since the government amendment seeks to ensure that the report will now be laid before Parliament before it votes on whether the company should be mutualised.

I reiterate that the proposals eventually brought before Parliament must be developed with the full involvement of all interested parties. The Post Office’s commercial position must have improved as we expect. Provided that these things happen, I am confident that proposals for a mutual Post Office will, after careful scrutiny, be implemented. The reports in Amendments 21, 23 and 33 will not be required because the improvements to the Post Office’s commercial position on which they seek comfort will necessarily already have occurred. Parliament will in any event have the safeguard of a vote on a move to mutual ownership.

Amendments 25, 26 and 27 are technical amendments that I hope I can clarify as unnecessary. As I stated at Committee, Clause 4(4) makes quite clear the only people who can own an interest in the Post Office. The clarification envisaged by Amendment 25 is not required to achieve this. Amendment 26 seeks to ensure that any disposal made by a relevant mutual would be a disposal of its entire interest. Again, as I said in Committee, we believe this amendment to be unnecessarily restrictive. Clause 7 provides sufficient safeguards to ensure that it is perfectly possible for different stakeholders to form separate corporate bodies to take their interest in the Post Office. Provided the safeguards in Clause 7 were met, why would we want to prevent this prior to completion of the process of designing what a mutual might look like?

Finally, Amendment 27 in the name of the noble Lord, Lord Kennedy, is technically unnecessary as Clause 4(1) ensures that a disposal of shares can be made only pursuant to a direction under subsection (2) or an approval under subsection (3). In addition, the government amendments brought forward today will ensure that any direction made by the Secretary of State under subsections (2) or (3)(b) must be subject to approval by Parliament through an affirmative resolution procedure.

I therefore hope that these government amendments will provide noble Lords with further reassurance regarding the move to a mutual model. I hope, too, that the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, will feel they need not move their amendments. I beg to move the amendment in my name.

[Lord Stevenson of Balmacara]

My Lords, we welcome government Amendments 19, 22, 24, 28, 29, 31 and 32. They are a very positive response to the representations made inside this House and beyond for greater accountability before Post Office Ltd is made a mutual. They also deal with the case of that mutual disposing of Post Office Ltd subsequently in whole or in part to another mutual or set of mutuals, and we are very pleased to see them. We are particularly pleased that provision has been made for the Secretary of State to come back to Parliament to provide details and seek approval of an order under the affirmative procedure before it is too late to influence events. We welcome these amendments and support them.

I shall speak to a number of the amendments in this group that we have tabled, but I have taken comfort from what the Minister has said in her response and will give her some assurance that we will not press the amendments to a vote. However, one or two points need to be made for the record.

Amendments 25 and 26 seek the safeguard of maintaining Post Office Ltd as a single entity before and after the creation of a mutual. From what the Minister has said, that is probably not necessary. Amendments 21 and 23 seek to ensure the Government give proper consideration to the case for a post bank. We have heard from the Minister that she has looked hard at that proposal. Given that that is the case, would it be possible for the Minister to share some results of the investigation with us? That would put our concerns beyond all doubt. Perhaps she could write to me with as much detail as she feels she can.

What I am left with is to reiterate the comments that we made earlier but to add more flesh to the suggestion about the volume of government business being transacted at post offices before the disposal takes place. We should be given more information about that, and a report should be provided to both Houses.

On the amendment in the name of my noble friend Lord Kennedy, who is not in his place at the moment, I understand the wish to avoid unnecessary sloth over creating the mutual, but I agree with the Minister that the overriding consideration must be to have Post Office Ltd in good shape before mutualisation. That is why we put in Amendment 33 a call for a sustainable development plan for Post Office Ltd before any change of ownership is mooted.

It would be nice to see the Co-operatives UK report when it comes. It was promised in April but has still not been delivered. When it does come, we would like to have a look at it as well. The Minister said that she would publish it, and we are grateful for that. That will get us only to the stage where we understand better what the options are. We will need to know what the Government intend to do; as we have discussed, the Government intend to provide a full report on that before any proposals come through. I hope that in preparing a report for both Houses of Parliament, the questions that we have about what obligations a privatised Royal Mail will be under to utilise the Post Office network will be answered and, in the case of Post Office Ltd, what type or range of mutual bodies may end up owning our post office network. What will the rules be and what will be the extent of its powers? Who will be eligible to be a member? How will a board be constituted and could the mutual-owned post office have ownership and nationality tests that would be appropriate for a company-owned Post Office Ltd? Those are all questions that we will want to come back to at that time.

I turn to Amendment 23 and government business. The amendment puts in context some of the difficulties facing those who run the network of post offices throughout the United Kingdom. The Post Office is a trusted and traditional outlet for government services on the high street, and the future of the service lies in the redevelopment of that role. The post office network needs new sources of revenue to survive without subsidy; the Government need a reliable means of communicating with and serving the public directly in their local communities and, in this time of economic downturn, access to government services is more crucial than ever.

The Government should consider making the Post Office a first-choice provider of local and national government services on the high street. A systematic policy of using the Post Office as a shop front for government services could help the Government reach vulnerable and marginalised members of society in rural and urban deprived areas. Moreover, it could further the Government’s regeneration agenda, tackle the financial exclusion that is rife in communities across the UK and, in so doing, ensure a future for the post office network. Despite some of the removal of government services over recent years, post offices remain a massively popular and a reliable source for information and assistance to the public.

If the Post Office is to survive as a mutual, it cannot continue along its current trajectory. This can happen only if it keeps the work that it gets from two major clients—Royal Mail and the Government. Already there is concern about the Post Office’s business relationship with Royal Mail. A survey by the Communication Workers Union this week, widely published in the papers today, found that nine out of 10 sub-postmasters said that they could not survive without Royal Mail business. Assurances from the Minister about that relationship do not hide the fact that the Bill contains no real protection for Post Office Ltd in that regard. Equally, there are reservations about the so-called locals model of franchised post offices, which by their nature make it difficult for customers to interact with staff on anything other than the most superficial transactions. A recent report by Consumer Focus highlighted some of the problems in this regard.

The Post Office is dependent on Royal Mail’s business for its survival. Over one-third of its revenue, £343 million, and one-third of its sub-postmasters’ pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are forced to separate, a privatised Royal Mail will be likely to look elsewhere for retail outlets to sell its products. There is no guarantee that it will use post offices to the same extent. The loss of accounts such as TV licensing and the “green giro” was a bitter blow, particularly for those post offices operating at very tight margins. Taking those contracts away was a classic case of the Government’s left hand not knowing what the right hand was doing.

Having said all that, we think that the move to mutualisation is highly welcome, but employees and managers within Post Office Ltd will be concerned that the business they inherit has a real future. They will want to know that future revenue streams from the Government are secure and that business planning can proceed accordingly. Our amendment provides that assurance by setting out which government business will be transacted through post offices. Such a report will also enable the Government to consider what other types of their business the Post Office might be able to develop. We have a range of thoughts about that which echo many of the points that the Minister made, and we will be happy to exchange views on that, perhaps outside this discussion today.

We think that the Post Office banking remains a prize that could help sustain the future of the network. I heard what the Minister said about it not stacking up, but it is surprising that many of Post Office Ltd’s overseas equivalents have developed comprehensive banking services to offset losses of other traditional services which have made substantial contributions to the viability of those national post office networks. Even if they are not like-for-like comparisons, they are useful examples of where the future might lie.

The post office network, mutualised or not, can prosper as a standalone business with the Government and Royal Mail as key customers. Our amendments do not seek to force that choice upon the Government but ask them to consider what business they intend to transact via Post Office Ltd over the next few years so that the people who run our post offices, whom the Government want to take ownership of the business, can do so with certainty and security.

Postal Services Bill

Lord Stevenson of Balmacara Excerpts

Wednesday 6th April 2011 Lords Chamber

[Lord Laird]

My Lords, I have two amendments in this grouping. I propose, with the permission of your Lordships, to refer first to Amendment 24L. The purpose of this amendment is simple; by delaying the ability of Ofcom to review the universal postal service, the current minimum requirements of the universal postal service will be protected for six years.

It is not my intention to go over a lot of the information so excellently put on the record today by the noble Viscount, Lord Tenby, so I shall try to be brief. The universal postal service is a part of life for small businesses, rural communities, pensioners and others who value the six days a week, one price goes anywhere service.

As noble Lords have already said, the universal postal service and the post office network are part of our nation’s infrastructure and must be protected following the privatisation of Royal Mail. By moving this amendment, I wish to ensure that the current levels of service we enjoy are maintained for six years. The British public do not want to see their service watered down. I believe that guaranteeing the service for six years, while not ideal, offers sufficient compromise for the Government to accept without discouraging any potential new provider of the postal service.

Let us be under no illusions; our postal service is a national treasure. While the financial difficulties it has faced in recent years have led to a need for significant investment from the private sector, this should not be at a cost to the public, as is often the case with privatisation. If this House allows the universal service to be unprotected, the most vulnerable in our society will see increased prices and reduced services. This is not acceptable.

With your Lordships’ permission, I turn to Amendment 24M. I believe that this amendment, and others like it, reflects deeper concerns about the impact that the privatisation of Royal Mail will have on services in our communities, particularly in rural areas. Noble Lords have set out in Committee a number of worries that they have about the lack of commitment from the Government to use this Bill to ensure that postal services are continued at a level that users currently enjoy. There is also a worry about the effect that this privatisation will have on the network of post offices, which are so essential to rural communities across the United Kingdom.

I am instinctively nervous about this privatisation. I am not against privatisation per se but I believe that in this case the test of whether a transfer of ownership is successful is if those who need the service most see it improve. So far more questions have been asked than answered about the long-term future of postal services in rural areas, which in reality are never going to be anything other than a cash drain on Royal Mail. These concerns have been rejected by the Minister, who prefers to hand over responsibility for the maintenance of the universal postal service obligation to a regulator, whose remit is to promote competition to ensure that it reflects the reasonable needs of users.

This amendment aims to slow down any attempt by the regulator to denude the service that users in rural areas enjoy. As the noble Viscount has already pointed out, Northern Ireland, Scotland and Wales have similar characteristics in that the majority of their populations live in towns and cities and there is a substantial land mass that is sparsely populated. I ask the Minister of the day to report to Parliament on the impact of any review of the universal postal service on those areas to ensure that the people who rely on the postal service are not the first to suffer in the new age of Royal Mail commercialisation. That is why I have tabled these amendments.

[Lord Stevenson of Balmacara]

My Lords, in responding to the last two groups of amendments, the noble Lord, Lord De Mauley, said that the Government would consider strengthening the protection for the maintenance of the current universal service. We welcome that, and thank him. This group of amendments, as we have just heard, contains a number of rather interesting suggestions for how the Government might go about that.

Clause 33(5) would permit the Secretary of State to amend the minimum requirements of the universal postal service provided for in Clause 30, which, as we are well aware, provides a mail service six days a week at affordable, uniform prices throughout the United Kingdom. Under Clause 33(7)(a), such an order would be subject to an affirmative resolution procedure. Amendment 24LZA would delete Clause 33(5) in its current guise and ensure that the European Communities Act 1972, which would otherwise permit the Secretary of State to alter the minimum requirements for the universal service through the negative resolution procedure, cannot be used to reduce the universal service.

The Government have stated that the protection of the universal service is at the centre of the Bill and in particular underpins the privatisation proposed for Royal Mail. On Second Reading in this House, the Minister emphasised this, saying:

“The purpose of the Bill is to secure the future of the universal service. The Government are committed to the existing service—six days a week collection and delivery of letters, at uniform and affordable prices, for all the United Kingdom's 28 million addresses. This is at the heart of our legislation. We have no intention of downgrading the minimum requirements of the universal service”.

She continued:

“Crucially, this Bill gives both Houses of Parliament a say in whether the universal service can be amended in the future”.—[Official Report, 16/2/11; col. 776-77.]

Our concern is that although the Government say that they have no intention of downgrading the minimum requirements of the universal service and, indeed, have repeated that intention today, the Bill brings in a procedure for the amendment of the universal service not previously contemplated in legislation. This seems to be a bit of a problem, which we should address. Our amendment seeks to ensure that any amendment of the minimum universal service requirements can take place only as a result of primary legislation and not through an order brought in by the Secretary of State.

The Delegated Powers and Regulatory Reform Committee expressed concern at the way in which Clause 33(5) contains a significant power that would allow the Secretary of State to alter the minimum requirements for a universal postal service set out in Clause 30. It is worth quoting a little more of this passage in full:

“Clause 29(1) requires OFCOM by order (subject to no Parliamentary procedure) to set out the services which a universal postal service should provide. Clause 29(2) requires the service to include, as a minimum, the services set out in clause 30”.

We have touched on that before. It continues:

“The order by OFCOM cannot alter the minimum requirements”.

That is a very important safeguard. The committee then says that,

“clause 33 provides a power for OFCOM to review the extent to which the minimum requirements reflect the needs of users of postal services. If OFCOM carry out a review (and they may be directed by the Secretary of State to do so) the Secretary of State may then, by order subject to affirmative procedure, amend clause 30. The Secretary of State is not constrained necessarily to follow any conclusions of the review”.

The committee makes no recommendation on Clause 33(5), but draws it to the attention of the House as a significant power that would allow the Secretary of State to alter the minimum requirements for the universal postal service set out in Clause 30. We will come on to some elements of this in later amendments, but I want to pick out a particular aspect.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

24NZA: Clause 34, page 19, line 3, leave out subsection (1) and insert—
“( ) OFCOM must designate a postal operator as universal service provider.”

[Lord Stevenson of Balmacara]

I shall speak also to Amendment 24AHA. All the amendments in this group have a common theme. Amendment 24NZA seeks to maintain the integrity of the universal service obligation by maintaining one universal service provider. Amendment 24AHA provides that consumer protection conditions should apply not just to the UPS at the discretion of Ofcom but to all postal operators as is appropriate to the postal service that each provides.

There are several points where the Bill provides for more than one universal service provider. One example is where Ofcom makes a procurement determination under Clause 43 and decides to hand the provision to another operator. We do not know how rare an occasion that might be, although we hope that it would not be regular. The second is where the USP has been taken into administration under Part 4. We hope that this will not happen but, again, we do not know whether it will occur. Our basic contention is that the universal service should be delivered by one provider and that the only provider capable of delivering this is Royal Mail.

The provision of a daily collection and delivery service covering 28.4 million addresses in the UK requires a very large capital infrastructure and a large and skilful workforce. Because it constantly deploys such an array of capital and workers, Royal Mail is able to sustain an extraordinary turnover of mail. In the first half of 2010-11, the average daily mailbag contained around 68 million letters, packets and parcels. In 2009-10, Royal Mail carried 6.3 billion items of USO mail, 6.4 billion items of downstream access mail, and around 18.7 billion items in total.

No other company has ever delivered such a service in the United Kingdom and it is our view that no other company could do it going forward. However, surely the danger is that some companies think that they can provide parts of a universal service in certain geographically restricted areas. These areas are likely to be highly urbanised and, as was explained in our earlier debates, potentially very profitable for the provider. Therefore, we could envisage a competitor to Royal Mail offering to be a universal service provider for a city such as Birmingham. However, we could also envisage a situation where that competitor could not offer an alternative to the rural areas in the West Midlands.

Should that happen, there would be some huge problems. First, the areas surrounding Birmingham would have to continue to be serviced by Royal Mail. This would inevitably be loss-making, and Royal Mail would either have to bear the costs or increase stamp prices to compensate.

Secondly, the Birmingham provider would require a much more comprehensive access arrangement to Royal Mail’s network than exists under current downstream access arrangements. Not only would this create the basis for large-scale friction between the two networks but it would almost certainly create new costs, as the interaction between the two networks would have to be supervised.

Thirdly, there is no evidence in the EU of any other country currently operating with more than one USO provider. In Germany, at the moment there is no designated USP at all and it is all left to the market. Deutsche Post, however, is the effective provider, offering services six days a week nationwide and benefiting, by the way, from VAT exemptions in order to do this. The regulator in Germany has the power to arrange for the USP to be provided through public procurement if the market does not deliver a universal service but, as the market in the form of Deutsche Post is delivering a universal service, this has not happened to date. In the Netherlands, TNT can apply for a partial repeal of its designation as the USP, which perhaps could allow more than one USP to be designated but, again, that is not taking place.

It is noticeable in the legislation that there are two options under which we could see more than one USO provider in the UK. The first is a possible case of bankruptcy of Royal Mail and an interim administrative regime that would follow from that. The second is the case of the regulator making a procurement determination. On the first point, there has been no serious study of Royal Mail which suggests that its delivery of the universal service obligation has been malfunctioning to date; indeed, some earlier speakers have praised its operations, and I agree with that. Perhaps this lack of academic study is just an oversight of generations of academics and economists. Perhaps it is a tribute to the excellent staff and management of Royal Mail. Or perhaps it is really an acknowledgement that there is great effectiveness in the manner in which the USO has existed in Royal Mail—and, after all, if it isn't broken, don't fix it.

The second case in which more than one USO provider is provided for in the Bill is where Ofcom decides to allow for such a development by making a procurement determination. That is a power and not an instruction. We would argue that there is no reason why Ofcom should engage in such a move. We are all worried that there will be pressure from Royal Mail's competitors to secure such a procurement determination. That is why we think that, rather than experiment with the USO, it would be wise of the Government to secure its future without a gamble. The USO is a very complex operation to maintain, and ill-thought out ambitions are no alternative to the present provision.

On Amendment 24ABA, Clause 43 deals with how the universal service should be dealt with should Ofcom find that it constitutes a financial burden on Royal Mail. If it is found to be a burden, Ofcom has three options open to it. First, it can undertake a review of the minimum requirements of the universal service under Section 33; secondly, it can require that contributions be made from other postal operators towards the maintenance of the USO; or, thirdly, it can make a procurement determination, allowing part or all of the USO to be provided by a company other than Royal Mail. This amendment requires that a minimum of three years’ notice be given before any other operator can begin to provide postal services required under a universal service obligation.

As I have just argued, there are serious concerns about the potential impact of breaking up the USO through a procurement determination. It is questionable whether a multiple-provider USO could guarantee consistent levels of service across the country. We do not know what it might mean for the financing of the USO if the more profitable and easier-to-complete parts of the service go to competitors and Royal Mail is left servicing the more expensive, hard-to-deliver-to parts of the country. In a time of great change and economic flux, Royal Mail and the postal industry desperately need stability. Royal Mail is in the middle of a major programme of modernisation, including more than £2 billion of investment. That process, combined with an unloved regulatory regime, means that the company is facing a very restrictive financial position. Further major upheaval through the potential loss of the USO threatens the viability of such a programme. Any change to the USO provider must surely not come before Royal Mail has completed its modernisation and is financially secure. Moreover, the loss of any part of the universal service via procurement determination would have a major impact on Royal Mail’s business model and the viability of the business.

Royal Mail successfully delivers mail across the UK at an affordable, uniform tariff by taking advantage of the considerable economies of scale that it is able to access. The business must be given sufficient notice of any change if it is to be able to plan effectively and to continue to provide the service that we expect of it. A procurement determination is a very real possibility and inquiry into whether the universal service is a financial burden on Royal Mail would very likely find that it is a burden. For example, in evidence to the Scottish Affairs Select Committee, Tim Brown, the chief executive of Postcomm, stated that, a number of years ago,

“Royal Mail lost about £350 million on the universal service products”.

The postal industry has suffered from a lack of stability in recent years. The potential break-up of the universal service would exacerbate the problem. The most important element in the future of the postal services in the UK is the successful investment programme and the modernisation of Royal Mail. Long-term investment in postal infrastructure should not be compromised in order to make short-term savings via what would essentially be the franchising of elements of a profitable universal service. I beg to move.

[Lord Cotter]

My Lords, Amendment 24X suggests that the proposed period for the review of the universal service provider by Ofcom be extended from three years to four years. The Bill gives Ofcom a series of different powers to review the financial burden and how it is to be calculated through various recommendations. It has a lot to consider in the review and it is vital that the matters are considered in the correct manner. Ofcom must look at and assess the cost of the service provided both to the generator and to the consumer. We need to make sure that that is examined correctly to ensure that further losses are not made by Royal Mail. In view of the diversity and depth that are needed for the review to ensure the success of the universal service provided, why not allow an extra year for the evidence to be collected and presented? We need a comprehensive review that gives detailed examination to ensure that all aspects of the universal service provider are examined and given consideration. An extra year would ensure that all aspects were considered in such a way. I maintain that it is quite clear that more time is needed for the review of the universal service provider by Ofcom.

--- Later in debate ---

[Baroness Wilcox]

I apologise. Scrap that. How about Amendment 24NZA? This amendment is tabled in the name of the noble Lord, Lord Young, and is concerned with removing the ability to designate, in extremely limited circumstances, more than one company as a universal service provider. The intention of Clause 34 is to give Ofcom the power to designate more than one universal service provider in two specific circumstances only in order to ensure the provision of the universal service. As with other elements of the Bill, Clause 34 has been drafted to ensure that the Bill is future-proofed. It enables the regulatory regime to adapt when it needs to in order to ensure the continued and long-term provision of the universal service. The measures that we are taking are designed to put Royal Mail on a sustainable footing so that it can continue to provide the universal service that we all value so highly. However, it makes sense to future-proof the legislation in this way to ensure that the universal service could continue to be provided in two specific and extreme circumstances.

Clause 34 will allow Ofcom to designate more than one provider in only two specific cases. The first case is where providing the universal service is found to represent an unfair financial burden on the universal service provider. The Secretary of State agreed with Ofcom’s advice that the best way of addressing that burden was through a procurement exercise provided for by Clause 43. This would assess whether another company could provide the relevant part of the universal service with less of a burden. In that event, that company could be designated the universal service provider for that part of the universal service.

The second circumstance is where Royal Mail has become insolvent and has entered special administration. Where a postal administration order has been made under Part 4 and it is not possible to rescue Royal Mail as a going concern, some of its activities could be transferred to another company. Ofcom could then designate that company as a universal service provider as well in order to secure the universal service.

As I said, the full package of measures in this Bill is designed to secure the future of Royal Mail and the universal service and therefore to ensure that we do not end up in either of these scenarios. Both the procurement process and the special administration provisions are backstops to be used only—I repeat, only—if the future of the universal service is at risk. However, as I mentioned, having the ability to make multiple designations in these specific cases is a sensible and pragmatic safeguard.

It is also important to make it clear that having more than one designated universal service provider in no way provides for or permits a varying level of minimum service across the country. Provisions elsewhere in Part 3 have the effect of guaranteeing that the minimum requirements of the universal service must remain uniform. Given these assurances, I hope that noble Lords who tabled these amendments will feel able not to press them.

Amendment 24AHA, in the name of the noble Lord, Lord Young, relates to the power that Ofcom has under Clause 49 to impose a consumer protection condition on either,

“every postal operator, or … every postal operator of a specified description”.

The amendment would replace these categories with a single category that allows for the imposition of consumer protection on,

“every operator appropriate to the postal service each provides”.

The intention of this amendment may be to ensure that regulation can be applied with greater precision or to ensure that all circumstances are captured by regulation and that none falls through a perceived loophole. However, I hope that I can reassure noble Lords that it is unnecessary and has the potential to create confusion for the regulator and postal operators.

Giving Ofcom the power to describe separate categories of operator enables it to direct the consumer protection conditions very precisely. This follows the model in Section 52 of the Communications Act in relation to Ofcom’s functions in other regulated sectors. This approach is consistent with other parts of the Bill and allows for the clear and effective targeting of regulation to where it is required. I can therefore assure noble Lords that there are no loopholes.

I do not believe that this amendment would help Ofcom to regulate, nor would it offer any greater protection to consumers than is already provided for by Clause 49. However, it might leave the regulatory system open to challenge and confusion, which I believe all involved will wish to avoid. With these reassurances, I hope that the noble Lord, Lord Stevenson, will feel free to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her full reply. It was good of her to take the time to go through the detail we have raised because some of these are very technical points. Obviously we will need time to read through what she has said because she covered a lot of ground. I have not been keeping score, but my sense is that rather a lot of concessions were emerging in the previous two or three groups, which we are pleased about. We seek no vainglorious victory on this, but simply to improve the legislation, which is always the role of Her Majesty’s loyal Opposition in these matters. However, I am pleased that we are beginning to see a degree of discussion and debate around the issues that is not on the lines of “We have made the legislation and we will keep it”. We look forward to seeing what the Minister brings forward on Report.

Most of what has been said in this debate and in the debates on the two previous groups has really been about the type of regulation that must apply to the universal service provision and to the universal service obligation within that. There is bound to be tension between economic regulation on the one hand, which the noble Lord, Lord Jenkin, spoke to very fully, and the more social regulation which this side of the Committee wishes to see strengthened in order to ensure that the citizenship approach to the service is preserved. As many noble Lords have said, this is in a sense a fault-line across all the regulation that applies to former public utilities. I do not think that anyone has got it right yet and that there are going to be tensions. You cannot have at the same time the best possible public provision and the most profit-generating and economically appropriate way of doing these things because the two are in conflict. Profit will often—not always, but often—drive out the best. We have to live with that, and as the Minister said, we have to find a judgment that will work not only now but in the long term.

Although noble Lords who have spoken in the debate come from different places, we are all trying to seek one thing, which is that in times of change there will be some stability in the processes we are engaging with in this Bill. I felt that the Minister did respond in a way that gives us some assurance that on Report we will be able to see that built into the Bill. She also tried to explain why the Bill spends a lot of time future-proofing the arrangements. This may be simply because the advice she is getting from her civil servants is that, having gone through this in 2009, having walked up the aisle towards the altar and having been jilted at that point, they are experienced in these issues and therefore able to work towards producing what could be a divorce-proof marriage going forward. Perhaps there is a pre-nup situation here that we should be thinking about and using in other places, or perhaps not.

Having said that, the last part of the Minister’s speech stressed that future-proofing does not necessarily open loopholes, but we feel a little sceptical about that. We would like to look at it in some detail and I suspect that it will form one of our debates on Report. However, given what the Minister has said and the assurances we have received, which are extremely welcome, I beg leave to withdraw the amendment.

Amendment 24NZA withdrawn.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I thank the Minister for introducing these amendments. We on this side have no objection to them. They carry forward sensible recommendations from the Delegated Powers and Regulatory Reform Committee which we support in relation to these amendments and the subsequent amendment to the Government of Wales Act.

Amendment 25 agreed.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

25D: Clause 67, page 41, line 4, after “order,” insert—
“( ) the rescue as a going concern of the company subject to the order,”

[Lord Stevenson of Balmacara]

The amendment introduces an additional objective for the postal administration so that the main aim should be to rescue as a going concern the company that is subject to that order. This means that, instead of staying neutral as to whether the current universal service provider should be allowed to fail and should be replaced by an alternative or whether the company should be saved, the postal administrator would have a primary duty to seek to save the company.

When this issue was raised in the House of Commons Public Bill Committee, Mr Ed Davey said:

“We hope that we never find ourselves in either of those scenarios, and we do not expect that we will. Both procurement determination and the special administration provisions are genuine backstops, only to be used if the future of the universal service is at risk”.—[Official Report, 7/12/10; Commons, Postal Services Bill Committee, col. 602.]

While it is reassuring to read what the Minister said and that backstops will exist, it is essential that the Bill properly reflects this intention.

Transferring all or part of the universal service provider to another company, should it find itself in financial difficulty and subject to a postal administration order, would be hugely disruptive to customers, to service provision, to the company and to its staff. While it may not always be possible to support the company and help it become a going concern, there should surely be a presumption that this is the first and least disruptive course of action to be pursued. If this is not possible, the option to pursue a relevant transfer of course remains.

Royal Mail operates on a huge scale. While the business is modernising successfully, should it find itself in financial difficulty, this would likely be attributable to significant market changes and potentially an unsympathetic regulatory regime which exacerbated the problem rather than supported the company as a universal service provider. Therefore, we propose a further amendment, Amendment 25E, to ensure that the postal administrator takes into account the interests of employees of the company. Should the business go into administration, it is hard to see that passing all or some of the business to an alternative mail operator would be good for the employees. It would clearly, where possible, be preferable to re-establish the business as a going concern, and that is why we make these proposals.

Amendment 26A refers to the regulatory powers exercisable during postal administration. We note that Clause 80 creates a huge power, including in Clause 80(5), which says:

“The Secretary of State may by order amend section 30”.

The regulatory regime—in particular, access pricing—has been one of the most contentious areas of regulation since the introduction of competition into the United Kingdom. Indeed, the updated Hooper review of 2010 recommended the introduction of a new access regime to ensure the right balance between competition and the financial sustainability of the universal service.

It is rare for regulators to be loved and it is clear that Postcomm did not get the balance right. Among the outcomes of its tenure is the fact that Royal Mail’s competitors now have more than 60 per cent of the pre-sorted, “upstream”, bulk mail market, the most profitable business sector of the letters market. So we can certainly see how regulation can go wrong.

Unless the right balance is struck in pricing, there are likely to be further reductions in the universal service, at great cost to the public. The amendment would restrict the Secretary of State's hand so that an order to amend Section 30 may not do so in way which reduced the extent of the minimum requirements of the universal postal service. We hope that the Government will see this is a reasonable provision and support it.

Amendment 25F deals with postal transfer schemes and stems from the report of the Delegated Powers and Regulatory Reform Committee of this House, which invited the House to consider whether the Secretary of State’s approval, so far as it relates to the exercise of power in paragraph 9 of Schedule 11, should be subject to the negative procedure. Schedule 11 contains provisions for transfer schemes to achieve the objective of a postal administration. New paragraph 9(4), proposed by the amendment, would set out the conditions for approval and modification of a postal transfer scheme by the Secretary of State. The Secretary of State has to have regard to the public interest and must consult Ofcom prior to any modification of the scheme, but there is no requirement to consult Parliament. The amendment would therefore strengthen oversight and accountability for the Secretary of State’s approval or modification of postal transfer schemes. As the Bill stands, the Secretary of State has complete discretion to approve or modify a postal transfer order without any reference back to Parliament. The amendment would make such a decision subject to the negative resolution procedure as recommended by the committee. I beg to move.

[Lord Christopher]

These amendments certainly deserve support. One of the problems with writing the law is that you do not necessarily relate it to what is going on in the global economy. As I have said before, one should not rule out the prospect that whoever buys Royal Mail may get into difficulties and present you with considerable problems.

There are two examples at the moment, one of which is certainly ongoing and the other is, apparently, temporarily resolved. Not many people know that all the fire engines in London are owned by a company called AssetCo, which recently got into significant financial difficulties. I am told that it will be all right on the night but I have never seen anything to give me assurances about that. It certainly begs a question in my mind as to what would have happened if AssetCo had gone into administration or whatever. The other case, which is certainly continuing, concerns Southern Cross, one of the largest care home companies in Britain, with 31,000 residents in 750 homes. As I understand it, it is owned to a substantial degree by a company in the Middle East. I am not sure what would happen if the worst came to the worst in respect of these. It is therefore appropriate for the Government to place within the Bill sufficient provision to ensure not only that the service continues but that the staff are looked after and their future provided for. I can see no reason why these amendments should not be accepted.

--- Later in debate ---

The final amendment in this group, Amendment 25F, seeks to introduce the negative procedure into Schedule 11(9). The Delegated Powers and Regulatory Reform Committee did not recommend this change but invited the House to consider whether it would be appropriate. I thank the noble Lord, Lord Young, for tabling his amendment and allowing us the opportunity to do just that. It may be helpful to set out the intention behind Schedule 11(9); it permits the transfer of statutory functions to a new company that is taking on all or part of the provision of the universal postal service in a special administration scenario. However, we expect that all significant statutory powers will automatically accrue to the new company when it becomes the universal service provider in accordance with Schedule 11(8). Schedule 11(9) is simply a mop-up provision to ensure that any obscure powers—for example, in local or private legislation—can be captured and transferred to the new company. This is, once again, simply prudent government at work. We do not expect to have to use the provision and, in the event that we did, it is highly unlikely that the powers in question would be significant. We do not feel that it is necessary or appropriate to have a separate parliamentary procedure attached to the provision. I hope that the noble Lord finds this explanation helpful and will consider withdrawing Amendment 25F.

[Lord Stevenson of Balmacara]

I thank the Minister very much for his comments. He came up to us at the end of day three of the Committee stage, with a more mournful expression than he sometimes has on his face, saying that we had cheated him of his moment of glory because we had withdrawn our amendment at quite short notice. It was the only amendment that he was down to speak to that day, and we took it away from him. Now here he is, irresistibly back in the Box, popping up all the time. So it does come back; it goes in rounds.

Quite a lot of what we have talked about today are what could be described as mop-up provisions and backstops—things that are very unlikely to occur. The Minister argued that, as a result, we did not really need to put them in the Bill, because they were so unlikely that it would be a waste of our time to spend our precious moments on them. In The Hitchhiker's Guide to the Galaxy, a book that I am sure all noble Lords have read, or listened to the programmes, there is a vehicle driven by a thing called the improbability drive, which has the result of making the space travellers turn up in the least likely situation that can be imagined at the time of their arriving. In a situation where they are being threatened by giants and attacked from all sides, they think of something completely unlikely and are immediately transported there. I simply say this because sometimes the impossible and the improbable does happen; we should not be deluded into thinking that it is so remote that we should not have provisions for it. That was what inspired us to put forward these proposals, some of which the Minister looked at sympathetically and some of which he did not.

It is important to have contingency provisions, and we are not arguing against that, but if we are going to do that we should be consistent. I hope that on reflection the Minister might accept that there were one or two points in what we said that might be worthy of a little bit more consideration. The principle on which we have been working is that if the aim is continuity, the going-concern process would be the least disruptive. That is why our amendments are framed as they are. I do not think that anything the Minister said is against what we are trying to achieve. My sense is that the whole process of going into administration would be such a major issue that making sure that there was greater concern than currently expressed in the statute for going concern would be helpful. But we would not push that at this stage.

As we reach the end of our discussions here, I wanted to say that, particularly today but as mentioned on a number of occasions in Committee, we have been a little unkind about Postcomm. We had a quotation from the noble Viscount that expressed in its own terms what it felt about itself. Even so, I am sure that the people at Postcomm have done what they could with possibly difficult ammunition to achieve what Parliament wanted them to do, and no personal criticism should be implied by what we or anybody else has said. On the other hand, the Minister kindly pointed out what the framework was for the new regulatory structure and expressed various options and hopes for that, but he did not say that Ofcom would not be an unsympathetic regulator in the same way as Postcomm was. We should bear that in mind. Having said that, we register our support for government Amendment 26.

[Viscount Eccles]

I intended no criticism of the individuals in Postcomm. We need to remember that regulators have only a limited amount of independence. We are inclined to talk as though they had a rather larger amount of independence than they actually have. When I look at the 2000 Act and think about the policy intentions behind it and the interpretation of them, I am not entirely surprised that Postcomm got itself into what it admits is a very difficult position. In any evaluation of how the present situation comes about, we have to remember—and that is exactly why I intervened on Schedule 9—that the Government of the day are in the final analysis the accountable body and Parliament with it, and the regulator is trying to carry out their wishes as it interprets them, with a certain amount of independence, but only a certain amount.

[Earl Attlee]

My Lords, I must confess to never having read The Hitchhiker’s Guide to the Galaxy, but I do have my own personal copy of the law of unintended consequences, which was passed many aeons go. I am happy to have further discussions with the noble Lord offline and we take on board his comments about Postcomm.

[Lord Stevenson of Balmacara]

I beg leave to withdraw the amendment.

Amendment 25D withdrawn.

Postal Services Bill

Lord Stevenson of Balmacara Excerpts

Monday 14th March 2011 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

15: Clause 2, page 2, line 12, leave out subsection (5) and insert—
“( ) In order to ensure that it remains a single company, for the purpose of this Part “Royal Mail company” means the company that provides the universal postal service.”

[Lord Stevenson of Balmacara]

My Lords, I thought that, following that interruption, we should have a few seconds of silence to gather our thoughts in case we are interrupted.

This amendment restricts the issue or transfer of shares in Royal Mail to the whole company by defining a “Royal Mail company” as the company that provides the universal service. Clause 2 allows for the issue or transfer of shares in a Royal Mail company. The Bill defines a Royal Mail company as one that,

“provides a universal postal service and … is or has at any time been in the same group as … the original holding company, or … another company that … has at any time been a Royal Mail company”.

That, I think, means that, as the Bill stands, the Secretary of State can dispose separately of the various companies that can make up the Royal Mail Group.

The Royal Mail Group provides the universal service. It currently consists of a number of business units, the largest of which is Royal Mail, or Royal Mail Letters. This is the part of the business that deals with the collection, sorting and delivery of letters, packets and parcels, and it accounts for more than 70 per cent of the Royal Mail Group’s revenue.

Royal Mail Letters is a huge operation, delivering some 70 million items every day to more than 28 million addresses. It is at the core of the Royal Mail Group, ensuring the maintenance of the universal postal service. However, it works only because it is an integrated whole. Large volumes allow the business to achieve sufficient economies of scale to make the universal service affordable and to pay for the countrywide labour-intensive network on which the postal service depends.

We believe that Royal Mail must remain an integrated whole if the universal service is to survive and if postal services are to thrive in the United Kingdom. The financing of the universal service has already been put under strain by the operation of upstream competition in the mail market and by the way in which the market for access mail has developed.

Royal Mail has lost over 60 per cent of the pre-sorted bulk mail market. This is mail which competitors collect and sort and give to Royal Mail to deliver. Royal Mail therefore handles far fewer items upstream than it used to and it has had to cut back its upstream operations as a consequence. Royal Mail must maintain a viable upstream business if it is to be able to provide the universal service at an affordable tariff. It is therefore important that an integrated business model is encouraged and supported through legislation and regulation.

We believe that it would be in the public interest if an integrated Royal Mail business model were established by legislation. The amendment would prevent the separation of Royal Mail through the sale of separate business units and through the break-up of Royal Mail Letters and its sale as a series of separate business units.

There will be an appetite among Royal Mail’s private competitors for the break-up and sale of Royal Mail. This might suit their business models. However, it would be short-sighted and would eventually damage the postal industry and the provision of postal services in the UK.

If anyone would like to see Royal Mail stripped down to only a core delivery network, with all other parts of the business separated and broken up, that would not help the provision of a robust universal service. Competitors might wish to collect and sort bulk mail but they do not generally wish to collect and sort individual items from domestic customers. Royal Mail must do this as part of its universal service. The universal service will become more expensive and less sustainable unless Royal Mail can continue as a viable, integrated end-to-end operator.

Along with Royal Mail Letters, the Royal Mail Group further consists of Parcelforce, Global Logistics Systems—GLS—and a number of other smaller businesses. It also consists of Post Office Ltd, whose sale is of course restricted by the Bill, and we welcome that.

Parcelforce and GLS, the third biggest parcels provider in Europe today, are both profitable businesses—GLS particularly so, with £122 million in operating profit in 2010 alone. That is almost the same level of operating profit as was seen in the whole of Royal Mail Letters, a company with four and a half times GLS’s revenue. That means that GLS is a target for Royal Mail’s competitors. Many would like to get their hands on it, but they are less keen to take on the difficult but important operations undertaken by Royal Mail Letters. The sale of GLS and Parcelforce separately from Royal Mail would be revenue-generating but would leave Royal Mail, the universal service provider, in a much weaker position.

Royal Mail needs to operate as an integrated business and it needs to be able to hold on to what valuable assets it has while it goes through its current difficult and costly transition. We do not want to see it asset-stripped. It is therefore important that restrictions are placed on the sale of Royal Mail that mean that it can be sold only as a single company, and that it cannot be asset-stripped or broken down in the interest of short-term gain to appease the company’s competitors or to consolidate a regulatory model that has damaged the business and is in desperate need of change. I beg to move.

[Baroness Wilcox]

My Lords, I believe that the intended effect of Amendment 15, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, is to seek to ensure that Royal Mail remains a single company providing the universal postal service and that it is the only universal service provider. We will, of course, come on to the protection of the universal postal service when we debate Part 3 of the Bill, but I should make it clear now that we expect Royal Mail to be the universal service provider in the UK for the foreseeable future. I hope that reassures noble Lords.

I now turn to the issue of whether Royal Mail should be a single company. I do not consider that we should be legislating on the future structure of a company that will no longer be in public ownership. A privatised Royal Mail should be free to organise its business and operations in such a way that enables it to provide the universal postal service efficiently and effectively. This could mean establishing subsidiaries to deliver part of the service or it might mean no change at all. We simply do not know, in 2011, what the best operational structure should be for Royal Mail. Through a disposal of shares, we are giving Royal Mail real commercial freedom, and I do not consider that it is appropriate for the operational structure of Royal Mail to be set in primary legislation.

I have two answers in the question and answer part of the brief on subjects that the noble Lord mentioned. On whether Parcelforce or GLS will be part of the package, no decision has been taken on the formal method of sale. Just as for the Royal Mail, we have no plans to retain either Parcelforce or GLS in public ownership in the long term. The noble Lord also asked about the risks of a new owner stripping the assets from Royal Mail. The Government simply would not sell to a bidder if they believed that they would not assist in securing the future of the universal postal service. Furthermore, any shareholder would want to see a successful business and a sustainable universal service, given that the cash generated by a successful Royal Mail will outweigh the asset value in a very small number of years. Investors would also face significant reputational damage if they allowed Royal Mail to become insolvent. We believe that there is ample protection against that, both in the Bill and more generally. With those answers and the answer I gave previously, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for that response. We seem to be placing a great deal of stress on hopes and aspirations about what will happen after the sale—other noble Lords picked up on this, I think—and very little on what many people in the country would regard as sensible and appropriate public interest measures, which are being taken on board by the Government or even considered in a serious way.

From what the Minister has said, there is a grave danger of cherry picking. That will still be a possibility. If the successful owner is robust and strong enough, they will be able to do what they wish once they have control of the assets. It is particularly important to register that the Government have not ruled out dismantling the Royal Mail and cherry picking the most popular parts, in particular GLS, which is the most successful European parcels service, as I said earlier. That must be a worry as we go forward.

The assets can be taken away; they do not have to be very large or prestigious to be capable of being sold. On the first day in Committee, the noble Lord, Lord Christopher, considered selling the Oxford sorting office at a profit. Heaven knows why. I have not visited it yet, but perhaps the Minister has. If that is his vision of it, then clearly the assets are valuable and they will go. There is also the possibility of the Royal Mail being split in a geographical way or by function, which would undermine the viability of the universal service provision, which in effect cross-subsidies rural and other diverse locations. We think this is an important issue, but on this occasion we shall not push the matter to a vote. I beg leave to withdraw the amendment.

Amendment 15 withdrawn.