Baroness Wilcox
Main Page: Baroness Wilcox (Conservative - Life peer)Postal Services Bill
Baroness Wilcox Excerpts
Lord Christopher
I was not going to speak on this amendment, but I have been provoked. I hope that the Minister will answer directly the question just asked from behind her on whether the Government will have some say on the sale or whether it will be left exclusively to the board of Royal Mail. I do not think that it should. One issue has not been mentioned in this discussion. While there may be much anxiety about the hope that by Christmas 2012 we can all go back to where we were, underlying this is another issue—on this matter I hope that the noble Baroness will have something to say. As I said at Second Reading, it is easier to say to whom you would not wish to sell Royal Mail than it is to say to whom you would. There is such a lack of clarity on this that the Government need to give reassurance. Would we, for example, be prepared to see it sold to a hedge fund? Would we be prepared to see it sold to a private equity fund? Would we be prepared to see it sold to a sovereign wealth fund? If so, would that be to all, to none or to some?
I have one final point on this issue. Would we sell it to any buyer with a reputation for asset stripping? I hope to come to this point on a later amendment, but I believe that unless we get the price right, there are assets in Royal Mail which could easily be sold at a very significant profit.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I wonder whether it would be okay with your Lordships if I deal with the question put by my noble friend Lord Skelmersdale and supported by the noble Lord, Lord Borrie, before moving on to the amendment. Clause 1(2) ensures that the two major issues under Part 1, the ownership of Royal Mail and the ownership of Post Office Ltd, are addressed in the very first clause. We believe that, given their importance, this is appropriate. The purpose of subsection (2) is to assist the reader in understanding the full implications of the Bill. It is intended to highlight the relevant provisions that appear further on in the Bill and of which the reader might not yet be aware. Without subsection (2), the clause may read as lifting the restrictions on ownership of Post Office Ltd with no indication that new restrictions have been put in place further on in the Bill.
While the majority of readers will look at the full Bill and draw up relevant connections, we believe it is important to consider how to make the Bill accessible to those who may be unfamiliar with legislative text or to those with an interest in one particular aspect of the policy. It is these readers who may look at what they believe are the relevant provisions and then fail to see the other relevant provisions further on. Provisions such as Clause 1(2) are designed to assist readers by making explicit any interdependencies between clauses. Furthermore, subsection (2) ensures that the two major issues in Part 1—ownership of Royal Mail and ownership of Post Office Ltd—are addressed in the very first clause, thus reflecting their importance. I hope that this explanation addresses the concerns of noble Lords, but I am sure that they will come back for further clarification if they feel that we have not been able to cover the point at this stage.
Lord Lea of Crondall
As someone who is not directly involved in this, perhaps I may make an observation. It is plain common sense for the noble Baroness to say, in the light of the remarks made by the noble Lord, Lord Skelmersdale, and my noble friend Lord Borrie, that it is no big deal, but this is not language appropriate to an Act of Parliament. Quite simply, will she agree to think about some answers on the back of a postcard before we move on to the next stage of the Bill?
Lord Skelmersdale
My Lords, I would not put it quite as rudely or as crudely as the noble Lord opposite has just done. However, I did suggest in my few words that the draftsmen ought to look at combining Clause 1(1) with Clause 4 and then putting that at the very beginning of the Bill. I noted that my noble friend did not respond to the suggestion, but as I said, I do not expect her to do so now. I am sure she has many more important things to do, such as responding to the amendment moved by the noble Lord, Lord Young of Norwood Green, which I am sure she will do in her usual adequate fashion. All I am asking for is future discussions, and from what my noble friend has just said, I am sure that she would find that acceptable.
Baroness Wilcox
I thank my noble friend and of course I will be happy to speak to him afterwards, at any time that is convenient to him. I should now turn to the amendment tabled by the noble Lord, Lord Young, otherwise we may be here for much longer than we anticipated.
I believe that Clause 1 exposes the real difference between the previous Government’s approach as set out in their 2009 Bill to the fundamental problems facing Royal Mail, and the approach that this Government are taking to secure the company’s future. Setting aside the ownership issue for a moment, I think it is clear to everyone that the powers in the Bill to tackle the pension deficit and regulation are either the same as or very similar to those provided in the 2009 Bill. This is perhaps not surprising as we have based our Bill on the same evidence, that of the Hooper report, as the previous Government. However, we have not simply produced a cut-and-paste Bill. As we will discuss during this Committee stage, we have included new regulatory measures to safeguard the universal postal service and introduced fresh ideas on employee ownership and the potential of a mutual ownership structure for the post office network.
All sides of the House agreed with the analysis contained in Richard Hooper’s 2008 report. We all agreed that the current framework was untenable and that urgent action needed to be taken if we were to secure the universal postal service for the benefit of all postal service users, both business and social.
Richard Hooper’s recent update showed that the situation is now much worse than it was in 2008. In fact, he described the Royal Mail’s current position as being “even more precarious”. The noble Lord, Lord Young, asked about the effect on the value of Royal Mail of prolonged uncertainty. I would say to him that it was the failure of the previous Government’s Bill that has caused prolonged uncertainty for Royal Mail and all other postal operators. That is what is putting the universal postal service at risk.
The Bill addresses those problems and creates a framework that will help to secure the future of Royal Mail and maintain the universal postal service. Part 1 sets out provisions relating to the restructuring of the Royal Mail group of companies. The Government committed in the coalition agreement to injecting private sector capital into Royal Mail, including opportunities for employee ownership. We also said that we would retain Post Office Ltd in public ownership, on which the noble Lord, Lord Young, raised a number of points. We will have plenty of opportunity to discuss the Post Office when we debate those clauses dealing specifically with it.
I turn to Amendment 1. The disposal of shares in Royal Mail will be a commercial transaction. The Government’s objective is to ensure that the transaction represents value for money for the taxpayer and secures the future of Royal Mail. In doing so, our overriding objective is to secure the future of the universal postal service. I cannot understand, therefore, why the noble Lords have brought forward this amendment, the substance of which was fully debated in the other place.
By setting a deadline for a disposal, all the commercial advantage would be given to the buyer if we were selling the business by auction. The buyer would know that the Government were up against a deadline, giving him the whip hand in any negotiation, and all sorts of demands could be made as the deadline approached. The amendment would not therefore allow the Government to ensure that they could get value for money from a sale and secure the best future owners for Royal Mail; in our view, it would do the opposite. When I was on the opposition Benches, I was very keen on sunset clauses in legislation and I am not opposed to them now—in fact, in most cases I encourage them—but the proposal set out in this amendment is simply not appropriate to the circumstances.
A failing of the previous Government’s policy on Royal Mail was that it tried to do too much at the same time by running the legislative and the sale processes in parallel. We have decided to take a staged approach; our first priority is passing the Postal Services Bill to allow the framework for action. The Government will then bring into force the new regulatory regime. Only then will we start the process to introduce private sector investment, including the employee share scheme and the pension solution.
The noble Lord, Lord Young, asked what the Government would do if they could not sell Royal Mail before the end of the current modernisation plan. Through this Bill, the Government are taking the preparatory steps necessary to enable Royal Mail to attract the private capital that it needs. As noble Lords will appreciate, the timing will depend on when we can best secure our twin objectives of the best outcome for Royal Mail and the best outcome for the taxpayer. The Government are focused on ensuring that Royal Mail can attract private investment, not on putting new obstacles in its way.
An integral aspect of the Bill is that it allows flexibility, because that is what any sensible commercial shareholder would retain for themselves. Such flexibility enables the Government to decide when to conduct a disposal of shares and how to do it, either through a trade sale or a flotation. I agree with my noble friend Lord Hunt, who said, as did the noble Lord, Lord Jones, that we want no artificial deadlines. Although I do not agree with everything that the noble Lord, Lord Hoyle, said, I do agree that we want the right price and the right company, and for that we must wait our time until the right moment. I thank my noble friends Lady Kramer and Lord Eccles for their support.
I say to the noble Lord, Lord Christopher, that I hope we will be flexible, get a really good deal for the taxpayer and make sure, as always, that we support the universal service. The proposal in the amendment is, I fear, impractical and would risk the future of the very universal postal service that we are all trying to save. I therefore ask the noble Lord, Lord Young, to withdraw his amendment.
Baroness Wilcox
Amendment 2 seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009, although it never completed its passage through the other place and on to the statute book.
I reassure the noble Baroness, Lady Turner, that I have great respect for the noble Lord, Lord Young. I take what he says most seriously. I always listen to him and will be doing so throughout the Bill. I say to the noble Lord, Lord Hoyle, that we are listening and will continue to do so.
I should say first that I am pleased that the amendment indicates that the Opposition continue to accept that the sale of shares in Royal Mail is the right way to secure the future of the universal service and that, as Richard Hooper recommended, an injection of private capital into the company is necessary. My noble friend Lord Cotter supported that also.
The noble Lord, Lord Young, suggested that the Government had not consulted appropriately. The Bill actually draws heavily of the year-long independent review of the universal postal service chaired by Richard Hooper, as did the previous Government’s Bill in 2009. The Bill also draws on the subsequent update by Richard Hooper published in September last year, which was commissioned by the Secretary of State. The original review and the update took evidence from hundreds of organisations and individuals with an interest in the future of the postal sector. For the original report, there were some 200 meetings and 70 written submissions. All major stakeholders in the sector made an input into the review. We feel that that constitutes consultation.
However, the difference between the positions of this Government and the previous Government is that we do not believe that it is necessary for government to retain overall ownership of Royal Mail. The noble Lord, Lord Young, argued that there is no public mandate for this privatisation. The Liberal Democrat manifesto was explicit about the need for private-sector investment and employee shares. The coalition agreement also was explicit. It stated:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill is doing exactly what we said we would do.
Indeed, we believe that the Government are the wrong shareholders for Royal Mail, especially at a time when the postal market is undergoing significant change and Royal Mail has to respond to that change. We are not alone in thinking this. Moya Greene, the chief executive officer of Royal Mail, who has been complimented from all sides of the House today, made this clear to the Public Bill Committee in the other place. As I said during the Second Reading of the Bill, public ownership has failed Royal Mail and has not helped it to move with the times and make the changes which it needs to succeed. That is why we need a different approach if we are to safeguard the universal postal service.
Government cannot provide capital fast enough and, as the House knows, every investment that we make has to be cleared by the European Union under state aid rules. With so many competing calls on the public finances, we cannot guarantee that Royal Mail will always have access to the capital that it needs. In addition, we believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. For example, private investors are likely to find it more attractive to invest in Royal Mail if there are no barriers to owning a majority of shares and they can therefore have real control to ensure the future success of the company. I suspect that this was one of the reasons why a buyer could not be found in 2009.
The noble Lord, Lord Lea of Crondall, asked what specific protections against asset-stripping are in the Bill. A number of protections are in place if asset-stripping or other shareholders’ actions become a concern. The protections are contained in the Bill and in other legislation. Ofcom has the power in Clause 35 to imposed designated USP conditions, akin to condition 16 in Royal Mail’s existing licence, that do not allow it to do anything such as asset disposal or make a dividend payment that,
“creates any significant risk that necessary resources will not be available to”,
continue its business. If Royal Mail is found to be breach of its regulatory obligations—
Lord Hoyle
I am listening intently to the Minister, but there is a whining noise and I cannot hear clearly what is being said.
Baroness Wilcox
I think that it was someone's hearing aid that they have now switched off. I will return to the specific protections in the Bill against asset-stripping that could affect the universal service. A number of protections are in place in case asset-stripping or other shareholder actions become a concern. These protections are contained both in the Bill and in other legislation. Ofcom has the power to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. If Royal Mail is found to be in breach of its regulatory obligations, Ofcom could fine it up to 10 per cent of the annual turnover of its postal business. On current turnover, this would be more than £650 million.
Directors of a company must act in the way that they consider most likely to promote the success of the company for the benefit of its members as a whole. If an asset disposal or dividend payment did not meet that test, they would be in breach of that obligation. Royal Mail's debt is secured on its assets, so it is simply not possible to transfer assets away from the business and its debts. The Pensions Regulator may also not allow such behaviour, as it would weaken Royal Mail's covenant to its pensioners. I hope that the noble Lord, Lord Lea of Crondall, will find that helpful.
Lord Christopher
I hear what the noble Baroness says, and I will certainly have another look at the Bill. However, it does not seem that the sale of a particular asset would necessarily interfere one way or the other with the service. For example, if I provide a much cheaper-sited sorting office and sell one that is very valuable for another use, that may not alter the delivery service at all.
Lord Lea of Crondall
Perhaps it would be convenient if I asked for confirmation from the noble Baroness at the same time as she answers the noble Lord, Lord Christopher. We all have the Bill in front of us. If I heard correctly, Clause 35 was drawn to our attention. That does not provide all the requirements that the noble Baroness referred to.
Baroness Wilcox
I am sorry. Ofcom has the power under Clause 35 to impose designated USP conditions akin to condition 16 in Royal Mail's existing licence, which does not allow it to do anything that would create a significant risk that necessary resources would not be available to continue its business. Is the noble Lord saying that his point is not there?
Lord Lea of Crondall
That point covers the universal service. The question of sovereign funds, and the other questions, are not covered by the clause; that is all I am saying.
Baroness Wilcox
Perhaps I may deal with that when we get to Section 35. I turn to the point of noble Lord, Lord Christopher.
Lord Christopher
I will put it in simple terms. If I owned a big sorting office in Oxford, I could sell the site at a good price to the university and build a sorting office outside Oxford. I would not have interfered with the universal service, but I would have made a nice profit.
Baroness Kramer
Is it not correct that in negotiating the sale of the shares, the value of property that could be disposed of would be considered as part of the mechanism for valuing the company?
Baroness Wilcox
I am much supported by my noble friends on this side. They have given every answer that I could give at this stage and I am very grateful to them. I return to Amendment 2 and ask the noble Lord to withdraw it. I am sorry that it is such a long time since I made my argument. I hope that he has kindly remembered it.
Lord Young of Norwood Green
My Lords, I shall address a few of the points that were made. The noble Lord, Lord Cotter, and I do not normally find ourselves so diametrically opposed. We do not see this as a fundamental attack; we see it as a different approach and one that we believe is well worth opposing, given the importance of the decision to privatise Royal Mail 100 per cent. We do not think that putting to the Committee an alternative solution, which was almost unanimously approved by this House, is a fundamental attack.
The noble Lord, Lord Skelmersdale, said that I contradicted myself with Amendments 1 and 2. I do not believe that that is the case. We have to take into account a number of eventualities, depending on how the Bill progresses.
My noble friend Lady Turner reminded us that privatisation is not necessarily always beneficial or effective. My noble friend Lord Lea made an interesting point about undervaluations in previous privatisations, and that should be a warning to the Minister about the importance of getting the sale right.
The sale of shares draws heavily on the Hooper report, and I would not disagree with that. We are not proposing that there should not be any external investment, but there is a fundamental difference between that and a 100 per cent sale. As we go through the Bill, I think that it will pose some difficult problems, one of which—the inter-business agreement and the ability to get satisfactory assurances in that area—we will explore in greater detail.
I shall obviously reflect on this debate. I await Report stage with interest, and we shall see whether we return to this subject then. In those circumstances, I beg leave to withdraw the amendment.
Baroness Wilcox
My Lords, I thank the noble Lord, Lord Stevenson, for being as succinct as he was in proposing Amendment 3. It seems a long time ago now, but he presented his amendment in three minutes flat, which was very kind of him.
Before I go on, I will put the mind of the noble Lord, Lord Christopher, at rest on at least point today. He was concerned about what will happen to Royal Mail’s valuable collection of stamps, including iconic and historic stamps such as the penny blacks. Collections of such stamps are classified as public records. These are deposited with the British Postal Museum and Archive, and under the Bill they will remain public records. The ownership of Royal Mail’s museum collection, which contains artefacts that are not classified as public records, has been transferred to the BPMA, and as a charitable trust the BPMA cannot sell off this collection—so at least there is a little good news there.
The proposal in Amendment 3, like the one in Amendment 1, does not seem to reflect the fact that the disposal of shares in Royal Mail is a commercial transaction. In particular, if the Government decided to conduct an auction and invite bids from trade buyers, it would make no commercial sense to advertise to bidders our own view of the value of Royal Mail. As my noble friend Lady Kramer has pointed out, that is not exactly the art of negotiation, because all anyone would do would be to bid to that price. We really feel that we will not do that. No trade buyer would bid above the value, and it would therefore reduce the Government’s ability to get the best result for the company and for the taxpayer, because that is what we are about. The Government will, of course, work with their advisers to consider the potential value of Royal Mail so that we can properly assess bids from buyers. However, as my noble friend Lord Eccles clearly said, there is little logic in revealing what we consider the value of the company to be before any sale.
As I have said previously, the Government have not decided how they will dispose of the shares. We wish to retain flexibility, and in this way get the best result for the company and for the taxpayers, but we expect that both the National Audit Office and the Public Accounts Committee in the other place might wish to review the sale process after a sale had been completed. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer.
I have of course listened to what has been said, and it will of course go on the record. I know that there are Members of your Lordships' House who would rather that Royal Mail was not sold at all, and I understand people who have been associated with Royal Mail for many years finding all discussions of this sort very difficult, especially having gone through all this a year ago with the previous Government—a Government of their own. Yet that Government, too, could not successfully find a way out. We need to find the right buyer for Royal Mail who will keep it alive and well. These are very difficult times. No one is writing letters. We have exercised these arguments over and over again, which I am sure everyone in the House knows. We think that this is the best way forward and that flexibility until the very last minute will be needed so that we can get the best price. I therefore ask the noble Lord if he will kindly withdraw his amendment at this stage.
Lord Stevenson of Balmacara
Dash it, I thought that the noble Baroness had forgotten that. I was going to enjoy wondering what to do if she had not asked me to withdraw—clearly, she was supportive. The point that we are trying to get across in this useful and interesting debate is that if there is no valuation process we will have two problems. The public will not necessarily know that we are getting value for money, which they should, and we would lose transparency, which is an important part of any transaction involving public assets. These are important principles to hold in our mind.
I fully accept what has been said, particularly by the noble Baroness, Lady Kramer, that public bodies are not in the normal business of valuing themselves. That is not what they are about. Their job is to provide a utilitarian service that is specified in statute. If they devote time to worrying about whether or not they have caught all the assets that they have acquired while they have been in existence and working out what their market value might be, they would not be focusing on what they should be doing and we do not want much of that.
However, if the Government are selling off the family silver, we should have a full inventory of all the aspects of that before it happens. The Minister is saying that that will happen and I hope that we will have a record. A compromise would not necessarily want to go all down this route, but we would get a much better Domesday Book of what the Royal Mail consists of and, thus, a better sense of what it might be valued at. We would therefore be in a better position to assess whether the bids received subsequently would be appropriate. Therefore, if the pound signs are removed, we would know about what we are talking a bit more at the time of the sale.
My noble friend Lord Christopher is eloquent in his ability to run the market in Oxfordshire—I am not sure why it is Oxfordshire—in terms of the sale he has clearly eyed up for the Post Office service stations there. I think that we would want to help him in ensuring his long retirement on the proceeds. I jest of course.
The second strand that comes through is that the valuation, or at least the lining up, of the assets that we are selling is not the same as disclosing to all and sundry what we want for them. But we can be a bit too coy about that. Clearly, we want to be in a position where we force someone to bid higher than we would have ever dreamed of receiving for the assets that we are putting up for sale. That is what we do all the time in our domestic lives.
I have always been perplexed by why the English do not adopt the Scottish system of selling houses, for example. In that situation, the seller seems to have all the cards. You say that your flat or house is for sale. What it consists of is advertised publicly and you say that you will accept offers in excess of £X where £X is the largest figure that you could possibly think of. Then you sit back and hope. It may have changed since I last sold a house up there, but the three times when I have done it I have been astonished by the braveness of those who have bid for the house and, disclosing no secrets, I have achieved many times more than I thought that I would get every time I have sold. I recommend that to all ye English and perhaps even to the Government in respect of the Royal Mail.
Yes, we want someone to bid more than we are prepared to disclose that we are prepared to accept. But there is a chap called Rupert Murdoch out there who is publicly engaged in bidding for part of his empire, which he only partly holds; yet I read every day about what price people are prepared to accept and what price they think it will be worth. The share prices down to even the last penny are mentioned. I do not think that we should be too worried about where we are going on this. It would not be wrong to say—privately if we want—what we will not accept. In other words, we would expect better bids.
The last thing we want to be part of is a post-hoc analysis of what went wrong in this case. Surely, we have got beyond that. The noble Lord, Lord Lea, made the point absolutely clear. If there is a 7 per cent premium on average sales of new or existing companies and it is 77 per cent on privatisations, there is clearly an issue to be addressed. I am jolly glad to hear that the stamps are being saved for the future, although it is a bit odd that they are going in the archive and not a museum where one would want them to be, but that is how it is.
Whenever one hears of public assets being sold, one has to think of the experience of other countries. It may be to the benefit of English football that this worked well in countries in the East, but we do not want that to be said of here. We want a good and sensible sale that is done in as open and transparent a way as possible. We want to be able to comment on the commerciality of what we are about and to do it so that no one feels that we have in any sense lost out. Those are conditions which I suggest should be taken into consideration of the Bill. We will reflect on what has been said, but at this stage I beg leave to withdraw the amendment.
Baroness Wilcox
The Government recognise the important role that employees will play in the modernisation of Royal Mail. The implementation of the business transformation agreement reached in March 2010 is vital to the success of the company. This requires changes in the way in which people work and will impact on everybody employed by the company.
This agreement sets out a new relationship between the management and the union in Royal Mail which seeks to improve industrial relations, which have been so poor in recent years. Progress on the implementation of the agreement has been encouraging, and we encourage both sides of the agreement to build on this promising start. Nobody inside or outside the House wants to see a return to the national strikes that so damaged Royal Mail and the postal market in 2007 and 2009.
The current position is that there is no employee representation on the board of the Royal Mail. My understanding is that there has been no pressure or suggestion that there should be an employee representative on the board. In public ownership the Royal Mail is being run on a commercial basis, so I fail to see that a change in ownership should automatically require that there should be an employer representative on the board, a requirement that the amendment proposes should be written into primary legislation. I have listened to the noble Lord, Lord Lea, and the noble Baroness, Lady Turner of Camden, with her terrific record within the union movement. The noble Lord, Lord Cotter, talked about bringing staff with you; I have done that myself. In a small company, especially, you are all working together very closely and you can really involve the workforce in a way that large companies sometimes cannot.
The noble Lord, Lord Brooke of Alverthorpe, talked about shares and NATS. I know how well he did there. On the point made by the noble Lord, Lord Myners, with his corporate governance, and the noble Lord, Lord Hoyle, on employee participation, a seat on the board is not the only way to actively encourage employee participation. For example, the concept of world-class mail at Gatwick and elsewhere has shown what increased engagement can achieve. We hope that there will be increased engagement. That is one of the reasons for making sure that shares are passed in such a large number to employees of the company.
I am not at all clear how such an arrangement as proposed in the amendment would work in practice. For example, how does it link up with the CWU and Unite’s representation of the workforce and their roles in collective bargaining?
I should say that the Government are not saying that there should never be an employee representative on the board. Royal Mail may decide in future that there are advantages to doing exactly that. I refer us back to my noble friend Lord Eccles, who suggested that Moya Greene might be a wonderful example of someone who could be brought on to the board to the benefit of the company, as she is at the moment the chief executive. However, I do not believe that it is appropriate to impose such a requirement through legislation.
Issues relating to board composition are properly issues for the company and its shareholders who, thanks to the Bill, will include its employees. I therefore ask the noble Lord to withdraw his amendment.
Lord Myners
The Minister started her answer by saying that as things were as they are, and there was no good reason for changing that, they should remain as they are. Surely, however, the Government are making changes, and that is the appropriate trigger for consideration of this factor. From these Benches we are urging that it is essential that the workers in this company, which has always been a very delicate organisation, who have served it loyally over many decades, are entitled to believe—almost as part of the concept of the “big society”—that the Government recognise that there is a degree of mutualisation. After all, that is why the Government are gifting shares to the workforce. So why go only halfway? Why stop at the point of gifting shares and not empower those shareholders to give voice and expression around the board table?
Baroness Wilcox
I can only repeat that, as we all know, the previous Bill failed. We hope that this Bill will succeed. We want as much flexibility as possible when it comes to selling Royal Mail. We have faith in the fact that the people who have worked for this company for so long should be offered the best possible opportunity. We are offering the biggest ever issue of shares to the employees of the company—over 10 per cent. That is a wonderful voice that they will have. No one is saying that no one will finish up on the board. We are saying that we cannot put this in legislation. We need to keep this as flexible as possible to get the best possible price and the best possible deal. The noble Lord, Lord Myners, of all people, City man that he is, knows what I am talking about. I ask that the noble Lord, Lord Young, withdraw his amendment.
Lord Young of Norwood Green
My Lords, it has been a fascinating debate; I did not expect quite as much of a debate as this. This is an important issue. I agree with my noble friend Lady Turner about the value of employee involvement. It is nice to return to agreeing with the noble Lord, Lord Cotter, in his evaluation of the importance of involving the workforce; I wholeheartedly endorse that. My noble friend Lord Brooke demonstrated the value of his experience as a partnership director in NATS.
Several times in this debate people have talked about there being only one representative. The Minister had trouble dealing with that. In fact, I remind the House that the amendment says “at least one”.
My noble friend Lord Myners made a fascinating contribution. I am glad that he told me what a high-conviction portfolio was; I would have thought it was someone being detained at Her Majesty’s pleasure if he had not explained that. His argument was valid when he talked about the question of risk and the way that other shareholders may be able to diversify their risk, but in many cases those employees are pledging all their working life to the company.
The noble Viscount, Lord Eccles, pointed out that there might be a flaw in the amendment, but I remind him that it says “at least one”.
I must admit that I was somewhat disappointed in the Minister’s response. The only argument that she could give us was the need to retain flexibility. Are we really saying that one employee representative—if indeed it were one—would wreck that flexibility? If that were the case, if you wanted ultimate flexibility, then why has she boasted about the 10 per cent employee shareholding? I do not believe that that was a valid argument against the very reasonable suggestion in this amendment.
Having reflected on the debate, I will withdraw the amendment at this stage. We were somewhat puzzled by the pre-emption, but as we are not going to invoke that we can have that argument outside the Chamber. We will certainly return to this subject, probably on Report. In the circumstances, I beg leave to withdraw the amendment.
Viscount Eccles
My Lords, we can only admire the way in which the noble Baroness, Lady Drake, put forward her amendments. She has carried out a lot of due diligence and her speech was wholly admirable. However, my problem with it is—noble Lords will guess that I have a problem with it—that I do not see any way of removing uncertainty now or in the medium term or, as she suggested, in three or four years. I hope that that pessimistic estimate turns out to be wrong and that this matter is resolved in a lot less time than four years.
The uncertainty arises primarily from the behaviour of the market. We have talked a bit about other privatisations. The steel industry was mentioned. That industry was in decline when it was privatised. However, the opposite was the case with British Telecom. A lot of our experience of privatisations is highly coloured by the market conditions prevailing at the time. If what I have picked up turns out to be true, one of the issues which faces a mail operator is to find new streams of business and not to rely just on the mail and the universal obligation to deliver it at the same price to every household in the country. That brings me to one of the uncertainties about any deal that might be proposed by the Royal Mail to the Secretary of State as being a deal that he or she might wish to approve. I think that I have mentioned this before. There could be two bidders—there might even be three—with very different solutions. It is not a question of there being one deal. In a negotiation you may well find that not only is there more than one bidder but their bids are so different that you have to have two completely separate sets of due diligence to make sense of them and to make a recommendation to the Secretary of State. As I see it, that is the way that this matter will go forward.
In those circumstances I am very doubtful about the role of Parliament except in an ex-post involvement through the National Audit Office and the Public Accounts Committee, as my noble friend on the Front Bench said earlier. Then Parliament will have its opportunity to say whether it thinks that the Secretary of State made a good or bad decision in backing one of the recommendations made to him or her. Parliament will have to be satisfied with an ex-post role.
As regards the super-affirmative procedure and the 60 day period, 60 days is a long time for a bid to remain open without being reneged on or altered. In my opinion it simply is not practical to think that any bidder will be willing to go through this process. Given my past experience of buying and selling businesses, if I was faced with these amendments in the Bill, I think that I would say, “Please will you assure me that this part of the Bill is not going to be triggered because if it is my bid is withdrawn?” or I would not enter the negotiation in the first place. The intentions behind these amendments are absolutely clear to all of us and if the circumstances of the Royal Mail and the mail market were entirely different we might be able to live with such a procedure. However, I do not think that we can live with it in these circumstances.
Baroness Wilcox
My Lords, this group of amendments seeks to add to the Bill a requirement for the Secretary of State to make an Oral Statement and obtain additional parliamentary approval before there can be a relevant disposal of shares in a Royal Mail company.
Amendment 5 of the noble Lord, Lord Young, proposes that an order on the disposal should be subject to the affirmative procedure. The noble Baroness’s Amendments 6 and 17 seek to insert into the Bill a requirement for a super-affirmative procedure before there can be a disposal of shares. Like my noble friend Lord Eccles, I congratulate her on the thoroughness of these amendments which set out clearly the process that is required under the super-affirmative procedure. The noble Baroness may be new to your Lordships’ House but from these amendments it is clear that her knowledge and attention to detail will ensure that its business receives proper and close scrutiny in the years to come. I congratulate her on that. From my noble friend Lord Eccles we received a master class in how to buy and sell businesses. I suspect that I shall lean on him heavily as this Bill goes through to make speeches like that again.
I do not believe that further parliamentary procedures should be required before there can be a disposal of shares in Royal Mail. A committee in the other place has fully debated the disposal of shares as set out in this Bill and this Committee of the Whole House is now debating the issue. The disposal of shares to enable an injection of private capital into Royal Mail is part of a package of measures set out in this Bill which should be scrutinised as a package. The disposal of shares should not be looked at in isolation but alongside the other two essential parts of the package—tackling the pension deficit and reforming the regulatory regime. Richard Hooper emphasised the importance of this package when he gave evidence to the committee in the other place. The noble Lord, Lord Young, asked about the timetable for state aid clearance. We have not at this stage notified the European Commission of the proposed aid but we will do so as soon as we are ready. As I said earlier, this Government have learnt the lessons of 2009. We will take a staged approach to all the steps we need to take before a sale can be completed.
The Opposition’s Postal Services Bill in 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As noble Lords opposite themselves said in 2009, additional parliamentary procedures would be unwelcome because they would create uncertainty for potential investors. During the passage of that Bill, noble Lords representing the then Government suggested that noble Lords would agree that the appropriate place for commercial negotiations to take place was not on the Floor of the House.
Noble Lords opposite have expressed interest in the value of Royal Mail. The uncertainty that would exist if a disposal is subject to voting in Parliament would only further reduce the value of the business. This would damage the chances of achieving the best deal for the taxpayer and the company from any future disposal. I fail to see how this amendment fits with other amendments tabled by noble Lords where there has been an emphasis to take forward a sale of shares quickly. These amendments would insert time-consuming mechanisms that would add delay to a disposal.
With regard to legislative provision for the Secretary of State to make an Oral Statement, we do not think that is necessary whenever there is a sale of shares. The Bill is setting the minimum requirements for government action. What is important is the principle that information on this sale should be provided to Parliament. The requirement for a report in Clause 2 applies not only to the first sale of shares but any subsequent sale of shares. I fully accept that an Oral Statement might, of course, be appropriate for the first sale of shares, but would it also be a good use of time if, for instance, five years later Ministers decided to put an extra 100 shares into the employee share scheme? We are committing in Clause 2 that there should be a report to Parliament every time the Government reduce their stake in Royal Mail. We will, of course, discuss with the House authorities the appropriate format for such reports at the relevant times, including whether or not an Oral Statement is appropriate.
Finally, the noble Baroness, Lady Drake, asks in her amendments for evidence of consultation and an impact assessment. I point the noble Baroness to the extensive consultation carried out by Richard Hooper in his two independent reviews on the future of the Royal Mail and the impact assessment published alongside the Bill. On this basis, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I thank the Minister for her response to the contributions. It was another interesting debate. I feel that I have been trumped by my noble friend Lady Drake in her forensic analysis of the super-affirmative procedure. She certainly demonstrated her knowledge of it and her diligence.
This issue is a matter of judgment. I did not expect the noble Viscount, Lord Eccles, to leap to his feet and say, “Yes, I agree with this”. He referred to the behaviour of the market and the introduction of more uncertainty. We balance that against accountability and the ability of Parliament to scrutinise but not negotiate. I look forward to hearing from the Minister when she notifies the European Commission, because that is an important point. She rightly pointed out that there was no provision for an affirmative procedure in the 2009 Bill. However, we were not going for a 100 per cent disposal. As the Bill is further scrutinised, we will analyse the issue of whether Oral Statements are required for a range of future share sales.
I will reflect on the nature of this debate and the Minister’s response. I warn that I may well return to this matter on Report but, in the circumstances, I beg leave to withdraw the amendment.
Viscount Eccles
I must say that the noble Lord, Lord Hoyle, said that with great charm. However, what will we do in Parliament if the bidder says that he will not make his bid unconditional if the matter is to be submitted to Parliament?
Baroness Wilcox
My Lords, the amendment seeks to ensure that the Secretary of State lays a report before Parliament before there is a sale of shares. I shall talk quickly, because I am worried about the blandishments of the noble Lord, Lord Hoyle, influencing me before I reach the end. I believe that the drafting of the clause makes it clear that the report should be laid before a disposal of shares is made. The clause requires the Secretary of State to lay a report as soon as reasonably practicable after a decision has been made to undertake a sale of shares.
The arrangements needed to organise a disposal of shares in Royal Mail to a trade buyer through a competition or to conduct a public flotation would take several months. It would not be the case that the Secretary of State would decide over breakfast to sell shares in Royal Mail and then complete the sale by the time we in this House enjoy our evening dinner. It simply would not happen that way. The starting gun for work on the specific arrangements for a sale would be a decision by the Secretary of State to undertake a sale. Under the Bill, the Secretary of State has to lay a report before Parliament as soon as reasonably practicable after a decision is taken to dispose of shares. This would be before a sale of shares. I therefore kindly ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her response. I must admit that had I known that the blandishments of the noble Lord, Lord Hoyle, would be that effective I would deploy him more regularly and more often. That way, we might achieve acceptance of at least one amendment. We have gone from considering affirmative and super-affirmative procedures to a report. Blandishments from me or the noble Lord, Lord Hoyle, seem to be of no use whatever. Nevertheless, we still believe that this is a reasonable request. It is part of what we would describe as accountability and scrutiny. For the time being, I beg leave to withdraw the amendment—again, on the understanding that I may well return to this matter on Report.