Postal Services (Scotland)

Gregg McClymont Excerpts

Monday 11th October 2010 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Royal Mail—[Interruption.]

[Mr Speaker]

I am grateful to the hon. Gentleman for his forbearance. If Members leaving the Chamber can please do so quickly and quietly, we can proceed to an orderly Adjournment debate. I, for one, certainly wish to hear Mr Gregg McClymont.

[Gregg McClymont]

Thank you, Mr Speaker.

Royal Mail is a vital public service in Scotland. With 1,400 branches, the Post Office is Scotland’s largest retail chain. According to Consumer Focus Scotland, its services are used by 95% of the population. Scottish business, too, depends on the service. The Federation of Small Businesses estimates that one in six small to medium-sized enterprises relies exclusively on Royal Mail.

The Minister will be aware of the serious risks involved in privatising a Government-owned industry that provides a popular public service. Get it wrong and the Government of the day preside over a carve-up: executive pay hikes, job losses and the curtailment of services to the detriment of consumers. That is why I am seeking clarification of the Government’s plans tonight. I am keen to hear about how the Minister intends to protect the existing level of service provided by Royal Mail and the Post Office in Scotland.

The Government propose to split postal delivery and the management of the post offices—Royal Mail doing the former, and Post Office Ltd the latter. Both functions currently reside in Royal Mail Group, which has an obligation to provide a certain level of service to the public. That is the universal service obligation. These obligations are contained in the licence granted to Royal Mail Group. The licence requires that Royal Mail provide a certain number of deliveries at a certain time to homes and businesses and that Post Office Ltd retains post offices in all Scottish communities.

Royal Mail is also currently obliged to take the provision of all post office services from Post Office Ltd. That is called the inter-business agreement. That agreement, alongside a taxpayer subsidy of approximately £150 million per year, enables Post Office Ltd to fund its entire network of 1,400 post offices in Scotland. If neither of those conditions existed—the inter-business agreement or the public subsidy—the number of post offices would fall sharply, especially in rural parts of Scotland. The danger is real, for the Business Secretary has said that the Government do not wish to retain a stake in Royal Mail. That means full privatisation, with Royal Mail managers incentivised to seek maximum profitability. In these circumstances, the importance of postal services as a public service to the nation cannot be their priority. I say to the Minister that there is a strong memory throughout this country of former public service managers making unmerited fortunes at the expense of the public following previous privatisations in energy and in rail. Indeed, this tension between managerial freedom and the preservation of public services always emerges when utilities are privatised.

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Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

[Gregg McClymont]

The response of policymakers is the universal service obligation, which specifies the services that the privatised entity is legally obliged to provide.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

I congratulate my hon. Friend on securing this debate. As he may know, last month reports surfaced of a leaked letter from the Business Secretary to the Chancellor hinting that flexibility may be built into the Royal Mail Bill to scale back the universal service obligation from six days a week to a five-days-a-week service. Such a move would set a very dangerous and worrying precedent. Will my hon. Friend join me in calling on the Minister to give a categorical assurance that under no circumstance will the Government allow delivery services to be scaled back in West Dunbartonshire and, indeed, across Scotland?

[Gregg McClymont]

My hon. Friend raises a very good point, and I am sure that the Minister will wish to address it.

An under-specified universal service obligation and an inadequate subsidy, where that is necessary, mean that there will not be a good postal service. That is currently the situation in telecoms in respect of the provision of fibre-optic broadband to rural areas. A universal service obligation is contained in the Royal Mail Group licence. The number of letter and parcel deliveries is laid down in statute and in the Royal Mail Group licence. However—this is crucial—the rules regarding the number of post offices are much less tightly drawn. There is very little in statute and a limited number of criteria in the licence that Royal Mail is obliged to fulfil.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does my hon. Friend agree that far from considering cutting the number of post offices, we should be looking to ensure that every community has access to the post office service? Can he, or the Minister, say what plans there are to ensure that every community has that access, particularly communities where new housing developments and so on are being generated?

[Gregg McClymont]

My hon. Friend raises a very good point.

There is very little in statute and a limited number of criteria in the licence that Royal Mail is obliged to fulfil in terms of post office outlet numbers. That did not matter in the past because outside the formal rules the Government, as owner, could and did order Post Office Ltd to maintain the current number of post offices. However, it will matter in future. The statutory or licence conditions, if any, imposed on Royal Mail will determine the future of up to 4,000 of the existing 11,500 post offices.

[Margaret Curran (Glasgow East) (Lab)]

I, too, congratulate my hon. Friend on securing this debate. As has been evident so far, post offices are highly valued by the British public. Does he agree that instead of post offices facing a cuts strategy it would be much better if they were facing a growth strategy? Surely as part of that, the Government could, for example, insist that Royal Bank of Scotland, a state-owned bank, signed up to the post office universal banking counter service. In fact, in these days, we do have opportunities to grow post offices. What is his view on that?

[Gregg McClymont]

My hon. Friend makes a good point. I am sure that the Under-Secretary will want to address a future strategy for growing the Post Office, and not letting it fall into decline.

I said that 4,000 post offices in the UK are at risk. Individuals with industry experience suggest that between 2,500 and 4,000 post offices would be at risk if the existing licence criteria remain unchanged. Scotland is likely to be at greater risk given its disproportionately large number of rural post offices. That is why I say that maintaining the current level of public service means not only retaining existing conditions for Royal Mail’s licence, but adding new criteria. I would be grateful if the Under-Secretary clarified which obligations will be maintained, and to which body they will apply, if Royal Mail is to be privatised.

I also hope that the Under-Secretary will agree that the scope of the universal service obligation must be a decision for Parliament, and not delegated to the regulator or to an individual Minister, even one as capable as the Under-Secretary. I say that as a matter of both pragmatism and principle: pragmatism because a Minister or the regulator would be subject to enormous pressure from the privatised entity to reduce the required service; principle because, if there is a will to amend the universal service obligation, it must be done transparently and publicly by Parliament. My constituents and those of my hon. Friends care deeply about the service that Royal Mail and the Post Office provide. They demand no less.

Moving from the universal service obligation to the future of the inter-business agreement, what happens if the current exclusive agreement between Royal Mail and Post Office Ltd is ended? There is a danger that the Post Office will be undercut unfairly by competitors. For example, a supermarket chain could say to Royal Mail, “We can provide post offices more cheaply than Post Office Ltd. We will include no loss-making outlets.” To avoid such an outcome, there needs to be a level playing field. Fair competition would depend on a strictly written set of licence criteria. Any business that wished to compete for supplying post offices to Royal Mail must fulfil exactly the same objective licence criteria on a national basis as Post Office Ltd currently does. The contract for providing post offices must be set on just such an aggregated basis, otherwise bidders will cherry-pick the profitable post office locations.

The Government have given a welcome guarantee that Post Office Ltd will remain in public ownership when Royal Mail Group is broken up, but, without a guaranteed revenue stream from Royal Mail, many branches will be at risk from public spending cuts. I fear that some of the Under-Secretary’s colleagues perceive privatisation simply as a way to generate a commercial incentive for reducing the demand for post offices, to which the Government will then acquiesce. Can the Under-Secretary confirm whether the public subsidy to Post Office Ltd will be maintained? I am sure that we would all like an answer to that question.

I urge the Under-Secretary to adopt measures that protect current postal services to the public. For deliveries, that means maintaining the current number. For post offices, the Government have two choices. They could adopt an exclusive supply arrangement between a privatised Royal Mail and a publicly owned Post Office, or they could set the universal service obligation criteria at a level that provides for maintaining the current number of post offices. Long-term protection of Scotland’s postal services means giving Parliament the power to agree the level of service and any subsequent changes to it.

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[Mr Davey]

I refer the hon. Lady to the agreement reached by the Communication Workers Union and Royal Mail recently, which looks at significant reforms to working practices. For example, I strongly support the fact that the CWU has agreed to a reduction in the number of sorting offices in order to reduce costs. That kind of change is very welcome.

[Gregg McClymont]

I have been listening intently to what the Minister has said and, as far as I can tell, he is replying to a speech that I did not make. I am asking whether the licence criteria, as currently constituted, protect the 11,500 post offices in the UK and the 1,400 post offices in Scotland. Unless I am mistaken, he has not addressed that point yet, and I hope that he will be able to do so.

[Mr Davey]

I thought that I had made it clear that, under this Government we will see no major programme of closures as we did under the previous Government. The hon. Gentleman will know the number of post offices that closed in his constituency. There were six, and I can list them. Greenfaulds, Queenzieburn, Banton, Rosebank, Waterside and Kildrum all closed in his constituency under the previous Government, and we will not see such a closure programme again.

[Gregg McClymont]

rose—

[Mr Davey]

Does the hon. Gentleman wish to intervene? I hope that he is going to apologise for those closures.

[Gregg McClymont]

I understand the determination in a political culture to ask people to apologise for things in which they played no role. I do not intend to go down that route. The Minister has given an undertaking to protect the level of Post Office services, but he has not explained how he intends to do it, beyond making some rather vague allusions to the path that the Post Office might go down in the future. I say again that, in my estimation, the licence criteria as currently written can be met only by 7,500 post offices, and I am waiting with great interest to hear something specific about how the 4,000 post offices are to be maintained.

[Mr Davey]

Over the next few weeks and months the hon. Gentleman will hear a huge amount about our proposals to ensure that we can make good on our pledge not to repeat Labour’s mass closure programme. I have already mentioned the extra revenues—whether from Government services or financial services—that will form a critical part of delivering on that. Frankly, it is not through regulation that we will save the post office network; it is by getting business through the network so that sub-postmasters can have a decent income and post offices can be financially viable. That is the way to do it.