Lady Hermon
Main Page: Lady Hermon (Independent - North Down)(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Katy Clark
My constituents on islands such as Arran express the fear that they will no longer receive deliveries and will have to go to a central point for collections, as happens in many countries.
Lady Hermon (North Down) (Ind)
The hon. Lady has been generous in taking interventions and it has been helpful to hear her responses. If the Labour party were to win the 2015 general election—I know that an awful lot of people hope that that will happen—what practical steps would a Labour Government take not only to ensure the survival of rural post offices, but to encourage them to expand?
Katy Clark
I suspect that that topic could be the subject of a lengthy debate. I do not want to stray too far from the terms of the motion, but hon. Members on both sides of the House have outlined fully in previous debates what needs to be done to ensure that post offices have a viable and successful future. The Government have a role to play in that. I call on parties on all sides of the political debate to do what they can, because we all have areas where we are in power and can ensure that post offices get more work and receive more support.
The overall package of pay and conditions of not only TNT staff in London but those employed on a similar basis by other private companies, which have been able to operate in such a way only since the 2011 Act was passed, is significantly worse than that of the Royal Mail work force. Ofcom is responsible for regulating the sector. It has explicitly stated that it is regulating TNT, but it has done nothing whatsoever about TNT either cherry-picking services or undercutting wages and conditions.
The fear is that this is the face of future postal services. Although TNT and others might wish to operate in London and other profitable areas, they will not be interested in many other parts of the country, such as North Ayrshire and Arran. Of course, that means that Royal Mail will not be able to use the money it makes in profitable areas to subsidise—to cross-fertilise—services in less profitable areas so that it can provide a national service. The Government say that they support the universal service obligation, as the hon. Member for Hereford and South Herefordshire (Jesse Norman) suggested in an intervention.
Mr Hain
I completely agree with the hon. Lady, who makes a valid point about the impact on businesses, especially small businesses.
Equally, if quality of service targets were downgraded it would be the harder-to-reach locations that would be most affected. Ofcom’s recent review of user needs suggested that removing Royal Mail’s air network in the name of cost-cutting could mean areas of Scotland, Northern Ireland, south Wales and rural England seeing first-class quality of service fall to just 50% to 75%.
The Government say that they have no plans to change the universal service requirements in law for the duration of this Parliament, but that is hardly a long-term commitment, given that we are just two years away from a general election. Royal Mail privatisation is likely to place pressure on the Government to downgrade those aspects of the universal service that hurt the bottom line. Private companies are primarily responsible to their shareholders, and the public sector ethos behind the Royal Mail’s universal service does not sit well within that model. We need only look at private parcel delivery companies to see what happens when profitability rather than public service is the driving force.
As my hon. Friend the Member for North Ayrshire and Arran said, consumers in remote and rural locations are frequently charged extra. She pointed out that there are reports of £45 being charged for the delivery of £25 phones. The Government say that Royal Mail faces imminent danger and that privatisation is the only answer, but that is simply not the case. The most recent financial results show that under public ownership its profits more than doubled in the past year to £403 million. That demonstrates that Royal Mail can be profitable in the public sector, which is where most people—two thirds of the public, not just the vast majority of staff—want it to remain.
Privatisation of the letters service will also impact on post offices in remote and rural locations. The post office network is reliant not only on Government subsidy but on the commercial relationship with Royal Mail that allows its postal products and services to be sold through that network. The current chief executive of Royal Mail says that the commercial success of both companies is best served by their working closely together, but a new chief executive of a privatised Royal Mail may take an entirely different commercial view. There are legitimate concerns that a privatised Royal Mail responsible only to shareholders would seek to sever this relationship in line with its commercial interests. That would have a disastrous effect on the entire post office network, but branches in remote and rural areas would be at particular risk because of their low population density and their revenues. The last Postcomm annual report on the post office network in 2010 found that fewer than 23% of rural branches generated over £40,000 per annum, compared with 70% of urban branches and two thirds of branches in deprived urban areas.
The Government and Ofcom need to make sure that the universal service obligation in its current form endures and postal services in rural and remote areas are protected. This requires Ofcom to use the powers that it has to tackle the end-to-end competition from private postal operators such as TNT UK. It also requires the Government to consider an alternative business model for Royal Mail that would keep the postal service run in the interests of the public and properly engage the work force. The main problem is that the model of competition under the 2011 Act has meant, in a privatised context, cherry-picking of the most profitable parts of Royal Mail’s business—for example, taking the profitable parts such as business mail, sorting it and then delivering it to city centres, but dumping it back into the Royal Mail network for delivery to the most remote and costly rural areas. That imposes a double burden on Royal Mail, taking revenue away and then forcing it to bear the extra cost.
TNT’s stated aim over the next five years is to increase its end-to-end operations to a work force of approximately 20,000 and to deliver business post—that is, the most profitable post—to doorsteps across the UK. Evidence from Communication Workers Union members in the trial areas of London shows that Royal Mail’s postal volumes have been materially affected because of this competition. Loss of revenues on the scale that TNT is working towards would have very serious consequences for Royal Mail. It means Royal Mail missing out on the most profitable business that would usually subsidise the high cost of delivering to remote and rural locations. Such unchecked competition places the current universal service under significant threat.
Lady Hermon
The right hon. Gentleman may be surprised to learn that I agree with every word he has said on this occasion, though that may not have been the case when he was Secretary of State for Northern Ireland. I think it would strengthen his argument if he could throw a little light on the last part of the motion which
“calls on the Government to provide more concrete, long-term protections for postal services in rural areas”.
Will he explain what concrete, long-term protections for postal services in rural areas would be introduced if there were a Labour Government in 2015? That would be enormously helpful.
Mr Hain
I am grateful to the hon. Lady. I mostly agreed with her when I was Secretary of State, even if she did not agree with me, but there we are. I would want the next Labour Government elected in 2015 to ensure that the competition regime was fair and that Ofcom regulated the market to ensure that competitors did not cherry-pick the most profitable parts of the business. That is quite an easy thing to do, but it has to be driven ultimately by Government policy.
Royal Mail needs a level playing field where its competitors also have an obligation to deliver up remote Welsh mountains, or to the Scottish islands or the Yorkshire dales. That is why Ofcom must use the powers it already has to introduce general universal service conditions on competitors such as TNT which provide services that fall within the scope of the universal service. GUSCs do not require legislative change or ministerial approval, and they provide the best option for intervention on cherry-picking in the short term. Requiring Royal Mail’s competitors to deliver to a minimum area of geographic coverage for a specified number of delivery days and to a representative proportion of the population would go some way towards ensuring that competition was on much fairer terms.
Ofcom could also seek to introduce a universal service compensation fund through which rival postal operators would compensate Royal Mail for the costs of providing the universal service. Similar support funds are being established in a number of other European countries to ensure the long-term viability of the universal service.
Running Royal Mail as a not-for-dividend company, such as, for example, Welsh Water, would provide a suitable alternative model, and that is entirely compatible with the 2011 Act. The Government could choose that model and I urge them to do so.
Royal Mail’s recent profitability shows that it could raise investment capital through its own profits, which would be a step towards becoming a self-financing, not-for-dividend company under the Act. Without changing ownership, Royal Mail could borrow from money markets, at a cheaper rate, as is the case with Welsh Water, even under the terms of the Act. That would be a much better model for protecting rural postal services. Otherwise I fear that the future will be an end to door-to-door delivery in remote rural areas and the appearance of personal letter boxes in village centres, with the post office network all but disappearing.
Mr McCann
Yes, but under Royal Mail, we maintain the concept of universal delivery. As the hon. Gentleman has made clear, Royal Mail is profitable—it is earning the country money—which is why, instead of a having a one-off pre-election bonus through the sale of services, the UK should enjoy a regular income from post office services throughout the country.
If privatisation is the trend, will there be other royal privatisations? Can we look forward to the McDonald’s civil list, the Starbucks Duchess of Cambridge, or the Mitchells and Butlers Windsor castle? After all, the latter company already has hundreds of Windsor Castles, so it would only be a consolidation of the brand.
I have said those things in jest, but there is a serious point. A line must be drawn on how far privatisation is allowed to go. Everyone, including the Government, agrees that some things simply cannot be put up for sale. Honours such as peerages fall into that category. Parliamentary seats are legally immune from sale. The Prime Minister’s dinner table ought also to be exempt, although there are reports that donations to one Government party can get people through that front door. The argument is about whether or not postal services are a proper candidate for selling off. I and many other right hon. and hon. Members do not believe that the case has been made. Perhaps it is worth looking at the debate from the other side.
Recent complaints from the head of Royal Mail, Moya Greene, about remuneration for higher executives in the service, suggest that one priority for a privatised postal service will be significantly better pay for those in senior management positions. I am sure that Moya is still smarting from having to agree to hand back the £250,000 she received to get on the UK housing ladder, on top of the £127,000 she receives annually in relocation payments. Marie Antoinette’s riposte, “Let them eat cake” comes to mind. Are those sorts of increases really what the country wants to see—and pay for—at a time when most families have suffered a drop in income as a result of the economic climate?
The evidence does not back up the case for selling off postal services, so what is the real reason behind the Government’s enthusiasm for these projects?
Lady Hermon
I preface my remarks by saying that I do not want the hon. Gentleman to breach confidentiality, but it would provide a helpful contrast to the pay, salary and bonus of the chief executive if he could give us some idea of the income of the sub-postmasters in the post offices in his constituency.
Mr McCann
I am grateful for that intervention, but unlike our salaries, which are publicly available, I do not know the salaries of individual sub-postmasters and sub-postmistresses in my constituency. However, I think we can say that their salaries will be a fraction of the money paid to the chief executive, who appears to be willing to increase the salaries of higher executives under Royal Mail privatisation plans.
The evidence does not back up the case for selling off postal services, so we must ask what is the real reason for this project. For most of those on the Government Benches it is surely a dogmatic belief that, whatever the evidence, private is good and public is bad. I anticipate that the argument that postal services do not really have the same status in this technological age as they may have had in the past may come up. We will be told that people have the alternative of going online or using e-mail, and so do not have to rely on postal services. However, my recent experiences in Blackwood, Kirkmuir Hill and other rural areas in my constituency suggest that that is a rash assumption. British Telecom and the Scottish Government, supported by the UK Government, are rolling out programmes for so-called superfast broadband. In rural Blackwood and Kirkmuir Hill, however, a part of the community—a new development—has been left out due to the rather bizarre claim that they could not be sure of demand. Those constituents may get new broadband speeds in three, four, five or six years’ time, so they cannot rely on the internet and e-mail to conduct their business now. They have to resort to more traditional means.
That clearly demonstrates that communities in rural areas, where it is most expensive and difficult to upgrade online services, are the most likely to have to rely on postal services for the longest time. Yet if postal services are deemed to be too expensive, it will be in those areas that services are most likely to be jettisoned by private sector companies as uneconomical. That has certainly been the experience in New Zealand. In the UK, the number of rural post offices has been cut by 2,765 since 2000. I acknowledge that that cut is less than the cut to the number of urban post offices in the same period, but the accessibility criteria I mentioned earlier mean it is more significant, as rural offices are much further apart. Rural areas suffer in the provision of traditional Royal Mail and Post Office services and in the technological revolution from which urbanised areas will be able to benefit more or less immediately.
There are, of course, questions about access to services for those who do not own cars and have to get to urban centres, where postal services are more profitable and more likely to remain. A recent Library note shows that the accessibility criteria already differ between urban and rural areas, with urban post offices expected to be within 1 mile of the customer, but up to 3 miles away in rural areas. There are bus services from rural areas—my constituency is no different in that respect—but they are by no means as frequent as those that urban users are familiar with. That self-evidently reduces access, compared with being able to walk up the road to a local post office facility in one’s own village.
Then there is the question of whether the public want postal services to be sold off. The evidence from my postbag is that many people are deeply concerned about the proposals and have shown support for the Communication Workers Union campaign. I, too, would like to mention Hugh Gaffney, who has been a regular correspondent and has worked tirelessly on behalf of his union members in my constituency. However, nobody has written to me to say that the sell-off is a good thing and should go ahead. I cannot find any reference to a Royal Mail sell-off in the 2010 Conservative or Lib Dem manifestos, so there can be no claim of an electoral mandate for the proposal.
In the face of public hostility to the idea and the lack of a clear mandate, surely the Government should reconsider their proposals and withdraw them. At the very least, they should defer the issue until after the 2015 election and put it in their parties’ manifestos to ensure that, before any decision is taken, there is a clear and proper mandate for such a potentially far-reaching act, because once services in rural areas have gone, there will be little chance of their returning and our country will be a poorer place for it.
Ms Ritchie
I take the hon. Lady’s point. In remote rural areas, where there is little access to broadband, there must be an alternative in the form of the rural post office, with all its attendant services.
As we have seen with other privatisations, once the horse has bolted and the rationale of market practices has been enforced, it can be very difficult to reverse or even moderate the impacts. Despite assurances to the contrary, the end result is likely to be a reduced and more expensive service, and the fear is that rural services will be the canary in the coal mine.
We have received lukewarm reassurances that the universal service obligation will be retained, but it is feared that once private owners are placed under financial and competitive pressure, they will re-examine it and seek to change the terms of that important social compact, or be forced to contract their service. It would be completely unacceptable at any point for rural customers to have to pay more for that service. I ask the Minister to reassure us today that that will never happen, and that we are not on a slippery slope towards the erosion of the universal service obligation. I should also like to hear from her a more detailed explanation of how the Government and Ofcom will prevent a private operator from ever altering the terms of the agreement.
Let me reiterate that I do not oppose the modernisation of the service. Indeed, the initial plans for modernisation met a degree of approval. It was hoped that more Government functions and business would be returned to the Post Office, and that the plans would return post offices to the centre of local life and diversify the service to meet the needs of all in the community. Over the last 10 months, I have been pleased to be asked by the Post Office to open rebranded branches in my constituency, which have been open for more hours and have offered a broader range of services. It is important for such services to be retained in hard-to-reach rural communities. There is clearly a public demand for more of them to be provided, primarily through local post office branches. In response to a recent ICM poll, 89% of people said that they wanted a face-to-face service, and 73% said that they preferred the post office.
I believe that, following the recent review of banking and financial services, the Government have missed an opportunity to put the Post Office at the centre of a restructured retail banking sector. I believe that there is enormous potential for post offices to offer high-street banking services that would provide income for the Post Office while also bringing customers through the door to use their other services. That would apply particularly in rural areas that are currently experiencing a wave of bank branch closures. In Northern Ireland, Ulster bank, RBS, First Trust—part of Allied Irish Banks—and the Bank of Ireland are closing branches in rural communities.
If high-street banks were compelled, or encouraged, to offer access to a wide range of transaction services in local post office branches, and to make customers aware of that, we could see a revolution in the functioning of our post offices, and a revitalisation of the rural economy. What we need from the Government is an approach that aims to develop and support our postal services, bringing them into line with the 21st century while supporting their invaluable social function, but instead there is the fear that they will sell in haste and repent at leisure.
Lady Hermon
Before the hon. Lady closes her remarks, I am sure that she would like to join me in paying tribute to all those in Royal Mail and the postal services in Northern Ireland who served the entire community, without fear or favour, through the awful years of the troubles. We owe them a sense of loyalty and dedication now, when they feel that their jobs and their services are in jeopardy.
Ms Ritchie
I thank the hon. Lady for her intervention, with which I fully agree. I commend all those—past and present—employed in Royal Mail and postal services throughout Northern Ireland, because through the dark days of the troubles they had to go to hard-to-reach communities, both rural and urban, in very difficult circumstances. They often risked their lives to ensure that people had proper access to a postal service. It is important that we commend them and that this House records that.
The postal service and the post office lie at the heart of rural life and the rural economy. While remaining open to new opportunities, modernisation and reform of these vital services, we must not let the driving logic of privatisation destroy part of the fabric of rural life. It is important to emphasise that the National Federation of SubPostmasters, a representative of which I met recently, has made it clear that in practice it is very much not opposed to modernisation or to getting more services, but it is opposed to any contraction or withdrawal of services. There has certainly not been enough to counteract the fall in income from Government services from £576 million in 2005 to £167 million in 2010. I am happy to commend the motion standing in the name of the hon. Member for North Ayrshire and Arran (Katy Clark). I fully support it, but we must show our determination to retain postal services and Royal Mail.
Jo Swinson
Of course, Ofcom, as the regulator, has a range of tools. The nub of the hon. Gentleman’s point—there is a sensible point that he is making—is that it is vital that Royal Mail can continue to deliver as a successful company, and one of the challenges it currently faces is its lack of ability to invest. The postal service market it changing rapidly—parcel delivery, in particular, is very much a growth area, as other hon. Member have outlined—and we need to ensure that the Post Office has the capacity to react to changing circumstances. That is why it needs to be able to access private capital and why that is a way of protecting the universal service obligation, rather than the contrary.
Time is short and I would like to ensure that I mention post office matters, but on the issue of profitability and Royal Mail, which various hon. Members raised, I will put into context the challenges it faces. Competitors are investing significantly in their postal service markets and in improving their technology to deal with that. For example, Deutsche Post has invested more than €700 million over the past two years alone in its mail facilities and infrastructure and is focusing on another €750 million of investment by 2014. That is the type of investment that Royal Mail, in its market, ought to be looking at and that others in similar markets are looking at. That is why accessing private capital will be so important.
The debate has also covered the post office network. I think it is important to point out clearly that Post Office Ltd is not for sale; as of 2012 it is formally separate from the Royal Mail Group and remains wholly owned by the Government. Issues of Government contracts have been raised. I point out to hon. Members that Post Office Ltd has won 10 of the 10 Government contracts it has bid for since 2010, and it has done so on merit.
The hon. Member for South Down (Ms Ritchie) talked about the important opportunity of high street banking being provided through post offices, and I absolutely agree. It is pleasing that 95% of high street bank accounts can now be accessed through local post offices. That network is very important, particularly in areas where many of the banks have closed their branches. I encourage hon. Members to bring that to the attention of constituents, as they might not be aware of it. Also, the Post Office is currently undertaking a current account pilot in the east of England, so current accounts can be available from the Post Office as a financial services provider across the rest of the country.
Jo Swinson
I will give way, but then I will have to bring my remarks to a close.
Lady Hermon
The Minister is very kind to allow me to intervene when she has only a few minutes left. I must say that, despite the assurances she has given in the Chamber this evening, there will remain a nervousness and anxiety right across Northern Ireland about the Government’s future intentions in relation to both Royal Mail and postal services. Will she kindly give a commitment that a senior member of the Department will come to Northern Ireland, visit rural and urban post offices and meet a representative group of postmasters and politicians?
Jo Swinson
I will certainly take the hon. Lady’s representation on board. I cannot give a commitment on when that can happen, but I thank her for the invitation.
The 2010 spending review allocated a funding package of £1.34 billion to the post office network up to 2015, which is providing significant investment in the shape of network and Crown transformation. The new Post Office Local models are proving very successful, as indeed are the Post Office Main models. More than 1,750 sub-postmasters have signed contracts to convert their branches and nearly 1,000 are open—the 1,000th is expected to open this week. These new offices are reporting high levels of customer satisfaction; many Members will be aware of that because more than 400 have at least one in their constituencies.
I take on board the point made by my hon. Friend the Member for North Cornwall (Dan Rogerson) about local branches. Where sub-postmasters wish to sell a going concern, it will be assessed on a case-by-case basis, and if it is not viable for one of the new models it can be sold under the existing type of contract.
I welcome this debate, which has featured contributions from all parts of the House and from all four nations. Postal services are indeed vital in rural areas, which is why the coalition Government are investing £1.34 billion to improve and modernise the post office network and putting Royal Mail on a sustainable future footing.