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.