Lord Stevenson of Balmacara
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Postal Services Bill
Lord Stevenson of Balmacara Excerpts(13 years ago)
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“( ) A disposal of the Crown’s interest in a Royal Mail company will not be authorised until the Secretary of State has secured a written contract from the proposed purchaser that at least one representative of employees within Royal Mail or its successors will sit on the board of the new body.”
Lord Stevenson of Balmacara
My Lords, we discussed the issue of a representative of employees serving on the board of Royal Mail in Committee and it received support from across the Chamber. The noble Lord, Lord Cotter, from the Liberal Democrat Back Benches, drew on his experience as managing director of a manufacturing company. He said on 8 March at col. 1553 of Hansard:
“It is crucial that employees have not only shares but a real voice in one way or the other. Without that, so many companies fail. We want the new conglomerate to succeed, to go forward and to bring its employees with it, as opposed to management and employees being at each other's throats as has sometimes been the case in the past”.
My noble friend Lord Myners pointed out that the shareholders in a privatised Royal Mail,
“—whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors—will nevertheless individually have a very modest interest in the company … few … will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money invested in a single share and all their employment in one place of work. It is surely right that people who exhibit such a high conviction to a company should have some voice in the leadership and management of the business”.—[Official Report, 8/3/11; cols. 1553-55.]
Postal workers already have a major stake in the company, and their livelihoods are dependent on its viability. This is more than just an issue of immediate employment, because postal staff invest their livelihoods and pensions in the company. We will suggest later under Clause 3 that they should be able to invest in trust-owned employee shareholdings in the company. Surely it is not too much to ask that they have a seat at the board table for their chosen representatives.
What do we see when we look across the channel? Employee representation is commonplace. In fact, some of the companies that are held up as shining examples of privatised postal services have employee representatives on their boards. The Minister for Postal Services, in Committee in another place, stated:
“I have never been opposed to the idea of employee representatives being on boards, or on board committees”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 325.]
We invite the Minister here to go one step further and make provision in the Bill for this good idea. Failure to introduce representation of postal workers would risk missing a real opportunity to create trust and confidence for the long term. I beg to move.
The Deputy Speaker (Lord Skelmersdale)
If the amendment is agreed, I cannot call Amendment 5, by reason of pre-emption.
Lord Stevenson of Balmacara
I thank the Minister for his comments. I agree that these debates have allowed us to touch on important issues that affect not just Royal Mail but the wider world of work and how Governments should relate to that. I also thank my noble friends Lady Wall and Lord Clarke for their contributions. The Minister responded positively to their speeches, but unfortunately has not been sufficiently moved to incorporate the amendments in the Bill. Perhaps we can come back to them at a later stage.
The issue raised in Amendment 4 is whether, at the point of transition from its present position as a wholly owned subsidiary of government, Royal Mail should be imbued with many attributes that will allow it to sustain and carry on its work. As I understand it, the Minister is very positive about the need for employees to be engaged at all levels in the work of companies, but believes that the responsibility for that must lie with the company and not the Government. We on this side of the House believe that the change from a wholly owned subsidiary to a 100 per cent private company changes the nature of the debate.
History is with us all the time in this debate. It is important to bear in mind that Royal Mail is a public service. It is a company in all but practical separation from the Government, but it is also a public service, and I think that those who work in it believe that that is what drives their motivation and allows them to engage with the public interest more widely than any ordinary employee would do. It also allows them to have high levels of staff retention and works to ensure that their productivity is high. These are public servants in the true sense of the phrase and the change that the Government wish to make—to sell them and their company to a private sector operation—will of course make that completely different. They may or may not be right; time will tell. However, I think that the Government are missing a great opportunity by not building into the new arrangements something of the past and the history of the public service which it represents.
I believe, and I think that many noble Lords on this side would support the view, that company law has perhaps not kept up with the needs of the modern employment world. It does not play well to the idea to which the Minister referred in terms of how companies operate in relation to staff, and it is perhaps not the right place to look for better employee engagement on this. The Government have the option of leaving a mark on the new, privatised Royal Mail. They could do so by a simple amendment—accepting what we have said in this amendment—but they have not done so. The warm words which we have heard are encouraging to those who will read them but they do not lead us to permanent change. I therefore think that we should test the opinion of the House.
Lord Low of Dalston
If it is truth that we are concerned with, as a serious House concerned about its reputation, it is not correct to say that it is more expensive to deliver to Norwood Green and Hampstead than to the Orkneys and Shetland.
Lord Stevenson of Balmacara
I hesitate to interfere in what is obviously an important battle of words; perhaps the Minister will take on the mantle of responding to ensure that we have equity at the end of this debate.
I shall speak to the substance of the amendments in the names of the noble Lords, Lord Low and Lord Rogan. The sale of Royal Mail and the separation of the post office network is a momentous event and is bound to cause concern and have genuine repercussions on the universal service and on the post office network, as we have heard and will continue to hear during debates on Report. We are very pleased by the stress that the Government are placing on retaining the universal service. There has not been a sitting in which we have discussed the Bill without that provision being at the heart of the remarks that have been made; we welcome that.
I pay tribute to the noble Lord, Lord Low, whose representations led the then Government to incorporate a service to blind and partially sighted customers into the universal service minimum requirement and to put it in the 2009 Bill. Nine million items a year are sent free of charge through the Articles for the Blind service, and the Bill carries through that decision, a move which will be welcomed on all sides of the House.
That experience illustrates the value of proper consultation to improve results and help people to feel part of the decision rather than the victims of one. It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups, but the amendments would require—just at the time it is needed—proper consultation with user groups, including small business, pensioners, people with disabilities and people in rural areas. People with a disability are more likely to use mail services as a means of communication. Disabled people visit the post office to post mail more than the average. Equally, other groups who I mentioned in that list need to be consulted, and the amendments would ensure that.
The other amendment deals with concerns in those parts of the UK which would be most vulnerable to any reduction in the USO or the post office network. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK.
I am not sure whether Ministers have had the chance to read the current edition of the London Review of Books and, in particular, the article by James Meek entitled “In the Sorting Office”. It is an extremely good tour d’horizon of some of the problems facing modern post services. He spends some time describing his experiences visiting the Netherlands and the operations being carried on there, some of which were mentioned by my noble friend Lord Christopher.
In particular, I draw attention to the points Mr Meek made in the article about when he visited rural parts of the United Kingdom. Muck is a Scottish island two and a half miles south of Skye. The article states:
“There are 12 households on Muck, and they get mail when and if the ferry arrives from Mallaig … Bad weather can cut the ferries down to one a week in winter. There have also been times—it happened the other day”—
when one puts a first-class letter on the early ferry and it reaches London the next morning. So they get a very variable service. The problem is that Muck now has a satellite dish for broadband internet. You can even, if you are lucky, catch a mobile signal in some parts of the island, if the wind is in the right direction—I added that last bit, but it is true.
“Nowadays email’s so important for communication that the post is getting less and less important”,
says one islander:
“I'm afraid the Royal Mail's in a losing battle”.
The article goes on to draw something to the wider public's attention which I had not known, which is that Jersey,
“has just announced it is abandoning Saturday deliveries in an attempt to staunch the flow of red on its balance sheet”.
I think that Jersey is still a part of the United Kingdom, although it is obviously a separate entity, so we are in danger of some dilution of the USO.
We will return to the question of the USO and how we will protect it. We know that the Government are on our side, but I think that there are measures that might strengthen that protection. The amendments are about consultation to make sure that user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas, are consulted, and I urge the Government to accept them.
Lord Stevenson of Balmacara
My Lords, the amendments make the case for employee shares being held as a trust and for employees to have a voice on the board in the light of the employee share scheme being established. We agree that that should be in the Bill because we have heard a lot of Ministers’ warm words for employees, but we need more assurances.
The benefits of employee share schemes, which were rehearsed to some extent in Committee, are widely recognised. They can include motivating employees to become more productive, helping to align employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do that on their own. They have to be part of a wider approach to good industrial relations. Employee shares will not be welcomed if they are felt to be a sop, to be at the expense of pay or a substitute for the usual channels of interaction between management, unions and staff.
However, given the more generalised benefits of such schemes and the very significant efforts made by current employees to implement the modernisation programme within Royal Mail, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. Carole Leslie of the Employee Ownership Association spoke of the benefits of such a scheme in evidence to the Public Bill Committee in another place. She said:
“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding … the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 76.]
If we accept the principle of employee shares, we are still short of detail. The Government have said that there will be a scheme but they have not said exactly what it will be. Having said that, we welcome two important concessions that the Government have made. First, we have pressed for greater detail about the scheme and are therefore pleased that the Government have brought forward an amendment so that, before the disposal of Royal Mail takes place, there will be a report to Parliament setting out the detail of the proposals for an employee share scheme.
Secondly, in Committee we pointed out that the Bill as it stands requires employee shares to be offered only when the last Crown share in Royal Mail has been sold. We argued the case for a trigger that kicks in when the first shares are sold. I think I heard the Minister suggest that that might indeed be acceptable to the Government, in which case we welcome that as well. However, whenever it is, we think that the Government should make some employee shares available when the first disposal is made.
The amendment proposes that shares should be held in trust for the benefit of employees, as we think that that is the right way to settle this matter. We now understand that this would be difficult for some employees to accept, as they would expect to be able to cash in the shares if they were taking them up, but we do not think that that is the right way forward to build in long-term value in the company. We believe that, for example, on leaving employment, shares held by employees should be disposed of only by way of transfer for consideration through the trust. It is obviously fair that employees who leave employment and leave a scheme should be able to capitalise on their shareholding, particularly if there has been capital growth. That is a scheme incentive. However, to maintain the integrity of the scheme as a whole, the disposals should go back into the scheme.
The amendment also calls for representation on the board for the employee share scheme once it is established. I have already made the arguments in favour of generalised employee representation but I think that they acquire additional merit when it is seen that some 15 per cent, we hope—but certainly 10 per cent under the Government’s proposals—of the shares will be available to be held by the employees of Royal Mail. This means that they should as of right have a chance to have a collective voice at the highest level, and we think that that should be stated in the Bill. I beg to move.
Lord Razzall
My Lords, having sat through what I would describe as “Lord Mandelson’s Bill” under the previous Government, I am absolutely delighted at the Labour Party’s conversion on the road to Damascus regarding their commitment to employee participation here. The noble Baroness would not be surprised if I indicated that, were the Government minded to go from 10 to 15 per cent, I could not be more delighted. However, whether she can persuade the Treasury of that, I have my doubts.
Lord De Mauley
My Lords, I again say that I am grateful to noble Lords on the opposition Front Bench who agree with us on the establishment of an employee share scheme. I think that we all agree that this is a key feature of the Bill and will help improve employee engagement and the culture of the company.
However, we should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and secure the future of Royal Mail. A key means of doing that is enabling the introduction of private capital. In a previous debate, the noble Lord, Lord Tunnicliffe, stated that the Government should strike the right balance between employee shares and attracting private capital. He also said that we should learn lessons from previous privatisations. Yet, through their Amendments 16 and 17, noble Lords seem to suggest that we have not gone far enough.
So let me put in context the commitment we are already making through Clause 3. The minimum 10 per cent share requirement in this Bill is the largest statutory employee share scheme of any major privatisation. There is no doubt that it is a meaningful share, but one which, in our judgment, will not harm our ability to attract private capital. As I have said previously, most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the eventual share schemes in those past privatisations offered generally smaller stakes—5 per cent in the case of BT and British Gas and less than that for the other utilities of electricity and water. Only Rolls-Royce and BA came close, at 10 per cent and 9.5 per cent respectively, but I reiterate that we are committed to at least 10 per cent. The noble Lord, Lord Brooke, referred to the bus companies. We of course looked at them, but they were generally very much smaller companies. We consider that a stake of at least 10 per cent already strikes the right balance between a meaningful stake and attracting private capital.
Amendment 16 would also require that the shares be allocated to employees on a pro-rated basis in line with the reduction of the Government’s shareholding. The Bill already allows for that and, as the noble Lord, Lord Stevenson, mentioned, the Government have committed to place shares into the scheme simultaneously with the first sale of its shares.
In Amendment 18, noble Lords have sought to specify the design of the scheme such that it is structured as a share trust. As I said during our debate in Committee on a similar amendment in the name of the noble Baroness, Lady Dean—ably spoken to by the noble Lord, Lord Brooke of Alverthorpe, in her absence—an employee share trust certainly has its attractions, particularly its ability to deliver the Government’s objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services, too, has been clear that he sees many attractions to establishing such a trust. However, it is important to keep options open on the design of the scheme at this stage. Individual share ownership also has its merits, giving employees a very real sense of ownership through their share certificates.
The design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be appropriate if Royal Mail were floated on a stock market. There are circumstances where it could also make sense to have some combination of a trust and individually held shares. The noble Lord, Lord Tunnicliffe, suggested in our debates in Committee that perhaps some shares could be used for training or bursaries. Again, there could be merits in such ideas. However, until we have reached a firm decision on the form of a transaction, it would be unwise to set in stone the form of the employee share scheme. However, I remind your Lordships that government Amendment 6, which we debated a little while ago and your Lordships accepted, requiring us to give details of the scheme when we put shares into it for the first time, will provide the House with further assurance about its proposed design at the appropriate time.
Finally, Amendment 18 returns to the issue of having an employee representative on the board. As my noble friend said when responding to Amendment 10, while the idea may well have some merits, it is for Royal Mail and its shareholders to determine whether the board should include an employee representative. Thanks to this Bill, Royal Mail’s shareholders will of course include its employees in the future.
The future ownership of Royal Mail, by both private investors and its employees, inextricably links them. Within the important boundaries set by Clause 3, the exact size and form of the scheme should therefore be informed by the type of transaction and the circumstances at the time of sale. I ask noble Lords to accept that it is imperative that we keep our options open. I therefore ask them not to press their respective amendments.
Lord Stevenson of Balmacara
My Lords, I thank the noble Lord, Lord Razzall, for his support for the amendment, and my noble friend Lord Brooke for sharing again his experience of working in this operation. We can laugh about it even if we cannot always agree on the absolute detail of what the figures mean. My noble friend Lord Brooke said that this was an opportunity for the Government to show themselves to be progressive in these matters, a theme which has run through most of our debate today. I am grateful to have had confirmation that the Government feel that the employee share scheme should be pushed forward and supported. We are pleased to have had confirmation that shares will be available from the first tranche.
The Minister said that the Government were minded to go for a trust but were not quite sure. There will be a point where they have to come down on one side of the fence or the other. We can see the argument for keeping options open—we are not so daft as not to—but what the purchaser is going to get needs to be clear. I would have thought that any purchaser who wanted to put a very large stake into Royal Mail would want to know that it is a well run and productive corporation and will do the job in which they are investing. That must require them to have good employee relationships, and we have argued—I think that the Minister agrees—that there is a case for ensuring that the employees’ involvement is proper, appropriate and at the level which will mean that we will get a well run and productive firm.
We have argued for greater than 10 per cent—I got a sense of some support from the noble Lord, Lord Razzall, on that. I do not think that the Minister is minded to go that way and he produced a long list of previous privatisations. But it is the future. Why not boldly go where others have not gone and take it up to 15 per cent, and then reflect on that? However, I shall withdraw the amendment.