Postal Services Bill

Lord Young of Norwood Green Excerpts

Tuesday 24th May 2011 Lords Chamber

Moved by

[Lord Young of Norwood Green]

1: Clause 2, page 2, line 6, at end insert—
“( ) the strategy for achieving the objective of making post offices the principal location for the provision of government services over the next ten years”

[Lord Young of Norwood Green]

My Lords, as we have scrutinised this Bill, many noble Lords have stressed the crucial importance of maintaining the link between Royal Mail and the post office network. We have urged the signing of a new 10-year interbusiness agreement of long enough duration to give a sense of security to the people who run our post offices and the many members of the public and businesses that rely on them. The Government have made helpful moves in providing the details for the IBA to be included in the report to Parliament. The Minister has said that she expects a new IBA in the spring and that she hopes that the agreement might extend to 10 years or more. That is good news. Royal Mail work accounts for the largest single stream of income for post offices, about a third, but government services are also very important. They account for more than 25 per cent of post office income; they used to account for more than 40 per cent.

I fully understand the difficulties facing the Government. It would have been wrong to prevent pensioners receiving their pension direct into their bank account if they so wished. It would be wrong to prevent the public from applying for licences by internet if they so wished. We understand the constraints of European competition law. So the Government should be realistic. They should not raise hopes only for them to be dashed and they should turn warm words into practical projections and plans. But when it comes to converting fine intentions into actual work, the results have been disappointing. The document produced by the Department for Business, Innovation and Skills in November 2010, Securing The Post Office Network In The Digital Age, contains welcome words. It boldly declares:

“We want to see the Post Office become a genuine Front Office for Government at both the national and local level … acting as a natural home for the delivery of face-to-face government services and helping citizens interact with Government online”.

Those are wonderful words, but the document is in truth a little thin on this particular subject. There are promises of pilots and one or two isolated examples. Indeed, Mr Billy Hayes of the Communication Workers Union described the Government as being as “joined up as spaghetti” in this respect, with different government departments each adopting a different approach.

The first practical test that came along was the DWP contract for so-called green giros, which are paid to an estimated 250,000 to 350,000 people on benefits or pensions who do not have a bank account or card account. In contrast to the record of my noble friend Lord Mandelson in suspending the bidding for the post office card account, the one actual decision that the Government made was to take away from post offices the multi-million pound contract to process so-called green giros. I suspect that that is a bigger blow to sub-post offices because of the added footfall that it brings than it is to Post Office Ltd as a whole, but it was a serious setback to the confidence of sub-postmasters. But the Minister for postal services was clear when he said that:

“BIS has no intention of subsidising DWP and I am sure DWP has no intention of subsidising BIS. I would simply say that if new services are put forward by any Government Department, unless there are issues that prevent a competitive procurement, those Whitehall Departments have to go through a proper procurement process and Post Office Ltd would have to compete with them”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 349.]

It is the usual stance of other departments and local councils, especially at a time of cuts of 20 per cent or more, to concentrate more on saving money, so there are practical steps that can be made. Injection of modern technology at post office counters, for example, could benefit from the comprehensive spending review funding; then there is the imaginative use of the post office as a central and trusted point in community life. There are deadlines for decisions on procurement and projections that need to be made. The views that I have expressed are views shared and supported perhaps even more strongly by the National Federation of SubPostmasters.

This amendment is intended to concentrate minds and encourage a strategic approach to the future of government services provided through post offices. It is an important addition to the call for a long-term interbusiness agreement, on which the futures of many of our post offices hang. The Government will be judged on this issue, to quote the words of the Suffragettes, through deeds not words. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, Amendments 1 and 2 seek to introduce new requirements into Clause 2. On Amendment 1, as we have discussed previously, Post Office Ltd has developed a clear strategy to deliver a commercially self-sustaining business while maintaining a network of at least 11,500 branches. This Government have allocated a funding package of £1.34 billion which will allow Post Office Ltd to deliver this strategy, as part of which Post Office Ltd has been clear in its ambition to become a front office for both local and central government. The Government fully support Post Office Ltd in this, as does the National Federation of SubPostmasters.

The National Federation of SubPostmasters realises that this strategy, along with the other elements of the Post Office’s plan, such as the introduction of Post Office Local outlets, must succeed in order for the Post Office to become the vibrant business we all believe it can be. Indeed, the National Federation of SubPostmasters stressed the importance of the front office for government strategy last week, when welcoming the publication of the Co-operatives UK report on options for a mutual Post Office. The front office for government strategy is already under way and the Post Office is working hard to develop competitive, innovative services targeted at both local and central government. It is also engaging with a number of departments, agencies and local authorities to develop the role it will play, particularly as all parts of the Government plan how to deliver their services in new and increasingly digital ways. This is beginning to yield results.

Only yesterday, the National Federation of SubPostmasters welcomed the beginning of a pilot scheme which offers document verification for pension applications across 106 post offices in the north-east. I welcome it too. The Post Office, the National Federation of SubPostmasters and the Government all agree that this is simply a good start and that more work should follow. It is therefore good news that the pilot is actually just the first of three planned pilots with the Department for Work and Pensions, which has set out that it will continue to work with the Post Office to explore opportunities for delivering welfare in the future, including universal credit. The Post Office has also been successful in its bid to provide registration services as part of an initiative to enrol local authority employees into a government employee authentication service.

The annual report on the Post Office network required under Clause 11 will provide ample information regarding its progress in delivering government and other services across its network, and that will be provided each and every year. I see no benefit in duplicating the information in the report to be delivered on a Royal Mail transaction. As such, and due to the reassurance I have given on the progress that Post Office Ltd is making in securing new government business, I hope the noble Lord will feel able to withdraw Amendment 1.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her words. I will obviously study the detail of them. I found them helpful and I do feel able to withdraw Amendment 1. In my desire not to take up too much time, I did not speak to Amendment 2 which, with the House’s indulgence, I should like to address.

[The Lord Speaker (Baroness Hayman)]

It might be to the assistance of the House if the noble Lord withdrew Amendment 1. He could then move Amendment 2 and get a response to it. That might be helpful.

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Moved by

[Lord Young of Norwood Green]

2: Clause 2, page 2, line 6, at end insert—
“( ) the criteria and method by which the value of shares or overall sale value of the Royal Mail Group, or part thereof, which is to be disposed of, has been assessed”

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[Lord Young of Norwood Green]

My Lords, Amendment 2 addresses a concern that, in the pursuit of other no doubt laudable objectives, attention may be diverted from getting the right valuation of Royal Mail and ensuring that the taxpayer is not short-changed. The noble Baroness, Lady Kramer, drawing on considerable professional banking experience, reminded us of her wicked past, although I doubt it was enough for a super-injunction to be called for. She said that it was,

“good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets”.—[Official Report, 14/3/11; col. 103.]

Those are wise words, based on experience.

There is a compelling case to show that in the heyday of privatisation, the 1980s and 1990s, privatised companies were consistently sold at too low a price. The noble Lord, Lord Lea, on the basis of his thorough research, pointed out to the House that it has been estimated that for 1986 alone the average share issue premium on major share issues was 7 per cent. On privatisation issues the average premium on the first day of trading was 77 per cent. One of the reasons for this undervaluation is that it is extremely difficult to place an accurate valuation on a company in which no shares have been traded recently. That would certainly be the case with Royal Mail. It is not uncommon, when a public body has kept records for other purposes, for its inventory not to be perfectly up to date for the purposes of a sale.

Ministers have previously warned that they do not want to publish the valuation of the company for fear of affecting the sale price adversely. In other words, they think they might undervalue the assets, compared with what someone is willing to pay. They have also been unwilling to guarantee that there will be an independent valuation, or to share the valuation prior to the sale with the Public Accounts Committee in another place. They have indicated that there will be an internal confidential valuation and that the accounting officer of the Department for Business, Innovation and Skills will be obliged to ensure value for money overall. That might be reassuring were it not for the fact that similar obligations also applied in the palpable underselling of public corporations in the 1980s and 1990s.

This amendment does not seek the publication of any figure for valuation. It does not even ask for a figure to be shared with the Public Accounts Committee in advance. It simply provides for the Government, at the time of their report to Parliament—already promised in Clause 2—and prior to the sale of Royal Mail, to make clear the criteria for and method of their valuation. That does not mean the valuation itself but at least the criteria and method of valuation. I hope the Minister will be able to give some indication of a willingness to present this or similar information, if not to Parliament as a whole then to the Public Accounts Committee.

Could the Minister also address a question raised by the coalition review of its year in office? It made reference to the timescale for European state aid clearance, which seems to have been extended by six months to May 2012. That conflicts with previous statements that this might be achieved in the winter of this year. I would welcome some reassurance—clarification might be a better word—on that.

We are pleased overall to help improve the safeguards in the Bill; to safeguard the viability of Royal Mail; to strengthen regulation transparency and accountability to Parliament; to strengthen the safeguards to the universal service and the post office network; and to ensure that we get the best possible value for public money in the event of a sale. I beg to move.

[Baroness Kramer]

My Lords, in my defence, although I continue to think that the Government do not have a very good track record in valuing companies that they put forward for sale, I did not think that the Floor of this House would be any more effective in coming to an appropriate valuation either. Therefore, I support the Government in this instance.

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I know and respect the noble Lord, Lord Whitty, from the time when he was a Minister and I was in opposition, and from when he took over as the chairman of what was the National Consumer Council, which became Consumer Focus. I would always do my very best to reach an agreement with him. However, once all these changes have been implemented, we will be focused on that final, critical piece of the jigsaw—securing private capital for Royal Mail. As I have said throughout these proceedings, we are committed to doing the right sale at the right time, consistent with our objectives, to secure the future of the universal postal service. We have brought our talents to bear, including our knowledge of the City and business. We have been able to build on the previous Bill that the previous Government worked their way through. I hope that in the light of that the noble Lord, Lord Whitty, will have a little more confidence in our ability to fulfil what he would like to happen, without us telling him beforehand how we are going to do it. I hope that your Lordships will find this information helpful.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her reply and for her clarification of the timescale; it was helpful to place that on the record. To respond briefly to a few points, I say to the noble Baroness, Lady Kramer, that I was not suggesting that this House should do the valuation. I agree with her assessment: valuation by committee—what a thought.

My noble friend is right: this is a modest proposal. It is true that it was not in the Bill presented by the previous Government, but as I have said on a number of occasions, we were not going for the full monty, 100 per cent privatisation. Perhaps in hindsight we did not get every aspect right anyway. I freely confess that. Although I welcome some of the points that the Minister made, the reassurances in relation to the National Audit Office and so on are all post-sale. We were trying to get a bit more transparency into the process that precedes the sale. I recognise that she has gone about as far as she can go, as the song said, and in the circumstances I will study carefully what she said but I am prepared to withdraw the amendment.

Amendment 2 withdrawn.

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[Baroness Drake]

The Parliamentary Under-Secretary said:

“Any amendment to the RMPP rules that would allow the scheme to be more easily wound up would fall foul of the protection provided for members under clause 19(2), as any such amendment would have a material effect on members’ ‘relevant pension provision’ … and given that our intention is to take on the historic deficits for the Royal Mail together with a more manageable scheme, it would not be appropriate for the Secretary of State to make any amendment to the RMPP that would allow the scheme to be wound up”.—[Official Report, Commons, Postal Services Bill Committee, 30/11/10; col. 445.]

In view of that debate, and in view of the fact that this amendment now introduces an intention to separate the plan into separate schemes rather than separate sections, is it the Government’s position that there will be no change to the winding-up provisions in any separate scheme if and when a section of the RMPP is constituted as a separate pension scheme?

[Lord Young of Norwood Green]

My Lords, I certainly concur with the points made by my noble friend Lady Drake, and I shall not repeat them because once again she has covered the waterfront on that issue. I want to take the opportunity to say, first, that we welcome the constructive approach of the Government Front Bench, led by the noble Baroness, Lady Wilcox, with her ineffable charm in listening to the representations, in bringing forward a number of appropriate amendments and assurances. Our every wish has not been granted but I did not expect that that would be the case.

I pay tribute to the many noble Lords who have contributed to the debate and I would single out two: the noble Lord, Lord Low, who unfortunately is not in his seat, but I am sure that it will be conveyed to him, and my noble friend Lord Clarke, who is not with us today. He reminded us how much of his life has been invested in what we both joined as the GPO. It is also traditional in these cases to pay tribute to the Bill team, who have served us very well. I was reflecting that it was led by Jo Shanmudalingam—I probably have her name wrong. I do not know whether she is in the Box today, but I know that she is expecting her second child. I could not help reflecting that some mothers pay a lot of attention to what babies hear when they are in the womb, and play them Mozart. I am thinking of this child who has been exposed to House of Lords debates, whose first words, instead of “Mama” may be “My Lords”. The only hope is that she will grow out of it, or it might be a career destination. In any event we thank the Bill team.

My final piece of advice to the Minister is to remember what they put on the side of fragile parcels or packages, and the same goes for this Bill: handle with care.

[Baroness Wilcox]

I shall start by giving my last response on this Bill to the noble Baroness, Lady Drake, and reassure her, I hope, that there is no change in policy. Clause 18 allows for the RMPP to be divided into different sections to reflect the restructuring of the Royal Mail Group Ltd under Part 1 of the Bill. We do not have powers to create a separate pension scheme. However, in the fullness of time it is possible that the businesses might wish to alter the pension arrangements by transferring a section of the RMPP into a new stand-alone arrangement. Any such change would need to meet the safeguards provided under statute and under the scheme rules. The amendment simply ensures that in this event, the information-sharing framework provided under Part 2 would apply to the new scheme as it did to the old section. The trustee would need to consent to any proposal made by the employer to create separate schemes under the scheme rules and under general pensions legislation.