Viscount Eccles
Main Page: Viscount Eccles (Conservative - Excepted Hereditary)
Lord Whitty
My Lords, I was not going to intervene in this debate because I agree with much of what has been said by the noble Lord, Lord Rogan, and my colleague on the Front Bench and I have intervened in this area at earlier stages in the debate. Parliament has a huge responsibility here as two great parts of the nation’s infrastructure are in trouble and both require a new start. The Government have concluded that, in respect of the Royal Mail part, the new start shall be under private ownership. As the noble Baroness knows, I do not entirely agree with that, but nevertheless that is where we are. Everybody who has contributed agrees that there has to be some sort of stable relationship between the two parts, as we move into this new world. The Government’s difficulty is that they have to find a buyer for Royal Mail, the logistics part of the operation. Nobody is saying, and indeed my noble friend Lord Stevenson explicitly said, that Parliament should lay down the terms of that relationship, but Parliament has a right to know that that relationship will exist because it will determine the nature of both sides of that organisation—in terms of this amendment for the next 10 years. Clearly both sides may have an interest in ensuring that such an agreement is established prior to this Bill being implemented and the privatisation going through.
If I can be a little rude, I want to talk about the elephant in the room. The suspicion on this side is that if an amendment of this nature is not passed then the issue will not be the nature of the negotiations between Royal Mail and the post office network but the nature of the discussions between the Government and a potential investor. The Government will not find it easy to find an investor. The last Government did not find it easy to find an investor for a rather smaller proportion of Royal Mail and, if the interests of Post Office Ltd were sacrificed by untying some of the responsibilities of Royal Mail towards its Post Office Ltd partner as part of the deal, the interests of both sides and particularly those of the post office network will have been sacrificed. I hate to put it this way, but I have a degree of suspicion not of Royal Mail or the post office network but of the Government’s need to induce an investor in Royal Mail in the first place. If one of the terms of that inducement were to prejudice the future relationship with the post office network then the suspicions could be justified.
Viscount Eccles
Can the noble Lord can give us some indication of how he comes to the conclusion that somebody buying into Royal Mail would have a different interest and would not wish to use the Post Office in the same way?
Lord Whitty
My Lords, it would be the nature of any investor in any situation to maximise their degree of flexibility—any company investing in any potential asset, particularly one which has so many obligations on it in the public domain, wants to maximise its flexibility. I do not know the investors the Government have in mind—we have not been clear on that; we have not even been clear whether it will be a single investor or an IPO or another arrangement—but my expectation is that it will be one or perhaps one or two in a consortium buying Royal Mail. They would wish to maximise their investment, on that front, as on other fronts. Giving them that flexibility could seriously prejudice the future of a socially, economically and regionally important part of our infrastructure. That is the suspicion that lies, in my view, behind this amendment.
I do not understand the point of the noble Lord, Lord Razzall, about state aid because if you have an agreement of that length in any case, whether it was voluntarily negotiated or imposed by Act of Parliament, state aid may be involved. So either way the possibility of state aid interest arises, and I recognise that that is one of the inhibitions on government. I am afraid that, if the noble Baroness does not accept this amendment or something like it, then she is heightening the suspicion that we are going to fall over backwards to placate a potential investor to the potential detriment of the post office network and those who depend on it.
Lord Borrie
My Lords, subject to the questions that have usefully been asked by the noble Baroness, Lady Kramer, and to which the Minister will no doubt respond, the amendments proposed by my Front Bench and the noble Lord, Lord Low of Dalston, are useful and would have definite gains if they were accepted by the Government. I want to make two points. First, in relation to a review by Ofcom, which is provided for and to which one cannot in principle object, Amendment 66, in the names of my Front Bench team, would confirm the uniform tariff. I do not see how the Minister can object to that; it is a brief and clear amendment. The second point, which was mentioned by both the noble Lord, Lord Low, and the opposition Front Bench, is that there should be a transitional period for the thing to work through. There should be a period in which there will be no change. That, too, seems a helpful and creative amendment, which has been modestly but clearly put forward.
Viscount Eccles
My Lords, Clause 33 provides for a process that has been accurately and elegantly described by the noble Lord, Lord Low, whose amendment concentrates on the Secretary of State’s powers. That is clearly the right place to put the emphasis. There seems to be no case at all for preventing Ofcom carrying out the review. The clause is expressed in entirely neutral terms, but in accordance with European legislation. It just says:
“OFCOM may from time to time review the extent to which the provision made … reflects the reasonable needs of the users”.
I cannot see how anybody could object to that. The review might indeed come out as saying not that the obligation should be reduced but that it should be increased. It is a neutral expression.
What is of more consequence is the point made by the noble Lord, Lord Low. Not only can the Secretary of State direct Ofcom to carry out a review without prejudice to what that review says or what the Secretary of State’s reaction to it will be, but he also has these order-making powers. What is being sought by the amendment of the noble Lord, Lord Low, is a statutory delay in the ability to use those powers. I find that difficult because Ofcom is coming to this service obligation afresh. We simply do not know what conclusions about the overall needs of the regulatory regime it will come to when it presents them in the first quarter of next year. Ofcom is independent, very large, very experienced and has substantial resources. It is most unlikely that it will come to conclusions that do not meet the reasonable needs of the users of postal services. That is what it is required to take into account.
In that event, we could speculate about the content of an order made by the Secretary of State in response to an Ofcom review but, frankly, it would be pure speculation. There is the conspiracy theory that is being promoted by the Benches opposite. Nothing supports the contention that there is a conspiracy in this. You can have doubts about how private sector companies behave. They have an ability sometimes to be one step in front of Whitehall because, on the whole, they do their homework with great diligence and know what they are allowed to do and what they are not allowed to do. However, we have decided in this Bill that we want private sector investment in both Royal Mail and, eventually, via the mutual option, the post offices.
Lord Young of Norwood Green
My Lords, I support Amendment 67. It would introduce a new clause after Clause 34 requiring Ofcom to monitor indebtedness and giving it the power to limit the indebtedness of the universal service provider in relation to the overall value of the company.
In an earlier debate, my noble friend Lord Brooke of Alverthorpe drew attention to the case of the air traffic control company, NATS, which, when it was privatised, was very highly geared. It was limited to 100 per cent, which was still an extraordinarily high gearing to bear for the airlines group that bought the major part of the company. One aim of the public/private partnership was to bring in capital. My noble friend pointed out that real difficulties would be caused if a company coming into ownership of a utility borrowed most of the money to make the purchase and then found that it was unable to provide the capital needed to effect the changes and necessary modernisation in the operation—a point made by my noble friend Lady Dean. In the same debate, the noble Baroness, Lady Wheatcroft, said:
“Overgearing is as bad for companies as it for Governments, and it is something we need to be aware of as we move towards selling Royal Mail”.—[Official Report, 6/4/11; col. 1758.]
I wholeheartedly endorse the analysis made by my noble friend Lady Dean. This is an important issue and we await with interest the Minister’s response.
Viscount Eccles
My Lords, perhaps I may make a very brief intervention. The noble Baroness, Lady Dean, and I have a small piece of shared past. In fact, we have shared more than one but this one is financial. We were both involved in a company which had an unhappy ending because it got its indebtedness entirely wrong. As far as I am concerned, I am sure that it is a small piece of burnt soul, and no doubt the noble Baroness, Lady Dean, feels the same. Therefore, being really concerned about the gearing of a balance sheet, which is what we are talking about, is absolutely right.