Post Office

– in the House of Commons at 4:40 pm on 29 January 2002.

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Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry) 4:50, 29 January 2002

I beg to move,

That this House
notes that under this Government the Post Office has gone from a profitable organisation to a business that is making half-yearly operating losses of £100 million, has the worst strike record of any business in the country and is consistently failing to meet its delivery targets;
deplores its reported intention to abandon its morning delivery guarantee;
condemns the Government for retaining Consignia in full public ownership while at the same time refusing to take any responsibility for its failures;
further notes that in the last financial year another 547 sub post offices closed;
regrets the Government's determination to press ahead with the withdrawal of benefit payments across the counter despite its failure to put in place any alternative source of income, thus threatening the survival of thousands more;
and further condemns the Government's total mismanagement, which has created the crisis that is facing the Post Office today.

It is less than two years since Parliament passed the Postal Services Act 2000, which established the Post Office—or Consignia, as it then chose to be called—as a plc in 100 per cent. Government ownership.

During the Third Reading debate on that legislation, the then Secretary of State said:

"This Bill guarantees a publicly owned Post Office, but with the commercial freedoms that will be needed to meet the challenges of the 21st century . . . It will ensure a strong Post Office that is better able to serve all its customers in all parts of the country."—[Hansard, 18 April 2000; Vol. 348, c. 939-40.]

That was the prediction of the then Secretary of State for Trade and Industry, Mr. Byers, and, like everything else that he has touched, it has since proved a disaster. In the short time since he made that statement, the Post Office has reported its first operating loss for 25 years, and nearly 63,000 days have been lost owing to industrial action in the last financial year alone. In that same period, another 547 sub-post offices have closed, and the company has moved even further away from meeting its delivery targets.

Last November, it was reported that Consignia was considering 15,000 redundancies. At that time, the company was quoted as saying that 20,000 was an extreme worst-case figure. A few weeks later, just before Christmas, the chief executive casually dropped into an answer to the Select Committee on Trade and Industry that the number of redundancies was likely to be 30,000. Since then, we have had the decision to scrap the second delivery, and reports that the early morning collection is to go. The latest report, received in the last few days, is that deliveries might not be made until the afternoon.

It is extraordinary that a national institution such as the Post Office could have been brought so low in such a short time. There is no reason for that to have happened. The Post Office is still a huge business, with a work force of 200,000 and a brand image that is generally respected and trusted throughout the country. In particular, the postmen and women who get up early to deliver the mail in all weathers do a great job and are the company's greatest asset, while the sub-postmasters who deliver services for the Post Office are at the heart of thousands of rural and urban communities.

Of course, post offices throughout the world are facing challenges. Fax machines, e-mail, electronic payments and direct debits have all provided competition that has gnawed away at some of the basic business of mail and parcel delivery. Other European and international postal services, however, have adapted far more quickly than the Post Office in the United Kingdom. In Germany and Holland, the Governments have recognised that lumbering state-owned corporations are unsuited to the new challenges and that, if they are to survive and prosper, they need the freedom and flexibility of private sector ownership.

Since it was partially privatised, the German Post Office has bought the majority share in DHL, and is now the biggest operator in the European courier express and parcel industry. The Dutch post office, which is fully privatised, has bought TNT and is the second biggest business in Europe. Both have left the UK Post Office far behind—its own acquisitions have been far less successful. Only last month, the Public Accounts Committee reported that the Post Office's acquisition of German Parcel is barely showing a positive return and that the Department of Trade and Industry has failed to operate proper oversight.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Is the hon. Gentleman pledging that, if elected, the Conservatives would privatise the Post Office completely or that they would subsidise through taxpayers' money the second delivery that he does not want to cut?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I am delighted to welcome the hon. Gentleman's conversion to the cause of privatisation. Part of the problem, which I shall explain to him, is the Government's failure to give the Post Office full commercial freedom. That is the view not only of the Opposition but of the National Audit Office, which reported last week that the absence of private shareholders might limit pressure to improve its efficiency and that the DTI might be more concerned with protecting the Government's dividend than with introducing greater competition. The latest figures show that the Post Office has recorded operating losses of £100 million, but the Government still refuse to say whether they intend to take a dividend out of the Post Office this year. Perhaps the Secretary of State will answer that question at least.

The Post Office has also complained that its present status—half in the public sector and half out—is unsatisfactory and has contributed to its problems. I should point out to Geraint Davies that, in evidence to the Trade and Industry Committee not so long ago, the chief executive of the Post Office said exactly that. The Post Office itself feels that, although it is still in Government ownership, it lacks the freedom that it needs. Ministers might be unwilling to take responsibility for its performance, but they have not hesitated to interfere in its operation at every turn.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

Perhaps the hon. Gentleman made it clear in the first 45 seconds of his speech, which I apologise for missing, that his party would privatise the Post Office 100 per cent. That seems to be his party's position. If he did not say that, will he clarify matters?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I remind the hon. Gentleman that the previous Conservative Government introduced proposals, which I supported, to privatise the Post Office. I regret, however, that we were unable to implement them because of opposition from the Labour party. The Secretary of State has criticised the previous Conservative Government for not giving the Post Office full commercial freedom, yet his party consistently opposed Conservative proposals to give it the commercial freedom that it needs.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Before my hon. Friend moves on from his point about Government interference in the Post Office, will he draw the House's attention to the fact that, although the Government interfere in a way that is largely deleterious, they have not interfered to help the Post Office take a lead in, for example, environmental matters? Rather, they have left it to become one of the worst-lagging businesses in this country in respect of matters such as clean air.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

Both sides of the House acknowledge that my right hon. Friend is an expert on the environment, and he is absolutely right. When it has suited them, Ministers have denied any responsibility for the Post Office's operation and pretended that it has nothing to do with them while interfering in its management and making life more difficult for those who are trying to run a business.

As evidence of how the Government have interfered in the Post Office's operation, I cite the fact that at Trade and Industry questions at the end of last year the Secretary of State chose to announce that she had sacked its chairman, Dr. Neville Bain. She did so without having warned either the Post Office or, I understand, Dr. Bain.

Dr. Bain's temporary replacement, whose appointment was announced last week, has said that the organisation is now in a "perilous state", and that the business model does not work. Yet it is hard to see how even someone of Allan Leighton's obvious talent will sort out that problem on the one day a week that he is contracted to work as chairman of the Post Office.

The management is entirely right: part of the answer must be Consignia's getting its costs down and its productivity up. Doing that, however, will mean making hard decisions, while also confronting long-established working practices. Many in the work force accept the need for change, but many do not.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

Let us find out which camp the hon. Gentleman is in.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I thank the hon. Gentleman for giving way a second time.

The hon. Gentleman talks of interference. In a world in which the Post Office had been privatised, would he superimpose the requirement for RPI minus X in terms of price and the requirement for universality in terms of public service? Would he also allow cherry-picking by private sector competitors? Does he agree with the NAO report's conclusion that there is an inherent tension among those factors?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

If the hon. Gentleman looks at the NAO report, he will see that it expresses some concern about the appropriateness of RPI minus X. What is certainly clear is that even if the Post Office were in the private sector, it would still have a quasi-monopoly, at least for the foreseeable future. It would therefore need to be regulated in the same way as other privatised utilities, and I would expect the universal service obligation to remain. The NAO report, however, specifically identifies as part of the problem the fact that the Post Office is not in the private sector, and has been retained as a wholly state-owned corporation. There is no doubt that that has contributed to its problems.

One of the Post Office's greatest problems, though, is the appalling industrial relations performance that has afflicted it over the past few years. As I have said, last year nearly 63,000 days were lost through industrial action in the Post Office—more than were lost in the rest of the economy put together. That is undoubtedly one of the main reasons for its failure to meet its performance targets.

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

Is not one of the key reasons for the industrial relations problem the catastrophically low morale among those who work in the Post Office, such as postmen? They feel very let down by the Government, which is one reason that they are so depressed about things.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I agree that morale in the Post Office has not been helped, especially given the announcement of 30,000 redundancies two weeks before Christmas. That inevitably cast gloom over many who work in the Post Office, as I saw when I visited my local delivery office. I am sure that my hon. Friend would see much the same if he paid a similar visit. The fact is that the performance of the Post Office has continued to deteriorate steadily over the past few years.

Photo of Bob Blizzard Bob Blizzard Labour, Waveney

Does the hon. Gentleman feel that his proposals for privatisation would improve morale in the work force?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I certainly think they would improve the performance of the Post Office, as has happened in Germany and Holland and, indeed, in other privatised utilities. The important thing is to improve performance and increase efficiency. I cannot believe that the hon. Gentleman will defend the Post Office's failure to meet its delivery targets, and the fact that in each of the last three years it has fallen ever further below them.

The Post Office's current performance is unsatisfactory. In some areas, especially in London, one in five letters fails to arrive on time. Postwatch, which the Government set up as a consumer body to monitor the Post Office, estimates that up to 1 million letters go missing each week. However, instead of working with the management to improve performance, the Communication Workers Union is now balloting its members about an all-out strike in the Post Office in pursuit of a pay claim. I hope that the Secretary of State agrees that further industrial action is the last thing the organisation needs, and that she will take the opportunity that the debate provides to condemn unreservedly any possibility of a Post Office strike.

Photo of George Osborne George Osborne Conservative, Tatton

Does my hon. Friend realise that Labour Members are being asked to vote for an amendment that congratulates the Government on

"encouraging partnership between employers and unions"?

Does he believe that Government Members know about the strike ballot?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

If they do, the amendment is curiously worded. My hon. Friend is right. There are nine days before the CWU announces the result of the ballot. When I was interviewed on breakfast television this morning, I heard the deputy general secretary asking his members to give him the authority to call a national strike in pursuit of a pay claim.

Photo of Michael Connarty Michael Connarty Labour, Falkirk East

The hon. Gentleman appears to be moving in a dangerous direction. Is he saying that if he were in power, he would ban strikes when people wanted a decent pay settlement from a private sector industry?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I understand that the hon. Gentleman is sponsored by the CWU, and I am therefore not surprised that he tries to defend it.

Photo of Michael Connarty Michael Connarty Labour, Falkirk East

That shows the extent to which the hon. Gentleman is out of touch. There are no longer any sponsorship deals. I am a member of the parliamentary panel of the CWU, and I declare an interest. When sponsorship existed, I also declared my interest on the Floor of the House. There is currently no sponsorship, but if the hon. Gentleman wants to ban strikes, that will apply not only to one union but to the whole of industrial Britain.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I accept the hon. Gentleman's curious distinction. I am not entirely sure what it means, but I accept his assurance that there is no sponsorship agreement. I am not talking about banning the strike, but I hope the CWU recognises that a national strike is the last thing needed by a business in the terrible state that the Post Office is in. Such action would do enormous damage, especially to small businesses, in a short time. If the strike goes ahead, I hope that the Government will consider removing the Post Office's monopoly.

Even if the Government do not lift the monopoly, greater competition will be one of the drivers of the improved performance in the Post Office that everybody supports. I welcome the regulator's moves to introduce more competition, and we look forward to his proposals for achieving that. Limited progress in introducing competition has already been made, but Postcomm needs to do more to encourage new entrants and to ensure that contracts with the Post Office are attainable and fair.

Competition will help to ensure that service standards do not deteriorate further. The universal service obligation is enshrined in the Postal Services Act 2000, but there have been worrying reports that it may be chipped away at the edges. As I have said, we already know that morning collections and second deliveries will be scrapped. Yesterday it was reported that domestic deliveries may not be made until the afternoon, with only businesses receiving mail before 10 o'clock in the morning.

It therefore appears that the Post Office cannot guarantee to deliver a first-class letter the next day, and that in future a letter may not even arrive until the afternoon of the subsequent day. Not only domestic customers will suffer: as the Federation of Small Businesses pointed out, it is often almost impossible to identify home-based businesses from the address on the envelope, so it is inevitable that many small firms will lose out if the proposal goes ahead. One report in Sunday Business even said that there are secret plans in the Post Office to end household deliveries all together. As the Liberal Democrats were identified as the source of the story, we can probably take any such reports with a pinch of salt. None the less, whether or not the report is true, the performance of Royal Mail is not good enough and is getting worse. Yet, Ministers have attempted to claim that that is entirely a matter for the management of Consignia and that they bear no responsibility. They cannot get away with it.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

Will the hon. Gentleman explain how the private sector could guarantee all the services that he fears losing, except by charging more for them? He may be aware of a report in yesterday morning's Yorkshire Post featuring a business man in Hawes, North Yorkshire, who says that he greatly fears the impact of all the changes. However, the hon. Gentleman must say what will replace them.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I ask the hon. Gentleman merely to look at the record of what has happened in Germany and Holland. Indeed, he should consider the record of other privatised utility companies, each of whose performance has improved.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

Will the hon. Gentleman share the information that he obviously has about the liberalised markets in Europe? To what extent has liberalisation affected domestic rather than commercial deliveries? Will he give us the figures?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I do not have the figures to hand. I have read the NAO report, which makes it clear that, where competition has been introduced, the main post office has largely continued to have the vast majority share of business. I see no reason why that should not happen in this country. The Post Office should be an extremely successful business. I have no doubt that if it were allowed to compete, it could do extremely well. I anticipate not that it would lose a large share of the business, but that the introduction of competition would, as has happened elsewhere, act as a general driver to improve performance and increase efficiency. It is the Government who have decided to keep ownership of the Post Office in the public sector and who retain responsibility for the management of Consignia and its strategic direction. It is, therefore, the Government who are ultimately responsible for the company's performance and for ensuring that the customers get the standard of service they are entitled to expect.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

Does my hon. Friend agree that the more the Post Office fails to give a reasonable, everyday service, and as the likelihood of a general strike increases, the more people will find alternative methods of sending their communications, perhaps through e-mail or text messages? As more people use such means of communication, fewer will be sending letters, so the unit cost will rise and the downward spiral worsen.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

My hon. Friend is entirely right. That is another reason why strike action is the last thing that the Post Office needs at this time.

I turn now to a different aspect of the business of the Post Office, but one that is equally important and that matters to a huge number of hon. Members in all parts of the House—the future of the counters business. I suspect that hon. Members in all parts of the House acknowledge that the 18,000 post offices and sub-post offices throughout the country perform a vital service. In my constituency and those of many other hon. Members, sub-postmasters play a vital part in sustaining the life of their local communities, especially in rural areas, and also in deprived areas of our cities. All too often, when the sub-post office closes, the village dies.

Once again, it was the current Secretary of State for Transport, Local Government and the Regions who said two years ago:

"There is no doubt in my mind that our programme for the Post Office network will guarantee a future for the network, recognising the very important role that it plays in our communities."—[Hansard, 15 February 2000; Vol. 344, c. 813.]

Yet, following that statement, another 382 sub-post offices closed that year. Last year, the figure increased to 547 closures in a single year. I have no doubt that the Secretary of State for Trade and Industry will say that the rate of closure has slowed. I must warn her not to take too much comfort from that. Many sub-post offices are hanging on only because it has been found that no one is willing to buy the business. The sword of Damocles is hanging over the sub-post office network, and the Government are responsible for that.

Photo of Bob Laxton Bob Laxton Labour, Derby North

Will the hon. Gentleman acknowledge that the issue is not only the closure of sub-post offices and rural post offices? In the constituency of Mr. McLoughlin, a small rural sub-post office has recently re-opened. That was at Ashford in the Water. In some areas, where there has been co-operation on the part of local authorities and Consignia, offices are opening. It is not a matter of closure everywhere.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I agree with the hon. Gentleman, who I understand is another Member who is sponsored by the Communication Workers Union.

In my constituency, I was delighted to assist in the re-opening of a sub-post office in Great Totham. However, for every sub-post office that is opening, I can point to at least a dozen that are closing. I have quoted net closures. I am sure that the hon. Gentleman will not try to pretend that the sub-post office network is not shrinking every year.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

I am grateful to Mr. Laxton for giving me the opportunity to intervene on my hon. Friend. I understand that the hon. Gentleman is a Parliamentary Private Secretary in the Department of Trade and Industry.

Although the opening of the Ashford in the Water post office is welcome, the closure of the post offices in Cubley, Longford, Rostan, Flagg, Lea Bridge, Kniveton, Fenny Bentley, Clifton and Taddington took place under this Government.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

I am most grateful to my hon. Friend. The real tragedy is that the experience that he has set out in Derbyshire will be repeated in every county. There is no question but that sub-post offices are closing in alarming numbers and are continuing to do so.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party

I have a sense of deja vu because many of the predictions that we on the Opposition Benches made two years ago are being seen to come true. Perhaps it is worth mentioning that sub-post offices are private businesses. They are businesses into which people have put their pension money and their lifetime savings. When they cannot sell them, they see their assets—often assets on which they were relying for retirement—diminishing.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

My hon. Friend is absolutely right. That is one of the great tragedies. People who have put all their savings into the asset of a sub-post office are finding that they are unable to sell the business. As a result, they will be left with far less to provide for themselves in retirement.

I have already quoted the former Secretary of State for Trade and Industry. When my hon. Friend Mrs. Browning was speaking for the Opposition on these matters, she warned precisely what would happen if the Government continued with their policy.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Does my hon. Friend agree that often post offices are unable to open to replace those that have closed because of the exorbitant terms that the Post Office forces upon new sub-postmasters? Is it not odd that although we can have a machine that is tied directly into a terminal in connection with the lottery, we still do not have similar machines that would enable people to obtain their normal social security benefits in post offices?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

My right hon. Friend makes an extremely good point. I hope that the Post Office will do everything it can to encourage the opening of new post offices. Indeed, I hope that that is already happening.

The sub-post office network is under threat because of the decision taken by the Government to scrap the proposed benefit card system and to move instead to compulsory electronic transfer of benefits into bank accounts from next year. That poses the greatest threat to the network's survival. It is well known that the biggest source of revenue for sub-post offices is the administration of benefit payments. That is worth some £400 million to the network, or about 35 per cent. of its income. The loss of that money will jeopardise the future of thousands of post offices.

In addition, there is likely to be another devastating effect on the businesses' retail side. Many pensioners and benefit recipients go to the post office to draw benefits in cash, and often spend some of the money on purchases in the same location. Stopping benefit payments in cash across the counter will cause sub-post offices to lose the income that the Benefits Agency pays them, and to risk losing a sizeable proportion of their sales income.

The Government have pledged repeatedly that anyone wishing to receive benefits in cash at the post office will still be able to do so. We are assured that post offices will be able to offer basic banking facilities to people with bank accounts and that those who do not have banking facilities will be able to set up a Post Office card account, yet just over a year away from the beginning of the switch to automated credit transfer, there is no sign of the universal bank being put in place.

Four months ago, it was reported that the Government were considering scrapping plans for the universal bank, as a result of rows between the Treasury and the Department of Trade and Industry over cost. Then it was announced that the Department of Trade and Industry was no longer to be responsible for the universal bank, and that the Secretary of State for Work and Pensions had taken it over. One report said that that was a

"fresh effort to make the troubled project work."

Two weeks ago, the Financial Times said that contingency plans were having to be drawn up in case the universal bank did not start on time, and that there was a growing conviction in Whitehall that the deadline would be missed. I hope, therefore, that the Secretary of State will take the opportunity this afternoon to say whether she is confident that the universal bank will be up and running by next year's deadline.

Photo of Bob Blizzard Bob Blizzard Labour, Waveney

I am grateful to the hon. Gentleman for giving way a second time. Will he set out his solution to the problem that he has outlined? I recall that the previous Conservative Government came up with a smart card solution that was not very smart.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

The scheme proposed by the previous Government would have preserved people's ability to receive cash across the counter. In addition, it would almost certainly have boosted sub-post offices' income and thus assured their future. However, this Government scrapped that scheme and replaced it with another that shows no sign of being operational in time. The problem for the hon. Gentleman is that we do not have time to wait until the election of the next Conservative Government, as this Government intend to scrap the cash payment of benefit in just over a year. They are failing to put in place any alternative scheme.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

Is not my hon. Friend being too kind to the Government? Most of the necessary efficiency savings and anti-fraud measures would have been achieved under the Horizon project, which has been scrapped at a cost of £571 million—a sum that has to be written off by the Post Office. In place of the Horizon proposals, post masters and their customers have been offered the vague hope of a universal bank that no one believes will be brought in on time. The result was last year's record number of closures, which have been a financial and social disaster.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

My right hon. Friend is entirely right. I accept his criticism; I shall do my best not to be so kind to the Government in future.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

Does not my hon. Friend agree that, even if the universal bank is introduced, the payment of benefits and tax credits through it will still depend on there being enough post offices in existence for people who wish or need to collect the cash to be able to do so?

Photo of John Whittingdale John Whittingdale Shadow Secretary of State (Trade and Industry)

Of course my hon. Friend is right. Although the universal bank may, if it ever happens, allow the Government to meet their undertaking that cash payments will still be available over the counter, it will not fill the gap that will be left once the sub-post offices lose the revenue that they currently enjoy from the administration of benefit payments.

I should like to press the Secretary of State a little further on some of the details of the scheme. Reports have suggested that the Government are working on an estimate of 3 million customers who may wish to take out post office card accounts. The Secretary of State will know that the potential number of customers is far greater than that. The Minister for E-Commerce and Competitiveness has said that there will be no cap on the number of accounts, so the right hon. Lady will understand that there is therefore some confusion about the number that the Government are working on.

I hope that the Secretary of State will make it clear whether all those who wish to take out a post office card account will be able to do so. In particular, can she guarantee that the choice available will be a genuine one, and that those who already have bank accounts but would prefer to use a post office card account will be able to do so? What agreement has been reached with the high street banks on their contribution to the cost of the universal bank? How much do the Government intend to invest in it?

If the Secretary of State is in a position to give those assurances, how does she explain the letter that has gone out from Paymaster, the body that pays the armed forces' pensions, which says that weekly payment of war pensions by order book will be withdrawn from April of this year? Instead, payment will be made electronically into bank or building society accounts or by voucher to home addresses. Can the Secretary of State explain how war pensioners will be able to continue to obtain benefits in cash at post offices, as the Prime Minister has promised, once the system changes in eight weeks' time? Or is she able to say that the universal bank will be up and running within that time?

As my hon. Friend Mr. Flight rightly pointed out—[Interruption.] I am delighted to see Lawrie Quinn seeking assistance and look forward to hearing the answer. As my hon. Friend said, even if the universal bank is put in place in time for the switch to ACT, it will not make up for the huge loss of revenue that sub-post offices will suffer as a result. To fill that gap, the Government have promised to create new business opportunities for sub-post offices to attract new customers. The performance and innovation unit report, which is a very good document, specifically identified a number of ways in which sub-post offices could modernise and attract new business. However, 18 months after the publication of the PIU report, almost nothing has been done.

In the urban network, there is widespread acceptance of the need for streamlining and for investment and modernisation of the branches that remain. However, no indication has been given of how many branches are likely to close. One recent report suggested that anything up to 8,000 sub-post offices could close. That has subsequently been denied, but no indication has been given of how many will remain, nor of what compensation will be available to those who decide to give up their business.

Another key way that we were told would bring new custom into sub-post offices was through the training of sub-postmasters as government general practitioners. Last year, a pilot project in Leicestershire and Rutland involved the installation of "Your Guide" terminals in more than 250 locations. I understand that the report which has been delivered to the Secretary of State said that the pilot project has been very successful. Indeed, I have no doubt that "Your Guide" will help people to access Government services and could, at the same time, provide a boost to sub-post offices. Yet since the pilot was set up, almost nothing more has been heard. Indeed, the only additional "Your Guide" terminal to be installed is the one that has just been made available in the post office in Portcullis House. Although that is an extremely welcome additional service for Members, surely the priority should be to install terminals where they are most needed—in the rural network; and to begin training sub-postmasters as quickly as possible. We are told that the Government have money available to do that so why has it not happened?

There seems little doubt that whatever new business can be won for sub-post offices will not be in time to replace the business that will be lost next year. The Government said that they will provide a subsidy to support the rural network and that money for that has been set aside. However, once again no details have been given as to how that subsidy will be determined or of the method whereby it will be paid. All we have heard are vague assurances from Ministers that everything will be all right on the day.

Time is running out. Thousands of businesses are being blighted as a result of uncertainty and gloom as to what their future holds. Unless action is taken to implement those measures, there is a real danger that many businesses will not survive.

The Post Office provides a public service, but like every public service in this country it is failing to deliver—literally, in the case of the Post Office. It is not good enough for the Government to wash their hands of the problem. They created the crisis that is affecting the Post Office and it is now up to them to say what action they propose to take to deal with it. 5.31 pm

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"condemns the running down of the Post Office under 18 years of Conservative government, which saw 3,500 post offices close, hundreds of thousands of days lost through industrial action, a lack of investment which allowed the Post Office to slip behind its competitors, a failure to give the Post Office the commercial freedom it needed to invest and compete;
congratulates the current Government for giving the Post Office commercial freedom to make its own decisions, enshrining the universal service obligation in legislation, establishing a new regulatory framework, bringing in new managers, modernising and supporting the post office network and encouraging partnership between employers and unions;
and furthermore notes that Consignia invested £296 million in the last financial year, is addressing its cost base, strengthening its management and striving to achieve a world class service in Britain.".

Last week, the Conservatives attacked the health service and our health service staff. This week, they are attacking the Post Office, but at least this time Mr. Whittingdale had the good grace to praise our postmen and women.

Let me start by paying my own tribute to the men and women who work for the Post Office. They do indeed work all hours—antisocial hours—in all weather, getting the mail through. The work is always hard. It is often inconvenient and uncomfortable, and sometimes—as we all recall from the murder of a postman in Belfast before Christmas—it is carried out at grave personal danger.

Behind those postmen and women are the sorting office staff. They make the deliveries possible by handling 81 million items every 24 hours. Then there are the sub-postmasters and sub-postmistresses who provide their communities with everything from benefit payments to travellers cheques; and from fishing licences to information on winter fuel payments. I agree with the hon. Gentleman on one point: they provide an invaluable service that strengthens the social fabric.

I agree wholeheartedly with the remarks of the acting chairman of Consignia, Allan Leighton. He said recently that postal workers are

"heroes of their local community . . . they . . . do a cracking job, a fantastic job, in very difficult circumstances".

All of us—at least on the Labour Benches—agree with that.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

The Secretary of State mentioned the acting chairman of the Post Office. She will have seen an article in The Sunday Times last week that noted that a report prepared by senior Consignia directors, with the help of the investment bank UBS Warburg, concluded that radical surgery was needed. The Sunday Times stated that a copy of the report was held by the DTI. Have the Secretary of State or any of her Ministers seen it? What does it say?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

Opposition Members need to stop relying on speculation in the Sunday press.

Our goals, as a Government, are clear. We want a universal service—[Hon. Members: "Answer the question."] I shall answer by spelling out our policy goals and what we are doing to achieve them—[Interruption.] Opposition Members do not like my answer, and they will like—[Interruption.]

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The Secretary of State was asked a question. She is trying to answer it and I should like to hear her answer.

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

Thank you, Mr. Deputy Speaker.

The Opposition did not like my answer—they will like it even less when I come on to their record in government.

Our goals as a Government are clear. We want a universal service that everyone can rely on. We want faster and more reliable mail deliveries. We want a strong network of modern post offices, an effective partnership between management and unions, and a better Post Office for people to work in.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

As all those issues were taken into account in the UBS Warburg report, will the Secretary of State now tell the House whether she has received and read it?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The right hon. Gentleman seems to refer, once again, to The Sunday Times report. I have not seen The Sunday Times report, and I am not interested in press speculation. Beyond that, I do not know to which report he refers.

Photo of James Gray James Gray Conservative, North Wiltshire

The Secretary of State says that she has not seen The Sunday Times report, but is she not aware of the parliamentary answer that she gave my hon. Friend Mr. Waterson today, in which she says:

"Any Consignia Strategic Plan would be commercially confidential and therefore under Exemption 13 of the Code of Practice on Access to Government Information could not be placed in the Libraries of the House."?

Is she not saying that that UBS report, not that in The Sunday Times, is commercially confidential and that she has seen it, but is not prepared to reveal it to the House?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I have not received the strategic plan for the company. I am waiting for it, and the position is precisely as I set out in my written answer today.

Photo of Michael Connarty Michael Connarty Labour, Falkirk East

On the more positive aspects of the comments on the Post Office and its employees, although none of us wants the management and unions to be involved in industrial action because they cannot resolve their differences, will my right hon. Friend give a firm indication that the Government recognise and respect the rights of any work force who cannot reach a settlement through the Advisory, Conciliation and Arbitration Service, or with the management, to take industrial action if they think it necessary, especially if they are not being paid a wage claim that should have been paid last October?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I shall come to industrial relations later, but let me make it clear, as I have done previously in the House, that I expect management and the unions to sit down, work with ACAS and reach a settlement.

I have set out clearly the goals of our policy. Because we are committed to those goals, we are delivering the reform and investment that Consignia desperately needs. The Conservative party refused to provide that investment and reform for 18 years. The real shadow hanging over this afternoon's debate is the Conservative party's failure to reform the Post Office.

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

I am slightly confused about the report. The Secretary of State has not told us whether she has read it. I know that she used to work for a company that was in the habit of shredding documents, but will she shed more information on the UBS Warburg report?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The hon. Gentleman should choose his words more carefully. As he ought to know, I did not work for Arthur Andersen, and he should take care not to make in the House remarks that would be libellous if made outside the House.

The legacy of Tory neglect, underinvestment and failure to reform the Post Office hangs over the Post Office's situation today. Frankly, this debate should have been called "The Conservative Government's mismanagement of the Post Office". Let me remind the House of the record because the hon. Member for Maldon and East Chelmsford seems to be suffering from false-memory syndrome.

In 18 years, the Conservative Government did not care at all about a secure future for the dedicated Post Office workers whom they are now so keen to praise. They did not care about improving delivery for consumers and businesses. They blew hot and cold on commercial freedom for the Post Office. They blew hot and cold on privatisation. Under the Conservative Government, the Post Office was treated as a cash cow—90 per cent. of its profits in its most profitable years went straight back to the Government. Between 1981 and 1997, the Conservative Government took a total of £1.7 billion from the Post Office. Let us understand why. In the 1980s and early 1990s, the Post Office was a successful publicly owned company. That is what the Conservative party could not stand.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My right hon. Friend must be well aware that £70 million is still being taken out of the Post Office every year. Will she assure the House that, as there are problems in the Post Office and further investment is needed, that £70 million will not be taken out until it is in a better position?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I remind my hon. Friend that we have cut the dividend that we would expect from the company from 90 per cent. to 40 per cent. I shall not make any decision on the dividend—[Hon. Members: "Oh!"] Wait for it. I shall not make any decision on the dividend that we should expect next year, or in future years, until I have seen the company's strategic plan.

Photo of John Pugh John Pugh Liberal Democrat, Southport

The right hon. Lady said two things. First, she said that, until 1997 or thereabouts, the Post Office was a successful publicly owned company. We would all agree with that. She also said that, in that period, radical reform took place. Will she explain what the problem was?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

If the hon. Gentleman would let me make some progress, I shall explain exactly what the problem was, and what happened under the Conservatives. They were not interested in a successful publicly owned company. It did not fit their view of the world, which was, "Private sector good, public sector bad." As we have heard this afternoon, all they did was cream off the profits and leave the Post Office to stagnate.

The hon. Member for Maldon and East Chelmsford had the nerve to tell us that, in that period, other Governments across the rest of Europe had seen the way in which postal services were changing and were taking radical steps to respond. He talked about privatisation and private involvement, but ownership was not the issue. Some postal services in Europe stayed in the public sector—in France and in the Scandinavian countries—while others, such as the Dutch and German postal services, obtained investment from the private sector. Different routes were pursued to achieve the same goal: reform and investment. All those postal services were given the chance to do better than our Post Office, which was denied the commercial freedom that it wanted within the public sector and the investment that it so desperately needed.

At the time when, as the hon. Gentleman had the nerve to say, change was happening in the rest of Europe, nothing whatever was happening in the United Kingdom under the Conservative Government. For example, in July 1992, the Conservative Government said that they would sell off Parcelforce and review the status of the rest of the business. Five years and £1.5 million of consultancy fees later, the Conservative party manifesto said in 1997 that, if re-elected, they would sell off Parcelforce and review the status of the rest of the business—five years to end up back where they started.

Our Post Office was falling behind. While other countries were changing, investing in and modernising their services, our Post Office's productivity was slipping. Between 1992 and 1996, Deutsche Post's productivity, for example, increased by 35 per cent. and overtook that of the British Post Office, which increased by only 13 per cent. in the same period.

The hon. Gentleman talked about industrial relations, which were disastrous under the Conservative Government. In 1996-97 alone—the last year of the Conservative Government—more than 800,000 days were lost to strike action. Let us consider the record under the Conservatives. Just like the many other public services that were run down under the Conservatives, our postal service went from being a leader in the 1980s to a laggard in the 1990s.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

On the record of the Conservative Government, will my right hon. Friend clear up the matter of the Horizon project? To listen to the Opposition, one would think that they were going to find a solution, although, in fact, the project was a consultant's gravy train. Let us nail their lie.

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I shall come back to Horizon, which was another botched procurement by the Conservatives. The position that we inherited in 1997 was as follows: more than a decade of underinvestment, 3,500 post offices closed, ministerial micro-management because of a refusal to give commercial freedom, hundreds of thousands of days lost to industrial action, and the Royal Mail left behind in an increasingly competitive world. So we acted. We immediately gave the Post Office greater freedom to borrow and invest. As I said, we cut the dividend from 90 per cent. under the Conservatives to 40 per cent. In the Postal Services Act 2000, we put the universal service obligation into law for the first time. We put in place a new regulator with a duty to safeguard universal service. We created a strong new voice for postal consumers and we gave the Post Office the commercial freedom for which management and unions had been asking for years.

Reform and investment go hand in hand. We have reformed the legal framework. We have also invested £450 million to computerise the post office network and earmarked another £270 million for it. We have been strengthening the management of the company, which many of my hon. Friends welcome. There are new non-executive directors for the board, including Allan Leighton, and new executive appointments, including a new finance director. We are continuing to strengthen the company's management through the open recruitment of a new chairman and a new chief executive for the post office network business.

Let us be clear about the enormous challenges ahead. The company is losing money. Its costs are continuing to rise, just as they did in the 1980s and 1990s, while the growth in mail on which it used to depend continues to slow, not least because of e-mail. Some 6,000 other firms now operate in the distribution business outside the regulated letter market. Greater competition will become a feature of the regulated part of the sector as the Postal Services Commission begins to exercise its powers and new European legislation comes into force.

Photo of David Drew David Drew Labour/Co-operative, Stroud

Will my right hon. Friend assure me that any licensed operator will pay the full relative cost to the regulator that Consignia has to pay? That is a key element in ensuring a level playing field when there is competition.

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The regulator is taking that into account in deciding on the new framework for competition.

There are enormous changes. Consignia is talking to its customers and work force. It has made no firm proposals to change the way in which the post is delivered. It is a great pity that the hon. Member for Maldon and East Chelmsford and other hon. Members keep quoting utterly ill-founded press reports. Any changes that the company wants to make will need the approval of the Postal Services Commission, the regulator, and Postwatch, the consumer body.

However, we know, and the hon. Gentleman said, that the company is not delivering consistently for its customers, who are our constituents. People in the company are working hard and in many parts of the country they are meeting—indeed, exceeding—their targets, but in far too many places customers cannot count on reliable mail delivery. That is because of long-standing industrial relations problems that should have been sorted out when the company was financially strong and the Conservative party should have given it the support and the chance to change.

If hon. Members look at the report produced last year by my noble Friend Lord Sawyer, commissioned, with our support, by the company and the union, they will find it easy to understand how fundamental industrial relations are to the company's future. There are many areas, such as my city of Leicester, where management and unions work effectively in partnership, and the customers get a good service as a result. However, in other mail centres, such as those in many parts of London and in Liverpool, the management culture is Victorian. Lord Sawyer's report mentions staff in the sorting offices having to put up their hands before they are allowed to go to the toilet. Such a management culture should not be tolerated in the 21st century. As Lord Sawyer put it, there are mail centres where

"There is a clear divide between managers and staff which is exacerbated by the lack of trust and respect for each other."

That cannot go on.

I have described the tough challenges that the company faces from the changing market and increasing competition. Management and staff cannot afford to make things worse for the customer and for themselves by failing to find a way to work together. It is clear that the best way to improve pay and conditions for postal workers is to create a real partnership and to make the company more efficient and more effective.

For years, management and the unions begged the Conservative Government for commercial freedom. Now, with a Labour Government, they have it. It is time for them to listen to each other and to find a way to provide more reliable services to their customers. They cannot take for granted the loyalty of those customers, and they certainly cannot expect taxpayers to keep bailing out a loss-making company.

Photo of George Osborne George Osborne Conservative, Tatton

Will the Secretary of State make it clear that if there is a postal strike, she and her Government will absolutely condemn it?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

Management and the unions are in talks and are working with ACAS. I have made it crystal clear that I hope very much that they will resolve the matter so that there will be no industrial action.

Photo of Michael Connarty Michael Connarty Labour, Falkirk East

On a related point, and in contrast to the inflammatory approach of the Opposition, may I ask my right hon. Friend to confirm that a study of industrial relations in the Post Office delivery section and other sections since last August—in fact, since Lord Sawyer did his good work—shows that there has been little industrial action and lost time, and every effort is being made to secure a settlement with ACAS?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

My hon. Friend is right: the immediate impact of the Sawyer report was indeed to improve matters. I very much hope, as indeed does my hon. Friend, that the improvement will continue.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

My right hon. Friend may not know of the proposal to close the post office in East Croydon or that, as the area has a massive public transport interchange and many people pass the post office when it is closed in the mornings and evenings, the unions say that they are willing to work flexibly outside the normal hours and, indeed, consider staff reductions. Does she agree that such a partnership approach, taken in the knowledge of commercial reality, is what we need if we are to have a vibrant Post Office?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I certainly do not know the details of the situation in the East Croydon office, but I entirely agree with my hon. Friend's general point.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee

Before the right hon. Lady leaves the subject of post, will she say a word about the report published last week by the National Audit Office? Will she comment on the tensions underlined by the report between the desire of us all to increase competition with the help of Postcomm, the equally strong desire to maintain the universal service obligation and the inevitable fact that companies wanting to compete with Consignia will want to cherry-pick from the profitable business sector, leaving Consignia to fulfil the universal service obligation, particularly in rural areas?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

It is precisely because of the importance that we place on the universal service obligation that we made its maintenance the No. 1 duty of the new postal services regulator. As the NAO report also says, rightly, competition will not only benefit customers but encourage Consignia itself to improve its services and offer its customers greater choice and reliability.

I turn now to the post office network. We inherited a post office network that, just like the mail business and the parcels business, had been weakened and undermined in the Conservative years. Again, unlike the Conservatives, we are doing something about it. This afternoon, the hon. Member for Maldon and East Chelmsford was, once again, talking down the post office network. Just last week, Colin Baker, the general secretary of the National Federation of Sub-Postmasters, dismissed as "rubbish" recent newspaper reports of widespread post office closures. Those are precisely the reports on which the hon. Gentleman relied. Colin Baker said:

"Talk of mass closures is scaremongering and wide of the mark."

He went on to say:

"It is wrong to criticise the industry for being out-of-date and in decline and then create panic when we are doing something about it."

He must have had an advance copy of the hon. Gentleman's speech.

Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office)

On the concerns of sub-postmasters, may I raise a point made to me by my local sub-postmaster in Fochabers, Mr. Paul McBain? He estimates that the introduction of the automated credit transfer scheme will cut his business by between 50 and 80 per cent. Will the Secretary of State take this opportunity to announce what she will do to reassure my constituent and many others that their post offices will not become unprofitable and go out of business?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

I was just about to explain exactly what we are doing to ensure that post offices such as that run by the hon. Gentleman's constituent do indeed have a thriving future.

Photo of James Gray James Gray Conservative, North Wiltshire

I am looking forward to hearing what the right hon. Lady is going to do. Does she remember that, two years ago, Mr. Byers made similar optimistic noises about sub-post offices? Does she realise that since then, 18 sub-post offices in my constituency have closed or are under threat? This week, we hear that the post office in the main town of Malmesbury will close. Does she think that the right hon. Gentleman's optimism was misplaced?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

We are taking action, which I am about to describe, to ensure that the post office network has a stronger future. That does not mean that we can prevent every closure, but we are doing a great deal to improve the situation, and I think that my right hon. Friend was right to be optimistic about the future of the network.

We started by commissioning the report by the Cabinet Office performance and innovation unit to which the hon. Member for Maldon and East Chelmsford referred. That excellent report was published in June 2000. We accepted all its recommendations and earmarked some £270 million to implement them. I shall explain exactly what is happening because clearly the hon. Gentleman is not aware of it. We started by placing a formal requirement on the company to maintain the rural network and prevent avoidable closures. That duty applies until 2006 in the first instance, and it is backed up, for the first time, by a fund to support community initiatives to sustain or reopen those vital post offices in rural communities.

We are developing universal banking services that will help to tackle financial exclusion while providing new income streams for the post office network. That is crucial in light of the decision to change benefit payments to the ACT system and to remove the old-fashioned giro system, which is not only extremely expensive to administer but costs taxpayers a substantial amount in fraud. I should have hoped that hon. Members from all Opposition parties would support strong action to deal with that problem.

The hon. Gentleman will recall that my right hon. Friend the Prime Minister gave a commitment that both before and after the change to ACT, benefit and pension recipients who want to continue to collect their payments in cash, in full, across a post office counter will be able to do so, and those services will be free to customers. We are making progress on universal banking services, and we have made it clear in our discussions with sub-postmasters that those services will strengthen the post office network not only by allowing benefit claimants to receive their money in cash over the counter if they want to, but by enabling other customers, who use other banking chains, to get more services at the post office.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

The Secretary of State spoke of strengthening the post office network. Will she explain to my constituents why Chelmarsh, Wall under Heywood and Monkhopton post offices have all closed in the past six months?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

If the hon. Gentleman looks at Postcomm's recent report on the subject, he will see that a large proportion of those post offices that closed last year were very small, generally operated part-time and were not attached to any wider retail outlet. More than half of them had fewer than 70 customers a week. There are genuine difficulties in attracting investment and new sub-postmasters to post offices when the existing sub-postmaster wants to retire, which is why we are determined to modernise and strengthen the post office network by investing in computerisation and ensuring that new services such as banking services, particularly universal banking services, are available.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

Before the Secretary of State moves on from universal banking services, can she say whether they will be available before automated credit transfer is implemented next year?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

That has always been the plan; we continue to make good progress on it.

The government general practitioner service was raised.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

Has my right hon. Friend considered how we should handle the problem of small rural post offices with penny numbers—fewer than 100 customers or 100 benefit recipients—where, often, the postmaster or postmistress is old? Is she suggesting that to keep them open we should make it compulsory for those people to remain in their offices and stay at their desks, especially when nobody else wants to buy an unattractive retail proposition? After all, there is a movement in the House for people to carry on working after 65 and, indeed, 70. Has my right hon. Friend thought about that, as it seems to be the only answer?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

My hon. Friend makes his point extremely effectively. The way to strengthen the rural post office network and ensure that people who depend on it for cash payments can continue to do so is to increase the retail and business opportunities available to the network. When that is not possible, we should ensure that subsidies are available to support community-backed rural post offices; that is precisely what we are doing.

As has been said, we have created a pilot scheme—the "Your Guide" scheme—in Leicestershire and Rutland. As a Leicester Member, I have had the opportunity to visit several post offices where that project is operating, and have seen how customers welcome the innovative service and benefit from it.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

Is the right hon. Lady saying that the subsidy scheme that is about to be introduced will secure income for smaller post offices to the same value as their present income?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The precise position of any particular sub-post office will depend on the details of its circumstances and the nature of its application. However, we have established a fund to support community-backed rural post offices to ensure that when they are not going to be commercially viable, they can none the less continue to serve their community. We are, perfectly sensibly, evaluating the "Your Guide" pilot to see whether it would make sense to roll it out nationwide. The test is not only whether it will benefit the public, but whether it will benefit post offices by bringing in more retail trade, which they badly need.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The Secretary of State is being highly disingenuous. The reason why sub-post offices are closing, or are not being taken over when the incumbent retires, is that they face the certainty that at least 40 per cent. of their income will disappear from next year. Against that, they have only the hope and the Secretary of State's word that some of that income may be replaced by the universal bank, which has not yet appeared. Can she give an assurance that the sum that sub-post offices will definitely lose as a result of the removal of the cash payment of benefits and pensions will at least be made up by the income stream that she anticipates and calculates will come from universal banking services?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The right hon. Gentleman is doing exactly what the hon. Member for Maldon and East Chelmsford did earlier—scaremongering about the future of the post office network; I refer him too to what Colin Baker of the National Federation of Sub-Postmasters said. The right hon. Gentleman ignores independent research that shows that many benefit claimants have already moved to ACT or will do so in future, and will continue to get their benefits from their post office when banking services are available there. When they do so, they will buy things as well. Along with the automation of post offices that we have put in place, universal banking services will make it possible for sub-postmasters to offer a wider range of services to their customers and thus increase their income.

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

One final time; I have been generous in accepting interventions.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

The Secretary of State has been exceedingly generous in giving way. She accused Opposition Members of scaremongering, but what does she think about the chief executive of Consignia, who appeared before the Select Committee on Trade and Industry and dropped the information that there were likely to be 30,000 redundancies?

Photo of Patricia Hewitt Patricia Hewitt Secretary of State, Department of Trade and Industry

The chief executive speaks for himself; he was simply pointing out the implications of a particular calculation and the need to deal with excessive rising costs in the Post Office. It is not I who accuses Opposition Members of scaremongering; I quoted the general secretary of the NFSP, who is fed up with press reports, constantly quoted by Opposition Members, about the inevitable mass closure of post offices. We are acting to stop closures; the Conservative Government, for 18 years, did not.

The hon. Member for Maldon and East Chelmsford spoke about the need for reform, greater choice, more competition and better management. However, the Government whom he supported did nothing whatsoever to enable the Post Office to thrive. Years of Tory inertia left the Post Office in a desperate state and in dire need of reform and investment. In opposition, we called for reform and investment; in power, we have delivered them. Under the Conservatives, we had cutbacks and cowardice. They ran the Post Office down with their policies, and are now doing so with their speeches. Under Labour, the Post Office has seen reform and investment—just what it needs to secure a better future for its customers, workers and sub-postmasters. I urge the House to support the amendment. 6.7 pm

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I should like to speak to the amendment tabled by my right hon. Friend Mr. Kennedy and others.

The subject of our debate is well chosen, and I agree with most of the language of the Conservative amendment. None the less, Mr. Whittingdale demonstrated amnesia about the past, especially when explaining how the Post Office has reached its current financial position. It has lost money for the past three financial years, including this year.

Photo of James Gray James Gray Conservative, North Wiltshire

On a point of order, Mr. Deputy Speaker. Dr. Cable said that he intended to speak to the amendment tabled by his right hon. Friend the leader of the Liberal Democrat party. I believe that you said that you had selected the amendment tabled by the Prime Minister. Am I right that the hon. Gentleman is out of order to speak in favour of the Liberal Democrat amendment?

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Gentleman has anticipated what I was about to say; my mind is perhaps working a little more slowly. Dr. Cable must speak to the Question that has been proposed from the Chair—[Interruption.] Order. We are not debating an amendment that has not been selected.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I will happily conform with your order, Mr. Deputy Speaker, and, in the process, use the excellent arguments in that amendment.

The Post Office has lost money for the past two or three financial years, but in the current period of economic expansion it should not be doing so. It is now beset by competition from fax and e-mail, and it has suffered from chronic underinvestment. Over the past 20 years, about £2.5 billion was taken out of it in dividends. It was effectively looted by the Treasury under the old dividend policy; that is part of the record.

The Secretary of State rightly said that the Government have changed the dividend policy to something more helpful, but for a variety of reasons that change has yet to manifest itself. Before this debate, I read Consignia's recent annual accounts, which are revealing and somewhat worrying. In 1999-2000, Consignia made a loss, mainly owing to extraordinary elements, of about £264 million. The Treasury none the less extracted a dividend of £151 million, plus £96 million in tax. Last financial year, when the new dividend regime had been implemented, Consignia made a very minor profit of about £66 million—it was targeted to make a profit of about three times as much—but still the Treasury took £93 million in dividend, plus £15 million in tax.

The Secretary of State for Transport, Local Government and the Regions has made a great issue of principle from the fact that Railtrack paid dividends while it was in a state of financial crisis and should have been investing, yet the Treasury is behaving exactly the same. I am struck by the irony in that.

The key question has already been put to the Secretary of State for Trade and Industry: will she agree to waive the dividend for the current year? I am sure that she will answer that in due course, but there is a related question. Much of the Post Office's revenue still comes from bond income on the financial securities that it held in the old days. I believe that there is an understanding that that will be transferred from the Post Office. Will the Secretary of State say when that transfer will occur, because it will significantly affect the way in which the Post Office handles its financial difficulties over the next couple of years?

The second issue concerning Consignia management is the company's freedom to make decisions. There is an underlying tension between the company's wish to run its own affairs on a commercial basis, which the Government have increasingly respected by standing back from the company, and the fact that the Government are the major shareholder and therefore have a responsibility for what is going on. I want to focus on one specific decision for which the Government have ambiguous responsibility: the appointment of the chairman.

I do not want to go over why the previous chairman went, but will the Secretary of State explain the process by which the new chairman is being appointed? My understanding is—I may be wrong—that the Department of Trade and Industry did absolutely nothing to initiate the process of choosing a new chairman until the very last day of the previous chairman's contract and the day he left the office. Given the four-month period for public appointments, that effectively guaranteed that Consignia would be left without any leadership for the best part of that period. That seems at first sight to be simple incompetence. Perhaps the Secretary of State will explain the matter.

The third issue raised by Mr. Whittingdale when moving the motion related to competition. I am sure that nobody would object in principle to competition in this context. However, Mr. Leigh, who has now left the Chamber, made a very helpful intervention to point out the comments of Sir John Bourn, the head of the National Audit Office, who explained that in the present context introducing more competition would simply make it unlikely that Consignia could honour its universal service obligations.

There is experience of post office networks in other European countries going further down the route of privatisation and competition than the British Post Office, and of what exactly that has meant. In Germany, as I understand it, only 50 per cent. of homes now have mail delivery. In Sweden, the stamp charge had to be doubled to cover the cost of the universal service obligation. The Secretary of State must explain what will happen if, as Sir John Bourn warns, Consignia can no longer continue to observe its universal service obligations. What will be the sequence of events? How will the Government ensure that such obligations are met?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Perhaps I might anticipate the hon. Gentlemen's intervention by referring to his helpful suggestion that one way of ensuring that such obligations were met would be for the commercial competitors allowed into the business under the deregulation arrangements to pay a charge, thus making their contribution. I hope that the Minister will take that suggestion seriously.

Photo of David Drew David Drew Labour/Co-operative, Stroud

I concur with the hon. Gentleman, but does he agree that such liberalisation in Europe is not a very good example because of the gross unfairness under such systems? All that seems to be happening as a result of the mad rush towards so-called competition and liberalisation is that we are losing the universal service—and at great cost.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman is right because in Europe, as in the UK, the sorting, distribution and collection system is a network monopoly—it is like the railways. Once cherry-picking of the system is allowed, profits are stripped out and the business is made progressively unviable—as indeed has happened in Europe and would happen here if the Conservative proposal were accepted in its present form.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

As the hon. Gentleman is on the subject of a so-called level playing field, what view does he take of the issue raised in the NAO report of Consignia alone being exempt from VAT?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

It is clear that in the long term all players in the industry should operate on the same basis, whether publicly or privately owned. The hon. Gentleman makes a valid point in that respect.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

For the record, Sir John Bourn, the Comptroller and Auditor General, did not say what the hon. Gentleman has just claimed. Sir John Bourn said that there is a tension between universal delivery provision and more and more competition. That is clearly true. The hon. Gentleman said that universality could not continue within increased competition.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I shall quote the relevant sentence and then there will be no need to debate what was said and not said. Sir John Bourn said:

"If it were to lose significant custom to its competitors, Consignia might find it hard to finance the provision of a universal service at current prices or service levels."

That is as unambiguous a warning as a public servant could give.

I share the alarm of many Members on both sides of the House over the prospect of the industry being further destroyed by industrial action. It is fair to say that it is proposing to take action under the ballot legislation introduced by the previous Government; none the less, if the proposed strike and others occur, enormous and perhaps permanent damage will be done.

Members of the Government have been floating the idea in the past few days, especially in relation to the railways, that we should be moving to a system of compulsory and binding arbitration for such utilities. Will the Minister give some idea of current Government thinking? Will they allow industrial action only within the framework set by the previous Government, or do they envisage some new initiatives to make such action progressively less likely?

The Post Office Counters network concerns many colleagues, especially those representing rural areas. The point has been clearly made that we are staring in the face the prospect of the network losing income of £430 million a year or thereabouts, and of a significant haemorrhage of Post Office branches. We are not scaremongering; the original parliamentary answer giving the figure of 40 per cent. was in response to a question tabled by Mr. Mitchell—a Labour Member. That is the basis of the arithmetic from which many of us have since worked. However, in the PIU report the Government proposed a variety of initiatives, and it is useful to go through them one by one and to ask exactly how far they have got.

On the post office card account, there is a rough target of 3 million and no cap. Will the Government confirm specifically that if numbers rise significantly above that, the scheme will be fully funded? The other option for people who wish to use the Post Office under the universal bank is the basic bank account, but there is a problem with that of which I am sure Ministers are becoming aware and alarmed about. Commercial banks are now charging £25 a day for failed direct debits. Many low-income people are faced with penal charges as a result. I hope, therefore, that the Minister will say how far he has got with negotiations with the banks to ensure that, when the basic bank account is introduced, the scale of penalties and charges will be appropriate to the customers whom they will have to serve. It has already been pointed out that those provisions are unlikely to work unless there is a banking network in place. If the branches close, people clearly will not be able to draw on their account in rural areas.

Perhaps I can take the Minister through the key segments of the counters network and ask about progress in each. About 18 months ago, the Government initiated a programme in rural areas that sounded attractive. It was a £2 million interim scheme to help owners of rural post offices to maintain their business. Answers to parliamentary questions from my hon. Friend Malcolm Bruce and others suggest that, 18 months later, only five claims have so far been processed under the scheme, amounting in total to £27,000, which is a ridiculously small sum.

Apparently, 300 inquiries were made, 18 applications were made, and only five have been processed. I hope that the Minister will explain why there is such a dismal take-up, why so many postmasters and postmistresses have found it so difficult to apply, and what will happen to the remainder of the applications in the pipeline. If such a small £2 million scheme does not work, what hope is there of a much more ambitious scheme working? Perhaps the Government can take us through the process by which that will gradually operate.

I understand that the Government commissioned a report on how to proceed with the modernisation and improvement of post offices in urban deprived areas; perhaps the Minister will give us some idea of the time scale involved.

The third segment, which is rapidly emerging as the most worrying part of the Post Office Counters network because no one in Government seems to support it, consists of the remaining urban areas, such as mine, which are fairly prosperous in national terms, but where the counters network is used by relatively low-income members of the population.

Post Office Counters seemed to envisage a substantial contraction of this sector, and consolidation. It has described the process whereby Post Office Counters will assess local need, prepare the ground for mergers, and compensate sub-postmasters and sub-postmistresses. There is a good deal of anxiety about how that will happen. Our experience of the management of Post Office Counters, even in areas such as mine, is extremely unhappy. Perhaps the Minister will explain when the process is to be finalised.

With reference to Post Office Counters' alternative income, I shall ask the Minister about the so-called GP service. A few weeks ago, in a debate in Westminster Hall introduced by my hon. Friend Mr. Kirkwood, we heard about the positive feedback to the pilot scheme in Leicestershire. What were the conclusions of that study? Are the Government committed to rolling out the scheme nationally, and will they fund it?

There are many unanswered questions relating to the counters network problem. We all know that there is a potential crisis. The Government have produced some answers, but let us have much more clarity and precision about the post office card account, the basic bank account and the roll-out of the GP system. We need to know what all those mean and how they will apply in practice.

In general, the Government are facing disaster with Consignia. It is a potential Railtrack. Unless we get clear answers about its future funding and organisation, the Government will face far more embarrassment than they have experienced this evening.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee 6:23, 29 January 2002

I am happy to follow the thoughtful speech of Dr. Cable. I have a good deal of sympathy with his remarks, although I take issue with the Railtrack scenario that he sketched out in his final comments. That was ill-considered, in an otherwise thoughtful and intelligent analysis of many of the problems.

I support the Government amendment. We are dealing with a relatively new organisation in the public sector—an organisation that was promoted by my Conservative, Labour and Scottish Nationalist party colleagues in the last Parliament, and by Conservative and Labour in the Parliament before that. From 1994 or 1995, the Select Committee on Trade and Industry was unanimous in the view that the Post Office ought to be reconstructed on a financial basis as a plc within the public sector, with a degree of independence.

Since April last year, such a body has existed. In anticipation of the European postal directives, the postal monopoly is in the process of being ended. It might have been more helpful if we had known what the thinking was about the ending of the monopoly, rather than the suppositions on which the National Audit Office report was based. We are rather impatient about the length of time that it has taken the regulator to publish his recommendations. It is quite reasonable for Consignia to delay its financial plans until it finds out the detail of the regulatory framework in which it is to operate. We know the difficulties, but we do not know precisely the next phase of the regulator's thinking.

The increasingly difficult state of Consignia's finances must be set in context and given proper weight, as well as sympathy. As my right hon. Friend the Secretary of State repeatedly stated in her speech, Consignia and its predecessor, the Post Office, have been starved of the means to carry out the investment that a modern postal service requires. If the investment had been made available, the poor industrial relations that have scarred the postal service for so long would have been dealt with. I am not sure, however, that the £200 million lost in a full year by the parcels operation could be saved. I shall return to that later.

Apart from lack of investment, Consignia attributes its financial difficulties to poor industrial relations, the parcels operation, higher transport costs, the need to invest in technology, the pay increases and redundancies that it has had to finance in the past year, and pay increases and redundancies that have not yet borne fruit in the form of real improvements, apart from a slight increase in the delivery performance, which I shall deal with in a moment. Alongside those problems, there is the prospect of the end of the monopoly. In short, the business needs money to invest to achieve greater efficiency, to pay off some of its staff, to meet performance standards and to fulfil its universal service obligations.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The hon. Gentleman speaks of the need for more investment in and by Consignia. As it is making losses, does the hon. Gentleman have a view about whether the Government should announce a decision not to claim a dividend in the current financial year?

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

The Government should give due weight to that, but they should wait until Consignia's own financial plan becomes available. We should have had that earlier. The regulator has been laggardly in producing the final version of the regulatory framework. I would not discount the Government's having to do as the hon. Gentleman suggests. I would favour that for the next 12 months, but an adult business working as a plc should not be getting subsidies from the state in the form of changing the financial premise on which it was, so to speak, set afloat by the Government. I am prepared for that to be done for a year, but not in perpetuity. Before we make a decision, it would be better to await the other two bricks that must go into the wall before we can address the situation properly.

There has been talk today of the ending of the two-delivery system. It is surprising that there was much talk about that by Opposition Members, but little in the way of figures. I am surprised that the hon. Member for Twickenham did not speak about the matter. The second delivery accounts for 30 per cent. of the delivery wage bill but only 6 per cent. of the mail. It cannot make economic sense in any business to have a drag on costs of that character. If we are to have two separate deliveries a day, I would prefer the first to be for business, and to be carried out by 9.30 or 10 o'clock in the morning at the latest. I would favour a second delivery later in the day, perhaps in the afternoon, for most households.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I will finish this point, then I will be happy to give way to the hon. Gentleman.

I do not understand people who spend their day waiting behind their letter box for their letters to arrive. In our household, and probably those of all hon. Members, most people have gone out to work by 8 o'clock in the morning and rarely see their post deliverer. Their letters are waiting for them when they return in the evening. [Interruption.] Some people may have a more leisurely lifestyle than the rest of us who have to work for a living; some of us are not necessarily as rich as some people on the other side of the divide.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

No, I am sorry. I am not going to respond to comments from a sedentary position. I shall take an intervention from Mr. McLoughlin in a moment.

As a private citizen, I do not consider the idea that a morning delivery is essential to be too important. I would like a guarantee that my mail will be waiting behind the door for me when I come home in the evening, as it usually is at the moment. If I thought that some of the financial difficulties that Royal Mail and Consignia have to confront could be assisted by the formalisation of such a plan, I would be happy for that to happen.

I have heard what has been said by the Federation of Small Businesses. It is up to small businesses to ensure that they are clearly identified, and it is not beyond the wit and intelligence of the small business community or of Royal Mail to make arrangements to achieve that, even if it involves adding another letter to certain postcodes at an appropriate time.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

The hon. Gentleman dismisses too lightly the serious concerns of small businesses, particularly those in rural areas. There has been an explosion of such businesses and, under the hon. Gentleman's proposal, it would be very disadvantageous to them if there were not some way of ensuring that they got their post earlier in the morning.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I take the hon. Gentleman's point. The rural hinterland presents difficulties, but—let us face it—it does not necessarily get its deliveries very early in the morning at present. It might in the hon. Gentleman's constituency, I suppose, but I have constituents who are for ever telling me that they have difficulties in that regard. I must also make the point that the increase in the number of small businesses in rural and semi-rural areas is a direct consequence of the growth of the lifestyle business, in which people may sometimes not be working under quite the same pressures.

The hon. Gentleman 's point must be considered, but I do not think that it is as big a problem as some people would have us believe, especially when we consider that an increasing proportion of the business being conducted by the kind of enterprises that we are discussing is carried out by e-mail and on the internet.

Photo of Andrew Stunell Andrew Stunell Shadow Chief Whip (Commons), Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

Does the hon. Gentleman also recognise that there is an increasing amount of home working being done by people in clerical, administrative and managerial jobs? In some cases, a steady supply of mail is important for those people, too.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I think we are getting bogged down here. It is not beyond the wit and intelligence even of Royal Mail—whose managers may not necessarily be the sharpest in the box—to establish a system to accommodate that type of mail business. Much of the work done from home is facilitated by the internet, however, and it is more important in that context to get broadband—which covers a different part of the communications network—in place. I take the hon. Gentleman's point, but we should not exclude the consideration of a change in the postal delivery system. We, as residents and workers, have changed our lifestyles and patterns in ways to which the Post Office has not fully adapted.

My proposal would make better use of the labour that the Post Office employs. The question of labour at the Post Office can be described as an asset and a liability at the same time: the labour is an asset but its cost is a liability. We must use the labour force to optimum effect. Whatever the figure would be for savings through staff reduction, a sizeable proportion of it would be achieved by natural wastage. Any organisation that has a staff turnover of about 200 per cent. in certain parts of the country will certainly be able to offload a number of people at relatively low cost, because, surprisingly, there is not only a high turnover but a relatively short period of service. We are not, in the main, talking about sizeable sums in terms of redundancy costs.

It is fair to say that that high turnover is a consequence of the inadequate system of industrial relations that exists in the Post Office. It was no secret, in the period before the 1997 election, that the Select Committee on Trade and Industry would have the workers in in the morning and the managers in the afternoon. We asked them the same questions, and we were equally rude to all of them, on the grounds that we felt that there was virtually a complete inability to talk sensibly about industrial relations. One of the actors in those scenes is now a member of the Government—indeed, he is a Minister at the Department of Trade and Industry. In his day, he would say to me that he was somewhat embarrassed by the questions that we were asking. Nevertheless, some of those questions remain unanswered.

It is no accident that industrial relations began to improve following last summer's publication of Tom Sawyer's report, in which he identified a number of issues and problems from which nobody could hide. The unions and the management—to a large extent—were embarrassed into addressing those challenges. The difficulty was that the fragility of the peace, the truce, the improvement—call it what you will—was evidenced by the reaction to the bombshell that was dropped when the figure of 30,000 staff slipped from the chief executive's mouth.

I am never sure whether to believe the cock-up theory of history or the conspiracy theory. I happen to like the chief executive, and I would attribute that occurrence more to cock-up than to conspiracy. Either way, it had a devastating effect on union opinion in Royal Mail, and set matters back considerably. Assurances that have been given since then are not of the kind that enthuse the postal workers' union in terms of the level of wages that its members are getting.

Hon. Members have been talking today about the number of people working in the postal services, and about industrial relations, but they have not talked about the issue behind the industrial dispute. I understand that, over two years, there will be an increase in the basic level of wages for postal workers outside London that will take them up to the princely sum of £300 for a 36 or 37-hour week. In the year 2004, £15,000 will not be much of a carrot to dangle in front of workers in an industry with a high staff turnover, when jobs elsewhere seem equally attractive.

The bombshell was dropped at the busiest time of the year—just before Christmas, when we want industrial relations to be at their best—so it is no wonder the union is to ballot under the law. That ballot will give the union's general secretary and executive the right to call a strike at a date of their choosing, although it does not necessarily follow that there will be a strike. Indeed, Labour Members highlighted the fact that the industrial relations legislation was deficient because it put an additional weapon at the elbow of the general secretary and the executive as they went into negotiations. They were able to say, "If you don't give us what we want, our men and women will walk out under the law." We are, I hope, still a long way from a serious industrial dispute, but if one took place it would set us back some way.

The conditions that have created the bad industrial relations are due as much as anything to management timidity, which is apparent across other Royal Mail activities. Let us face it: the main activity is delivering mail, so surely we could have a pricing system with more flexibility than first-class mail at 27p and second-class at 19p. People who want a speedy special delivery must pay £3.50, but developing a pricing system to deliver letters by guarantee in an emergency for less than £3.50 is not rocket science.

Those of us who drive and walk about London know to their cost that couriers on bicycles and motor bikes deliver parcels and packages of a relatively small weight across the city. We may curse the drivers of Post Office vans from time to time, but we can completely exonerate staff from any responsibility for courier services of that sort. The postal services do not run them, not because the unions have refused to take part—in fact, they have repeatedly requested that the postal services change tactics radically and consider running urban courier services—but because the postal services do not want to get involved. They have no interest. I find that timidity frustrating in what ought to be a vibrant private sector-minded and now liberated operation.

There is a long way to go before the business attitudes of the postal services change. In large measure, the culture is that of the civil service rather than that of a competitive business.

Photo of David Drew David Drew Labour/Co-operative, Stroud

When I visit my sorting offices, I never cease to be amazed by how little discretion the management have. They have to refer virtually every decision up the line, which causes frustration in the work force, who feel that they are never listened to.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I accept that. A number of able people at the lower levels cannot break through because they want to live locally and the structures are such that, in many respects, they inhibit best use of the talented management in the postal services.

All that the new broom has produced so far is a new cheaper headquarters outside London, perhaps fewer management layers and the contracting out of services such as fleet maintenance. Those required neither courage nor imagination, nor, for that matter, much innovative management thinking, but we must be careful not to go down the subcontracting road at will. If one aspect is responsible for creating the problems in Railtrack, the Atomic Energy Authority and British Nuclear Fuels, it is the extent to which subcontracting, either as a precursor or an alternative to privatisation, led to lack of management control.

My hon. Friend Mr. Drew alluded to control that is too centralised, but often nobody knows what is going on. That problem was created in Railtrack. My worry is not that there could be a financial disaster, but that management may not be able to appraise or understand what is going on in the business for which they are responsible.

I have criticised the management and the mail service, but there have been improvements: 91 per cent. of first-class mail is delivered the next day, which is up on 86.5 per cent. in the first quarter of last year—and second-class deliveries have also improved—while the figures for first-class mail in France, Ireland and Spain are only 81, 87 and 70 per cent. I accept that the figures for Germany and the Netherlands are 95 and 92 per cent., but, as the hon. Member for Twickenham said, mail is not delivered to every household or six days a week in those countries.

On costs, a first-class delivery weighing under 60 g is 27p in Britain and just under 30p in France, while a 60 g delivery is 45p. In the Federal Republic of Germany, the cost is 37p first class and 74p up to 60 g. In Italy, a first-class letter costs 50p while in the Netherlands a delivery weighing over 20 g costs about 54p. Let us not talk down or, as some would like, condemn UK postal services, which are doing a first-class job of work in a number of respects.

I am not arguing that postal charges should necessarily go up. In the first instance, we may have to consider removing the dividend obligation in the next financial year, as Mr. Waterson suggested from the Opposition Front Bench. Let us first consider the new pricing system and what the regulatory system offers, but let us also remember that, as the National Audit Office report suggests, if there is liberalisation there will be cherry picking, not in the domestic delivery market but in commercial sectors.

Significantly, when I asked the shadow spokesman, Mr. Whittingdale, about the split between commercial and domestic deliveries, he was unable to give me an answer. I do not have the answer, but I do not suggest that liberalisation will at present be anything other than very difficult for Royal Mail, given the constraints. I wish Royal Mail well, but we need a vast improvement in the quality of management, and continuing but non- interventionist Government sympathy. The Government are no longer allowed to intervene under the law, so they must look benignly on the postal services. We must also dramatically improve industrial relations so that strike threats are not used to get poorly paid workers a decent wage.

If all that happens, establishing the Post Office as a plc with the Government as the single shareholder will succeed. This is a novel, bold and innovative attempt to sustain the public service and the universal service obligation, so let us hope that it does indeed succeed. I look forward to the Minister's reply.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire 6:49, 29 January 2002

One of the advantages of having been here for a number of years is that I have observed the same scenery coming round more than once, and the same problems appearing again and again.

I can tell Mr. O'Neill that I plead guilty: I was the Back Bencher who tabled the amendment whose effect was to release on to the streets of London all the motor cycle couriers who frighten the heck out of people. At the time I could not work out why Ministers allowed me to do so, but when I saw the motor cyclists whipping through traffic I realised that I was the fall guy. Anyone who complained would be told, "It wasn't me, guv; it was that chap Richard Page."

I think I can fairly claim a long interest in this sector, stretching back not only to the amendment I just mentioned but to the early 1990s when the then Government were moved to introduce some commercialisation. We now observe the collective amnesia of the Labour party—led by that of the Secretary of State, who seems to have forgotten that the Labour Government opposed any move towards commercialisation. It must be said that they were joined by 12 to 15 of our own misguided Back Benchers.

That attitude was aided and abetted by an excellent campaign on the part of the union. Let me add, for the benefit of those collecting trivia, that the union was involved in a television documentary. I suggest that those who want to know how to run a campaign in the future watch that documentary, from which we can all learn many lessons.

The point is that because our majority was not as great as that of this Government, we could not proceed. The Government should know that they prevented us from going ahead with commercialisation some 10 years ago.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

By "commercialisation", does the hon. Gentleman mean privatisation? That is what the debate was about in the early 1990s.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I am afraid the Labour party erected a rigid wall between it and any change in the ownership or operation of the Post Office. No Labour Member told us, "We will resist this, but we will go along with that, that or that." One reason for our present troubles is the refusal of the then Opposition to recognise that competition was stirring in other European countries.

Conservative Members saw then that Royal Mail's monopoly could not be guaranteed for ever. We saw that it would run into trouble, and we greatly regretted that we could not go further. That is why some of us began to express concern to this Government as soon as they were elected, only to be given what I can only describe as a series of brush-off answers. In fact, my most recent contribution was made in DTI questions just before Christmas, when I listed a host of shortcomings and worries relating to Consignia. I was given what I considered a rather waspish reply by the Secretary of State, who said that she would take no lectures from me. A few days later, she demonstrated her fingertip control of Consignia by presiding over the announcement of 30,000 job losses.

The hon. Member for Ochil is a nice chap—I like him very much—but, as an old hand, he must know that no chief executive of any company suddenly lets slip from the side of his mouth that there could be 30,000 redundancies. In a state-owned industry, a chief executive is not allowed to breathe unless given permission by the Secretary of State. Whatever this Secretary of State may say, that is the truth: I know, having been there and done that. Her reply to me can only be described as misleading.

On top of all that came rumours of the possible closure of 1,000 or more sub-post offices. The Secretary of State's response that any such rumours were completely false was, in each case, less than convincing. I wish she had been more forthcoming and had said, "I know nothing of this, I have received no such reports, and I would wish to resist such moves, because they would be devastating to, in particular, our countryside."

In view of the pressures on her, I forgive the Secretary of State for her waspish reply. I am like that—I have a kind and generous nature. We can imagine the scene in the DTI just before Christmas, when the Consignia executives march in and say, "I am sorry, Secretary of State, but we have bad news. Consignia has made a thumping trading loss." I can imagine the thoughts flashing through the Secretary of State's mind: "Oh no, gosh. We've had the problems of the Dome, and the problems of Wembley stadium and the athletics track. We have not yet sorted out the tube, the national health service is in a mess, Railtrack is costing us a fortune, and now we have this. What to do?" The executives will have turned round and said, "It's quite simple. You must put up the price of a stamp, or you must face redundancies."

We all know that the regulator must have a hand in any increase in the price of a stamp, and that the Chancellor must be consulted. I think that the Chancellor's involvement with prudence would forbid such a move, so what must happen? Sadly, redundancies.

A number of Members have pointed out that Consignia has to pay the Government a dividend. It happens under extreme pressure, and there are good arguments against it. Indeed, it may be a further reason why no moves can be made in any direction which do not address fundamental structures—and fundamental efficiencies—in the Post Office.

Moreover, during past months a realisation has built up that the universal bank plan does not look healthy and cannot replace the income of sub-post offices following the introduction of ACT. I have no doubt that Post Office Counters executives have mentioned that to the Secretary of State and have said, "Do not look to us for a living, from one side or the other, because we are losing money: we have no money at all." As I have said, given all the problems that are falling on the poor Secretary of State, I forgive her for her waspish reply. I knew that the problems were building up and I knew they were serious, but I did not realise that they were as bad as they are, according to the way they have been presented to us.

The person I feel most sorry for, however, is the Under-Secretary of State, Nigel Griffiths. He has just been dropped in it. I envisage his life stretching ahead interminably, with Adjournment debate after Adjournment debate in which Members ask why this or that sub-post office is closing. He should look on the bright side, however: he can make the same speech to each of them, as long as he remembers to change the name of the sub-post office. That will cut down his work load.

Where does Consignia go from here? Let us consider Post Office Counters. The Secretary of State tried to give us some reassurance, but if we look at answers given by Ministers over the past few years we can only call them—let us be kind—misleading. Let me pull from the hat an answer given to Mr. Rendel on 14 May 1998. The hon. Gentleman had asked:

"Does the Minister share my concern that increasing commercialisation could lead to the Post Office's beginning to centralise some of its services so that it can concentrate more on the commercial aspects that may bring in increasing profits? Could not that lead to a further run-down in rural post offices?"

Mr. McCartney, as he now is, replied:

"The hon. Gentleman's fears are unfounded. The principle of the review is to maintain and develop the network of 19,200 post offices."—[Hansard, 14 May 1998; Vol. 312, c. 501.]

And so it goes on.

I made a small contribution a moment later, expressing concerns about the issue of setting the Post Office free. They were dismissed by the Minister with a comment about my own shortcomings—which, of course, was completely and utterly justified. However, that again gave the impression that the Labour Government were rebuilding the Post Office from the wreck that the previous Government had left. If we compare the current organisation with the Post Office of some five or six years ago, I know which is the healthier—and it is not the former.

The scene now shifts to Standing Committee B on the Postal Services Bill; I had the privilege of leading for the Opposition. The then Minister with responsibility for the Post Office, Alan Johnson, responded to anxiety about the number of sub-post office closures by saying he could reassure the Committee that the decline had ceased and the rate was again normal. He said:

"The decrease in figures was a blip. The headline in one of the newspapers that cited the figure of 500 was exaggerated . . . The Post Office is now convinced that the trend . . . is . . . slower".—[Official Report, Standing Committee B, 2 March 2000; c. 88.]

He was right. That year, 382 sub-post offices closed. However, in the subsequent year, the figure broke the 500 barrier with 547 closures.

It is worrying that, despite all assurances, 441 closures occurred in rural areas. My hon. Friends have reeled off dozens of sub-post offices that are closing in their constituencies. The closure of a rural post office means the death of a rural community. We are therefore exceedingly worried. Although it is not appreciated, there is a subsidy within Post Office Counters, whereby a great deal of money passes from urban to rural post offices to keep them going. They have different rates of funding transactions, but all that could be put at risk.

I shall leave aside the fact that some aspects of proposed Government funding may require EU approval. To some extent, I shall follow in the footsteps of Dr. Cable. I agreed with much of his speech, in which he gave a thoughtful summary of the problems that many Post Office activities face.

The Government have earmarked some funds for rural post offices. The Department of Trade and Industry has a start-up capital subsidy scheme of some £2 million, limited to £20,000 per application for rural sub-post offices. Will that be enough to influence someone to take the risk of putting a lot of money into a scheme? If I were in that position, I should have grave doubts.

The Government are working on the details of the universal bank service—combining the basic bank account and the new post office card accounts—that is due to begin in April next year. That is barely 15 months away. When will the Government share their plans for the migrating 16 million people who get their benefits from sub-post offices? The Government make statements about the cost to individuals of using the new accounts. What research have they undertaken into the numbers that might migrate from existing banking systems to the new one? If the costs of running the new account are cheaper and people can operate at a much lower cost, will not that put a strain on the universal bank service that will make it even more unviable?

The Government are working on the assumption of 3 million post office card accounts, but the figure is uncontrolled. Some hon. Members have already asked what will happen if the limit is exceeded. What will happen if more than 3 million people want POCAs? Who will pay? I shall not travel further along that path, but the sooner the Government make a definitive statement about their vision for sub-post offices, the better. It would reassure and give confidence to those who run sub-post offices. The Government appear to have forgotten that we are considering private individuals, who have put their savings into their sub-post office. Every closure represents a loss to the individuals involved.

I want briefly to consider the Royal Mail. In 1992, we had probably one of the most efficient services in the world. Even now, despite the effect of competition from e-mails, other distributors and mobile phones, our Royal Mail continues to measure up well. The hon. Member for Ochil did a good job in outlining the advantages. As he said, our first-class stamp is cheaper than the equivalent in the countries of our major European competitors. Our speed of delivery is better and door to door. However, Royal Mail has not moved on at the same speed as our competitors. I do not understand how it can compete if it is shackled by state ownership, which is not the quickest way to achieve success.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

Does the hon. Gentleman agree that a change has occurred since he previously had some ministerial interest in the matter? There has been a major breakthrough in sorting technology, but the Royal Mail has not been able to take full advantage of it, partly because of industrial relations but mainly through lack of money. The Conservative Government had to filch money in excessive dividends from the Post Office over the years to staunch the flow of the public finances. That, and failure to invest in the kit, meant that the achievements of the Royal Mail are even greater because it does not have the advantage of the same sorting equipment that its European counterparts enjoy.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

We shall consider the relative generosity of respective Chancellors when the current Chancellor takes action on the dividend. He will have a strong point if he waives it. However, when the Conservative Government were in control, the Royal Mail made a profit and did not lose money. The worries are caused by its losing money. Investment in letter-reading equipment has improved immensely in the past few years. The modern readers have greater speed; hand sorting was almost as quick as the work of those of 10 or 15 years ago.

The hon. Member for Ochil should not have tempted me to follow that route, but I should like to see a postcode box on every envelope. Postcodes can thus be read automatically by machines. That happens in France and other countries; why not here? Perhaps that will provide the substance for a ten-minute Bill entitled the "Envelope Marking Bill". Whoever promotes it will get the Royal Mail's seal of approval.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

As my hon. Friend says, it will lead to more regulation, but in the cause of speed and efficiency.

As we know, competition is emerging and the new regulator has issued specific licences to competitors such as TNT. Doing nothing is therefore not an option. However, we must ensure that we give Consignia the opportunity to operate on a level playing field. That is a terrible phrase, but we all know what it means. We must ensure that Consignia has the same access to European markets as its European counterparts have here so that our companies are not frozen out of competing on the continent. I appreciate that TNT, through its relationship with the Dutch post office, already has an opportunity in this country. I have to say to the Minister that Consignia faces a bit of a hybrid situation and there are worries about whether it will be resolved before complete liberalisation. I wonder whether the Government have caused more problems than they envisaged by taking a dual approach to the introduction of competition between Europe and ourselves.

There are a lot of worried people out there in the Post Office services, whether they work in Royal Mail or serve in local sub-post offices. It behoves the Government to come forward and make some clear statements on their policies. They should tell us what they are going to do, what levels of support they will provide and how it will all work. At the moment, there is a dispirited and very worried group of workers out there—and they deserve better.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 7:10, 29 January 2002

This debate continues to roll on and it needs resolving. There are a lot of questions that we all need to ask about the future of the Post Office. First, I congratulate postal workers on delivering a quality service. Chorley does very well and benefits from an excellent service. The mail arrives at people's homes very early in the morning. In rain or snow, whatever the weather, the mail is always delivered. We should remember that the issue is the quality of service that is given to us. We should all congratulate those who are responsible, as it is easy to forget that, day after day, they are loyal people who provide a quality service.

I want now to deal with some of the issues. As a member of the Select Committee on Trade and Industry, I was present when it heard about the possible loss of 30,000 jobs. That information came as a shock to members of the Committee and to everyone else, and the newspapers have been reminding us of it ever since. We should get people around the table. We must ensure that high-level discussions are held about the future of the Post Office, because whatever we do, we must remember that it is a universal, quality service. It does not matter whether people live in urban or rural areas or whether they use the Post Office on business or privately—the service must always be provided. We must be aware of that.

It is easy for competition to result in cherry-picking. We cannot allow the cherry-picking of services at the expense of remote areas and services that nobody wants to deliver. It is the quality of the universal service that we must protect. The service that is provided in remote rural areas is subsidised by that in urban areas. That cross-subsidy is easily forgotten but should not be. A remote rural service cannot be provided without finding the money, which the urban service provides. To keep the service in remote areas, the service as a whole must be combined and work together. It is important that we get that right.

Everyone has rightly mentioned rural post offices, but I want to mention urban post offices as well. We have two sorts of post office whose future remains uncertain, and it is that uncertainty that puts pressure on the postmasters, rural and urban, who operate the service. They wonder what the future holds for them. We must help and support them. If we relaxed the £70 million dividend that is taken by the Treasury, we could begin to ease those problems. We could help with computerisation in rural post offices. I know that my right hon. Friend the Secretary of State today announced financial support for these post offices, but we need an earlier commitment on that finance. The sooner that that commitment is made, the better it will be for the rural and urban post offices over which a cloud hangs. There are difficulties when such post offices are put on the market. Who wants to take over a post office in such circumstances? We need to provide help, support and clarity to ensure that post offices, whether urban or rural, know where the future lies. I want to see that commitment. I am sure that it can be made and hope that the Minister will make it in his reply and say where the Government support will come from.

We talk about the uniform tariff, but if we want to be realistic and ensure that the universal postal service continues, we need to allow the price of postage to rise. We cannot expect a service to continue throughout the country and between rural and urban areas at the price that we currently pay. I do not want the price to rise out of all proportion, but I believe that it is necessary to consider allowing an increase in the price of stamps. If people want the service, they will, unfortunately, have to pay a little more for it, especially on first-class, next-day delivery.

It is easy to forget just what happens when we open things up to liberalisation but we can see what has happened in other countries. It is the cherry-picking that worries me. Hon. Members have rightly mentioned Sweden. Since 1993, there has been a 52 per cent. reduction in the number of post offices in Sweden, where the price of a letter has risen by 60 per cent. in real terms. The Swedish post office organisation is in financial crisis and lost 1 million kronor in the first quarter of 2001, so it is not all good news. New Zealand liberalised in 1998. People in smaller towns now wait an extra one or two full days to receive their mail. Spain went for full liberalisation in 1960, but less than 70 per cent. of letters were delivered on target there in 2000. The mail service in Spain is beginning to collapse and is an absolute disaster.

That is not the liberalisation that many people talk about. We can pick out particular countries as good examples, but I can pick bad examples as well. The issue is about balance and asking what we really want. Do we want to look after the few or everyone? I believe that we need to look after everyone in the country. Without doubt, it is people who live in remote areas who should especially be considered. I look across at Opposition Members who represent rural areas. Do they believe that their constituents expect, and should expect, a quality service? I believe that my constituents should have a good-quality service with next-day deliveries, but we will not achieve that by allowing cherry-picking of the services that are provided.

A quality service can be provided only if it is a universal service with the cross-subsidies that I mentioned. That is the only way to proceed. We should be proud of the postal service in this country. We should all recognise that the problems of the Post Office are those of the Treasury. We all know about the previous Conservative Government, 18 years of draining finances from post offices and the lack of investment. The problem is that we cannot keep looking back. We should begin to look forward by saying, "Stop draining that money, put the investment in, make sure that the Post Office can be re-equipped, fully support the people who work there, get the management managing correctly and get away from those old practices that still exist."

We must make this a postal service that we can be proud of and support the people who turn out in all weathers to ensure that our mail drops through the letter box day after day. It is those people who ensure that our constituents receive the mail on time and we must continue to support them. The danger is that we will lose that service. Liberalisation means competition, but competition does not mean that things get better. It means that something drops off the edge—in this case, it is the people who live in remote, rural areas. They will not get the service that we get, but they should be able to expect the quality of service that is achieved in London. I am here five days a week and it is very nice that the mailbag comes through without a problem. At home in Chorley, we do very well and the mail is delivered, but I know that remote parts of my constituency will not receive the same quality of service.

I plead with the Minister to take on board those views and to ensure that we get the message across to the chief executive and the new acting chairman. We must get it across to the management that they must remember the people who deliver and remember that our constituents, the people who use that service, expect a quality service. We should be able to deliver such a service and it should be something of which we can all be proud.

We should be proud of the Royal Mail. It was easy to change the name and pretend that it no longer belonged to us, but we are still the only shareholder in the Post Office. We must ensure that the message is heard. Trade unions and management must discuss the future of a service that is provided for us all, and not only for the few.

I look forward to the Minister's reply. I know that he will take my points on board. The Government listen and recognise the need—

Photo of Ashok Kumar Ashok Kumar Labour, Middlesbrough South and East Cleveland

My hon. Friend the Under-Secretary is a listening Minister.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

That is right.

Without doubt, the Government will deliver on behalf of the postal workers and the postal service. We recognise the need for future investment and understand that the quality service that is provided should not be destroyed.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons) 7:21, 29 January 2002

It is always a pleasure to follow Mr. Hoyle. He made a passionate plea that the Government should not take money from the Post Office, or demand a dividend from it, at a time when the Post Office is making a loss. He attacked the Conservative Government for taking a dividend when the Post Office was making a profit. Should the Post Office be paying a dividend to the Government when it is losing money? When it is losing money, it is interesting to know whose money it is losing. There is a difference between that approach and saying that the Post Office should make a contribution to the Exchequer when it is making money.

Photo of Clive Efford Clive Efford Labour, Eltham

I am listening carefully to the hon. Gentleman. How does he explain his party's position on the money that it thinks should have been given to Railtrack?

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

I am glad that the hon. Gentleman raised that issue. I am about to deal with that matter.

I am minded of what was said by the then Secretary of State for Trade and Industry. On Second Reading of the Postal Services Bill, he said:

"I am confident that the Bill will transform the Post Office into a more commercial organisation. It will enable the Post Office to realise its ambition to become a world-class distribution company. In the global economy, we need a modern and competitive Post Office that can win new business, expand into new markets and create jobs and wealth in Britain . . . The Bill provides for a Post Office with a modern commercial structure while keeping it within public ownership. It provides for strong consumer protection, wherever possible through competition, and ensures that the benefits of competitive, modern postal services are available to all."

The right hon. Gentleman concluded:

"The Bill is forward looking. It creates a postal service that is fit for the 21st century, and I commend it to the House."—[Hansard, 15 February 2000; Vol. 344, c. 815.]

I am worried that those words were used by the man who is now the Secretary of State for Transport, Local Government and the Regions. He made a hash of dealing with the Post Office and its future, and he is now doing the same with Railtrack. We have seen the implementation of his words. As a result, the Post Office is in more serious trouble now than when he embarked on his policy.

I was disappointed when I read the report of a debate that took place during July 1994. At the end of her speech, Estelle Morris, who is now the Secretary of State for Education and Skills, said:

"Post Office workers have worked in an atmosphere of uncertainty for the past two years, and that is long enough. I invite the Government to give firm assurances on the specific questions that I have raised about the future of the Post Office pension schemes."—[Hansard, 12 July 1994; Vol. 246, c. 892.]

How does that fit in, now that she is in a position of some responsibility in the Cabinet, with how Post Office workers must have felt when they heard the remarks of the chief executive shortly before Christmas? He said, off the top of his head, that there could be about 30,000 redundancies.

The Secretary of State accused Conservative Members of scaremongering. We have heard scaremongering from many people. The chief executive certainly indulged in it in his evidence to the Select Committee shortly before Christmas.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

The hon. Gentleman quoted an Opposition day debate that took place in 1994 on the then Government's plan to privatise 51 per cent. of the Post Office. Given that none of his colleagues has been able to say whether the Opposition support privatisation, will he have the courage to say that he supports 100 per cent. privatisation of the Post Office?

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

The hon. Gentleman is slightly wrong. I was quoting from the report of a debate to which I replied on behalf of the then Government. That being so, I know what it was about. It was about a Green Paper that had been published that gave three options for the future of postal services.

I thought that we were in a new mindset from the one in which the hon. Gentleman finds himself. According to the Prime Minister, we should not denigrate the public sector or the private sector. I understand that we should work together to follow the third way. The hon. Gentleman must get the mood music right. If he does not, he will remain on the Back Benches for a long time.

The hon. Gentleman seems to be asking what the Conservative party's policy will be at the next general election. That is a question to which I shall gladly respond. When we come to the next general election, we shall publish a manifesto, upon which we shall fight the general election. We shall set out the policies that we shall put before the public in that manifesto. We shall not say what those policies are until we are ready to do so.

We are not discussing what the Opposition's plans will be in three and a half years' time. We are here to hold the Government to account on their policy for the Post Office and for the people who work in it. We want to know what will happen to the organisation over the next three and a half years. Instead of trying to score silly little party political points, perhaps the hon. Gentleman should question the Government about the future of those who work in and rely on the Post Office.

Photo of Ashok Kumar Ashok Kumar Labour, Middlesbrough South and East Cleveland

My hon. Friend Mr. Challen was not making a party political point, but trying to get some factual information from the Opposition.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

Mr. Challen has just been given it. The factual information is that we shall tell him and others in due course. At present, as I have said, we are holding the Government to account for their policies and for what they are doing. It is the Government who make appointments to Post Office boards.

We are accused of scaremongering. I was disappointed when the Secretary of State would not tell us whether she had read the report that was alluded to in The Sunday Times. She told us that we should not believe everything that we read in the newspapers, but that is the only way that we manage to get information these days. The Government are reluctant to make statements in the House, so we sometimes have to rely on what we read in the newspapers.

Those of us who rely greatly on the rural post network in our constituencies are extremely worried, and I am in that category. The report referred not only to rural post offices but to urban ones.

The Government amendment refers to the closure of about 3,500 post offices under a Conservative Government during 18 years. I am not prepared to say that there should never be any post office closures. Of course there are such closures. On average there were about 180 a year under the Conservative Government. Sometimes people who have run a post office in their homes, sometimes in rural communities, want to retire. They want to move out of the district, and they cease running the post office unless somebody else can be found to take over. Sometimes it is difficult to find other people to take on the business, and if they cannot be found the post office closes.

No Conservative Member is saying that we shall never see a post office closure, and that we must keep 19,000 sub-post offices always in operation. However, although 3,500 sub-post offices closed over 18 years at an average of 180 a year, 1,564 have closed since 1998. I omit reference to 1997 because of the change of Government half way through that year.

The Government's amendment implies that there were an average of 180 closures a year under the previous Conservative Government. The Government stand condemned by that amendment, as an average of around 350 sub-post offices a year have closed under this Government.

It is no good the Secretary of State saying that Conservative Members are scaremongering. A briefing paper from the NFSP stated:

"We remain very concerned about the rate of closures of sub post offices. Some 547 closed last year. Whilst we welcome the Government's commitment to support the rural network, there is a very real problem with continuing closures averaging two a day which requires urgent attention."

I urge the NFSP to be careful about assurances from this Government. As I have shown, the assurance that they would not close post offices meant only that they would close twice as many as the previous Government, than whom this Government always like to show that they are better.

I hope that the Minister will give the House some reassurance on the matter. It is one of the reasons why we were right to call for today's debate.

I hope that the Minister will also give his attention to the range of services that sub-post offices can offer. At the moment, sub-post offices can offer no services that are in competition with those offered by the Post Office. I think that they should be able to offer such services, especially in respect of the delivery network. For instance, if the Business Post group wanted to operate through the sub-post office network, it should be allowed to. Similarly, some of the delivery companies should be allowed to deliver material to post offices, possibly for onward distribution. In rural areas, that could be a useful service, especially given the growth of buying over the internet.

I have received many letters from the villages of Curber, Carver and Froggatt in my constituency. People are very worried about the future of post office services in that area. One constituent wrote:

"Like so many other people I have been concerned with the Government's proposals for the payment of benefit. The latest news that the Government may put a cap on the number of Post Office Card Account facilities has doubly increased my worry.

My village will be at a disadvantage if this was to occur, and many elderly and disabled and young mothers will experience great hardship. The collection of benefits in cash is the only easy way of obtaining money locally. The nearest bank is in Bakewell which is five miles away. This journey is not easy for anyone without his or her own transport and it also incurs a cost. Benefits in general have not risen sufficiently to take into account any new cost involved in their collection.

I would therefore ask you to impress upon . . . the Secretary of State for Work and Pensions, who is now dealing with the matter of benefits, that it is vital that POCAs are available at every Post Office and not just a select few."

Many people, especially those in rural areas, want to be reassured that the POCA service will not be available only at a few post offices. It is very important that it is much more widely available.

The sub-post office network can be a vital lifeline, especially in rural areas. Sub-post offices are often located in integrated village shops, and in rural communities they provide essential services for people who, for whatever reason, are confined to villages. The sub-post office is also a critical element in the village shopowner's financial plans.

Although I welcome some of the schemes introduced by the Government, the overall picture is very worrying. There is still great unease about the transfer to ACT and the effects that that might have. The Government have said that extra money has been made available for the network of sub-post offices, but that money will come on stream only in 2003. We would believe the Government's commitment more readily if the money were made available now. Moreover, the money being made available is a lot less than the amount that is being devoted to establishing ACT.

I hope that I am not accused of scaremongering. Mr. Laxton told me earlier about the circumstances in Ashford in the Water, of which I am well aware. I thought it amazing that a Parliamentary Private Secretary associated with this Department should tell me to celebrate the fact that a sub-post office had not closed, and not to dwell on the many sub-post offices in my constituency that have closed.

I accept that some sub-post offices have closed because it was difficult to find someone to take over the business. In such circumstances, closure is inevitable. However, whether the Government like it or not, it has become more difficult to find people to run village sub-post offices in part because there is great doubt about their future viability. What we have heard so far from the Secretary of State has done nothing to reassure people that they can rest easy about the future of village post offices.

If I am scaremongering unnecessarily, I will apologise in three and a half years' time, when no more post offices in my constituency have closed. I doubt that I am going to have to apologise.

Photo of Clive Efford Clive Efford Labour, Eltham 7:36, 29 January 2002

Earlier, I challenged Mr. McLoughlin about the Conservative party's position on Railtrack and its demand that the Government should devote taxpayers' money to paying dividends to Railtrack shareholders. I wanted to know how its approach to that issue compared with its position on Consignia. The hon. Gentleman failed to answer that question.

I think that we can dismiss the Conservative motion. I doubt that anyone will believe that the Opposition would do anything other than privatise the postal service. That demonstrates that they have learned nothing from the past five years, and that they will be consigned to the Opposition Benches for many years to come. People can be pleased that, at least in the near future, they will be saved from another term of Conservative misrule.

I wish to take this opportunity to pay tribute to postal workers in my area. They have been through a difficult time, and my hon. Friend the Under-Secretary must understand that parts of the work force are very demoralised. We have a lot to do to assure those people that their futures are secure. There has been a great deal of scaremongering, and that will inevitably cause much anxiety.

In recent times, the postal service in my area has been very short of staff, as a result, it seems, of management failure, but, even so, local workers displayed an enormous amount of good will. For instance, they used their own cars to take extra bags of post out to make sure that people got their post on time. In addition, they turned up early for work so that they could sort the post and get out on time. In that way, they made sure that they met the delivery deadlines for the first post.

Unfortunately, a new manager was appointed who did not respect the good will and dedication to providing a quality service exhibited by the work force. He started to play about with some of the restrictions governing the use of private cars, with the result that the good will was lost and the postal service in Eltham deteriorated enormously. For many people locally, that caused problems that went on for a long time. It has taken a lot of effort to put matters right.

There was a long delay in implementing a review of the local postal service. It was clear to anyone who knew anything about the matter that extra staff were needed. I intend to return to the question of the universal service and the fact that it is so labour intensive.

With a few exceptions, the service in my constituency has got much better, because extra staff were taken on. Some of the attempts made by the postal service over a number of years to automate the service and the sorting, which were doomed to failure, underline the fact that this is a labour-intensive service. The prospect of large cuts in the work force raises anxiety about the quality of the service in the future and the ability to deliver a universal service.

The delivery of letters to every household every day of the week requires a high level of service and is dependent on a vast army of postal workers. Figures in the Consignia budget show a huge overspend in the universal service. The Postcomm website puts the cost of providing a universal service at around £80 million. That is cross-subsidised from more profitable and lucrative areas of the postal service.

The future funding of a universal service gives rise to great concern. From what is said on the Postcomm website, it is clear that it is determined to have more competition in the postal network. That in itself is not a bad thing; I do not object to competition per se. However, when such competition is bound to undermine the postal service's ability to deliver a universal service to every household in the country, we have to question whether that is the direction in which we want to go.

Postcomm states that competitors coming into the market need not necessarily provide a universal service. I feel that I should point out to my hon. Friend the Minister that the costings for Postcomm were carried out by Andersens. He may wish to revisit those calculations in the light of recent events.

Postcomm is offering a recipe for cherry-picking the more lucrative areas of the postal service. That, in turn, will cause a great deal of concern not just to the work force but to those who rely heavily on the universal service.

A great many of my constituents who run their business or work from home rely on the postal service. I know that because when we recently had problems with our local postal service, they expressed their concern to me about the poor quality of service. We must ensure that their needs are considered when we look at the future and at the standards that we set for a universal service.

I was concerned when I heard a Consignia spokesperson suggest on the "Today" programme that a universal postal service might mean that a letter was delivered some time within the working day. For people who rely on having the post delivered within a reasonable period of time, that could have a devastating effect. When challenged, he said that perhaps Consignia could come to an arrangement for people who rely on it. If such an arrangement results in extra costs for those people, particularly if they work independently and have not budgeted for it, I am sure that it will not be welcome. I ask my hon. Friend to take that on board when considering the future of a universal service. Many small businesses rely on it heavily, and any changes to the delivery of the service could have a devastating effect on them.

Staff are concerned about the effects of many of the decisions made in the postal service. An enormous amount of money was invested in the Horizon scheme, for instance—I am advised that the figure exceeded £500 million. When they see Consignia return a loss in this financial year, they are worried that their jobs could be threatened by decisions over which they have no influence and which do not have a direct bearing on their performance.

Money has also been invested in the integrated mail preparation scheme, which cost more than £120 million, and is still not in operation. The work force feel a great deal of frustration and concern that they may be faced with redundancies as a result of poor management decisions. The scheme was purchased to automate the sorting of mail and, according to my friends in the Eltham post office, it is still not in operation.

Postal workers in my constituency feel threatened because of those decisions. We need to impress on Consignia that a great deal more needs to be done if industrial relations are to be improved and we are to avoid a strike.

Let me refer in passing to South West Trains. The trade union is prepared to go to arbitration and has acted within the law. If it had not, South West Trains would have gone straight to court to deal with the union and stop the industrial action. Managers are being used to undermine the strike, and the long-term effects on industrial relations in the industry could be felt for many years to come. We could rue the day that South West Trains took action to undermine the strike. I caution against any such action being taken in the postal industry, which already has poor industrial relations in many areas because of the decisions and threats that have been made.

People in my constituency and elsewhere want a reliable, efficient and economic public mail service. I accept that most people would not be concerned if part of the service were provided by the private sector. They are concerned about the quality of the service. However, it is not possible to maintain a universal postal industry where the core function is to provide a universal service without the cost being underwritten by the Government or by cross-subsidies from other lucrative areas of the postal industry. I caution against further privatisation without taking those issues into consideration.

Photo of Robert Syms Robert Syms Vice-Chair, Conservative Party 7:48, 29 January 2002

The debate is about the Government's mismanagement of the Post Office. If we had been in year 1, year 2 or even year 3 of the Government's term of office, the debate might seem a little unfair, but this is year 5. The current Post Office regime is covered by the Postal Services Act 2000, which, as we have repeatedly heard in the debate, was passed in the face of many Government assurances about what it would mean for the Post Office and the services that it was meant to deliver. So this is a perfectly fair debate to have and, as we have heard, the Post Office, or Consignia, has major problems.

When we talk of the Post Office we mean both the monopoly state business and thousands of small private businesses. I am not sure whether I agree with some of the comments that it is terrible to privatise the Post Office, because, of course, much of it is privately run. The general efficiency of the system over the years has been underpinned by the fact that it has been a successful marriage between small private businesses and a universal Post Office. However, there is no doubt that change is necessary because the volume of letters sent is not rising as much as it used to. There is a vast number of alternatives, ranging from electronic mail and mobile phones to the fax machine. They all mean that the Post Office—Consignia—will have greater difficulties in maintaining its market dominance in future.

The Government's solution has been to set up a state-owned but independent business. As we have heard, that business is suffering—it has moved from profit into loss. There are reports in the newspapers almost weekly about suggested changes to the service—the suspension of second deliveries and so forth. It is a business whose chief executive just happened to mention before a Select Committee that as many as 30,000 workers may lose their jobs. The business is not in a happy state. It does not seem to be well managed at present and it needs to change.

Some of my colleagues have suggested that private capital might be needed in the industry. The reason is not that we believe that privatisation is necessarily always the best solution for every case, but that sometimes, in industries such as the Post Office, we have to change the culture. Part of the problem—as we have heard repeatedly during the debate—is that the management and the trade unions, both of whom have had problems over the years, have not worked well together. We have a changed name and a changed set-up but the same old culture, which does not deliver the first-rate service that we need for this century. That is why we sometimes need to consider the ownership of businesses and how they are run.

My hon. Friend Mr. Page set out clearly what happened 10 years ago when the Government under John Major had to back down, due to the size of the parliamentary majority against the options that they were proposing. To some extent, we are returning to the debate that was held 10 years ago. The Labour Government are having to change the way in which the Post Office is managed—perhaps far more than they would have admitted 10 years ago—because of tremendous pressures from various sources.

Under the Postal Services Act, the Government proposed Ofcom. We all know that Ofcom, due to pressure from the European Community among other things, will be making proposals for increased competition in the postal market. We are all concerned about whether that will kill the universal service or spur the company into making the service more successful in future.

None of us knows what will happen, but we know that there are tremendous challenges. The Post Office has high fixed costs, but we know that the whole regime will have to change during the next few years. The company will have to face those challenges under the Labour Government. It is thus right and proper for my hon. Friend Mr. McLoughlin to say that our view will be set out in our manifesto, as we do not know what state the business will be in when the next Conservative Government take office. That is fair, because things are changing fast—indeed, in some cases, they are deteriorating much more than one would have thought possible a few years ago.

The business has stodgy management and the trade unions have not learned that they will have to improve their working methods. A total of 62,000 days has been lost through unofficial strikes, which have caused their own problems. We can all offer examples of industrial action in various sorting offices that has caused tremendous disruption to businesses, especially to small businesses.

Earlier in the debate, we heard how unusual it is for people to wait behind their front door for the mail to arrive. We were told that people have better things to do. However, the reality is that many small businesses in my constituency depend on the arrival of the mail because it brings the cheques that they need to pay wages and bills in order to trade. A regular cashflow can mean the difference between life or death for some businesses. That is why the postal service is important. Regular and decent deliveries are essential. There must be change.

There is no doubt that the sub-post office network faces major challenges. We have already heard that 547 sub-post offices closed during the past year. We know that the ACT changes—payments through banks—will deprive many of between a third and a half of their income. Many of those small businesses are marginal—they barely make a living—and if their income falls by that amount they will face problems staying in business as part of their community. There will be an avalanche of closures over the next few years.

None of the questions posed during the debate has been answered. It is true that the payment of benefits through post offices is an implicit subsidy of about £430 million for the post office system. It might be respectable to say that post offices should not have that role, but if the income of those small businesses is to be sustained the money will have to come from somewhere else. Although several schemes have been suggested, none of them would produce anything like £430 million.

The Government's proposals for a universal bank to offset that loss of income may not be implemented on time. We are not sure that the bank could cater for the required number of people. There are also concerns about whether a cap will be imposed.

When the Government took office, about 30 per cent. of benefits were paid through banks. The amount has risen to 40 per cent. but it will have to rise to almost 100 per cent. Will the universal bank have the capacity to deal with the rush? Will it be able to ensure that benefits are paid after the changes?

There are great concerns. Many sub-postmasters have invested years in their small business. They are part of the community, and dealing with that change is presenting them with a huge challenge. They are concerned. We have received general assurances, but nothing to make up for that substantial loss of income. That will have a major effect not only on the rural economy but in many urban areas.

I have an urban seat so I have not experienced the scale of the problems described by some Members today who have spoken about post office closures in villages. However, many urban branches will close. Many pensioners and others in my constituency consider their local sub-post office as an extra arm of the social services. They go there for advice and for help in filling out forms, to check information and sometimes to have official letters interpreted. The sub-post office is an important part of their life. When those businesses close, people will no longer have that facility. They may write to their MP or visit the citizens advice bureau, but all of us will find that the quality of life for many of our constituents will have deteriorated as a result of those changes.

We want a clear view of where the Government are going. We want an explanation of how the business will change in the broadest sense. How will Consignia perform in the future? We want reassurances about how the competition regime will change things. We want further assurances about the impact of the Government's policy on the large number of sub-post offices. Will the Government be able to deliver their universal bank? What is their commitment to subsidy? What and how much will it mean for the sub-post office network?

Although many questions have been posed in the debate, we have received few answers. There have certainly been few answers that will reassure those whose future depends on those answers—whether small post office businesses or the people who value and rely on their services. This is only one debate, but if we do not receive answers today we shall return to it. This will be a key political issue for the next two or three years. I can see only bad news ahead. If the Government do not listen, it will be bad news for them.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden 7:59, 29 January 2002

I am grateful to the House for the opportunity to make a brief contribution to this debate, because I believe that the Post Office is one of the most important institutions in Britain. It provides a great public service, but it is in need of modernisation and reform, and great challenges lie ahead.

Having said that, I am worried that this debate is another in a series of debates in which the Opposition attempt to make the public believe that they have had a damascene conversion to public service, when what they are really about is doing down the public services and weakening public confidence in them. The Conservative party had 18 years' worth of chances to give the Post Office the commercial freedom in the public sector that the management and the Communication Workers Union desired, but they failed to do so. If they had taken action when they had the chance, our constituents would be receiving an even better service than they receive today, instead of which we are still running to catch up with Holland, Germany and the Scandinavian countries. We are still trying to give our nation the first-class postal service that we need to function and thrive in the modern world.

The review carried out by Tom Sawyer after Labour came to government in 1997 showed that there was much to be done to reverse the decline of the Conservative years, when there was no investment in the postal service and 80 per cent. of the profits were squirrelled away into the Treasury. It is revealing that we have heard precious little from Conservative Members about the starvation of the Post Office, the mistakes that they made and the consequences of those mistakes—for example, 3,500 post offices closed across the country when they were in power.

I believe that Labour is committed to maintaining a viable network of post offices across the country, unlike the Conservative party, which oversaw the closure of so many vitally needed post offices. We have shown that commitment by placing a formal requirement on Consignia to maintain the network of rural post offices, which do so much to support rural communities with the range of services that they offer and which provide a focal point for many out-of-the-way communities. It is important to many of my constituents in suburban south-west London—they are not rural residents but they care about the countryside as well as our public services—that that requirement and that commitment to the post office network is underlined, as we demonstrate again that the public sector Post Office is safe under Labour.

Of course, we must not forget the value of post offices in towns, too. For example, in Collier's Wood in my constituency, I recently had the great opportunity to reopen a post office that was closed by the Conservatives 15 years ago. That post office in suburban south-west London provides an excellent services to pensioners, to people with young children and to those who do not want to travel too far to gain access to services. I believe that Labour understands the value of post offices in towns, cities and the countryside, and we have introduced appropriate safeguards to protect them for the people of this country.

As well as investing almost £500 million in modernising the postal network and developing universal banking services to allow benefits to be paid straight into post office accounts while ensuring that people who choose to have them paid in cash over the counter can still do so, Labour has given the Post Office the commercial freedom to enter into alliances, to raise more capital and to focus on better management practices. That is a welcome step, and the establishment of Postcomm to ensure that the principle of universal service provision is protected and to set and enforce standards of service is another welcome step towards ensuring that the public postal system, which has served this country well for the past 150 years, is built up and developed in the context of the public sector, not splintered and floated off into the private sector, as the short-termist Conservative party did so ineptly with Railtrack.

Of course, whether Consignia has used its new freedoms wisely is debatable, and to my mind that should be the true subject for today's debate. There are aspects of the company, particularly in its dealing with union representation, that are questionable.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden

No. I only want to make a short contribution, so I will not take interventions.

It is no longer for the Government to micromanage and intervene in every dispute that comes along, although I believe that we retain the responsibility to do so in extreme cases. Labour has quite enough on its plate with the reform and modernisation of all the public services to equip them for delivery—public services that the Conservative party either cheerfully sold off, or left to rot. I also believe we have a duty to the people of this country to encourage Consignia to work honestly and transparently with the CWU in resolving differences between the company and the work force.

Thankfully for my constituents as customers of the postal system, those differences have not been manifested in strikes. As a result of the agreement reached and facilitated following Lord Sawyer's report, there has been little or no industrial action since August last year. However, Consignia still insists that the work force are behaving militantly. Such claims can no longer be justified given the strenuous efforts which the union—led, I am proud to say, by my constituent Billy Hayes—has made towards dialogue with the company.

The union is at present conducting an industrial action ballot in pursuance of an outstanding pay claim that was due in early October last year. It is in discussions involving ACAS, and it has a desire to reach a negotiated settlement. The obstacle to such a settlement is Consignia, which time and again has shown itself reluctant to take constructive and progressive action towards resolving the claim.

On job security, the CWU has made good progress with Consignia and was hopeful of reaching a negotiated settlement based on voluntary, not compulsory, redundancy, despite the fact that Consignia apparently briefed the press after giving an undertaking not to do so.

To conclude, I believe that, since 1997, following the long, lean years during which the Conservative Government failed the Post Office and the people of this country, Labour has reshaped the service, providing a necessary period of stabilisation for further consultation and creating a public sector, public service organisation that operates in the commercial arena. The CWU is fully committed to making progress as outlined in the Sawyer report, having reached a good agreement with the employers on partnership. The CWU is waiting for that agreement to be introduced when the outstanding pay dispute is resolved. The key to that resolution is Consignia.

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk 8:06, 29 January 2002

A number of Labour Members, including the hon. Members for Mitcham and Morden (Siobhain McDonagh), for Chorley (Mr. Hoyle) and for Eltham (Clive Efford) have praised the Post Office's hard-working staff, and I join them in that praise. The hon. Member for Mitcham and Morden attacked the last Conservative Government, but the Labour party has been in power now for nearly five years, and I seem to remember that, when I was last a Member, the Post Office was making a lot of money, had excellent labour relations and was going from strength to strength. What we now see is in complete contrast to that.

I represent a large, rural constituency and, like my hon. Friend Mr. McLoughlin, I represent a significant number of small, rural sub-post offices. I also represent a number of people who work in a large Post Office sorting office at Baxter's Plain, King's Lynn. I visited that sorting office before Christmas and met a large number of its staff, and I was appalled at the very low morale that I discovered among those hard-working, dedicated postmen and women, who were sorting out their rounds, as well as among its long-serving management. It was a story of low morale, confusion as to where the industry was going and depression about the future. I found that very sad indeed.

I kept asking myself, "Why change the name of the operation to Consignia?" What the hell does Consignia mean? It is another example of new Labour political correctness. Why change an excellent brand—the Post Office, the Royal Mail—to something meaningless such as Consignia? That makes absolutely no sense whatever; it is a total distraction.

Photo of George Osborne George Osborne Conservative, Tatton

Is my hon. Friend aware that according to the National Audit Office report, the Royal Mail was the second most recognised brand in Britain after Coca-Cola?

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

Yes, I am aware of that, and I wonder how much was spent on management consultants, public relations people and advertising experts to re-brand the Post Office. That was completely daft and an utter waste of money.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

The answer to my hon. Friend's question is about £2 million. Is not the fact that people still refer to "the Post Office tower" 25 years after BT was hived off from the Post Office an indication of the incredible strength of the brand that the Government have started to throw away?

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

It was an extraordinary brand, and people worldwide would have paid a huge amount of money for it, but it has been chucked away under the aegis of this Government. The name change is nothing more than a ridiculous gimmick.

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

No, I will not give way; I want to try to make some progress.

The name change has certainly helped to foster the poor morale that I mentioned. The problem of poor morale results partly from the lack of direction in the business. Many people who work in the organisation are confused about where it is going. Many Conservative Members, including my hon. Friends the Members for Poole (Mr. Syms) and for West Derbyshire (Mr. McLoughlin), have made that crystal clear. The chief executive of the Post Office appeared before the Select Committee and talked in dire terms of redundancies totalling 30,000. No wonder there has been an adverse effect on morale. Morale is plummeting: it is on a downward escalator. Things might be improving slightly, then another announcement is made and morale takes a further tumble. That is the story I have heard from all the people who work for the Post Office in my constituency.

In a constituency such as North-West Norfolk, rural sub-post offices play a vital role. It was a treat to hear the Opposition Deputy Chief Whip, my hon. Friend the Member for West Derbyshire, speak in the Chamber, because he does not often do so. He made an excellent speech. Like me, he represents a constituency with a large number of sub-post offices and he was right to point out that they are often the lifeblood of villages. As my hon. Friend the Member for Poole pointed out, people go into post offices to obtain and share information and to engage in social discourse. Those post offices form part of the rural tradition.

In many villages in my constituency, pubs and others shops have closed. Village crafts, such as the those practised by the blacksmith, have disappeared. The problems go on. All too often, the village is left with just a shop and a post office. Now those sub-post offices, which are the very lifeblood of our villages, are being closed in huge numbers, and many others are hanging on by their fingernails.

Last year, as my hon. Friend Mr. Whittingdale, the shadow Secretary of State for Trade and Industry, pointed out, 547 small sub-post offices closed. A number have closed in my constituency, but many more are hanging on by the skin of their teeth. I am afraid that many will close in the future unless action is taken.

For many sub-post offices, lottery terminals are a lifeline. However, those terminals will not be enough if Labour continues to go along the mad route towards automated credit transfer. The Conservative Government considered the ACT of benefits payments carefully and we decided that the price of introducing it would be too great to pay. As my hon. Friend the Member for Maldon and East Chelmsford rightly pointed out, £400 million- worth of business goes into the sub-post offices as a result of benefit payments. People go to the post office to draw their benefit—unemployment benefit, their pension or whatever it might be—and they spend the money in the village shop. That helps to generate sales for the sub-postmaster or sub-postmistress, and that extra spending power is crucial to the viability of village shops.

Time and again, sub-postmasters and postmistresses have told me that the introduction of ACT will lose them the benefits that they derive from paying people in cash. They believe that its introduction will be an absolute disaster for their businesses. I do not understand why, in the face of all the evidence, the Government are determined to push this proposal through.

Not only are the Government determined to push the proposal through: they have said on several occasions that the universal bank will provide the answer to a number of the problems that post offices face. However, we have not seen any progress on the development of the universal bank and there has not been a proper response to the report of the performance and innovation unit. We have not had any further information since the Government statement of about six months ago that suggested that subsidies would be available to small rural post offices.

Rural constituencies face a huge crisis in agriculture and a chronic loss of jobs in the rural economy. In the two years before the outbreak of foot and mouth disease, 42,000 farmers went out of businesses. Employment is being lost in more and more businesses in the agriculture sector, and many rural constituencies face a serious crisis. Those with a strong livestock sector face devastation, and even in constituencies such as mine and that of my hon. Friend Mr. Lansley, where there are predominantly arable- based businesses, the story is one of depression in the farming community. The loss of jobs in other industries is also having a big impact, but the rural post office often keeps the fabric of such communities together. None the less, hundreds of post offices in East Anglia face closure.

I listened with great interest to the Secretary of State for Trade and Industry to try to find a glimmer of hope for the future and some consolation to which the hard-pressed sub-post offices in my constituency could cling. However, it was a lame speech full of attacks on the previous Conservative Government. Sub-post offices need direction and leadership. They are facing a critical period in their history and, as my hon. Friend the Member for Poole pointed out, the people running them are not appointed or employed by the Post Office. Many of them are small entrepreneurs and small business people who have put a lot of their savings into the businesses. They are at a crossroads, and they are looking for strong leadership, direction and a common-sense approach to their problems.

If the Government do not listen to what many Members representing rural and indeed urban constituencies are saying, to what the National Federation of the Self-Employed and Small Businesses is saying, to what the sub-post offices trade association is saying or to the views expressed in our motion, the future will be very bleak indeed.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell 8:16, 29 January 2002

I am pleased to take part in this debate because the first Adjournment debate of the year was the one that I introduced on the subject of competition in postal services.

I wish to set the debate in an objective context, and I shall not engage in the hypocritical bluster that the Conservative motion represents. The last two to three years have brought mixed fortunes to postal services around the world, and not just in the United Kingdom. In the United States, the postal service, which remains in the public sector, has in 2001 posted a loss of $1,680 million whereas only two years previously it had reported a profit of $363 million. In New Zealand, where the post office is in the private sector, the earnings per share plummeted from 62.7 cents in 1996 to just 17.5 cents in 2001. In Sweden, to which my hon. Friend Mr. Hoyle referred, the postal service is now heavily in debt.

In Holland, the privatised post office appears to be doing well, although we have heard something about the cost in terms of service delivery. In Germany, the post office also appears to be doing well but, even there, more than 50 per cent. of it remains in public ownership. In Japan, the Government are considering privatisation under their new, right-wing Prime Minister. However, a local newspaper said that, before they do that, the state should make the postal service profitable, so that it would have a strong equity base for the private sector to take over. There is an irony, indeed. They should make it profitable and keep it public.

Clearly our recent unfortunate experience is not unique, but there is no room for complacency. Nor is there any room for simplistic solutions, such as ideologically driven privatisations. If we study the Conservative motion carefully, we see that Conservatives are rather coy about privatisation. In fact, the contributions of Conservative Members show that they are extremely coy about it. They would presumably like to see the Post Office wholly privatised, but they do not have the guts to confront the British public over that again after their disastrous and destabilising attempts at privatisation failed back in 1994.

Perhaps we should ask the Conservatives again: "Yes or no? Will they privatise the Post Office?" I do not take silence as assent, but, if they had such a policy and they thought it was successful, perhaps they should launch it now because that might give them a slight chance of winning over public opinion in time for the next general election. The fact that they do not perhaps shows that they have no confidence in their policy, which they are keeping under wraps.

The reasons why the Post Office should not be privatised were set out clearly in an Opposition day debate on 12 July 1994 when my right hon. Friend Mr. Cook moved the Labour motion. It recognised that the best way of maintaining services, not least in rural areas, which most Conservative Members represent, was by keeping the Post Office as a cohesive whole, capable of delivering an equal service to all residents and businesses in the United Kingdom. That motion was, of course, defeated.

At least one or two Conservative Members were honest enough to admit that what they wanted was the 100 per cent. privatisation of the Post Office. Mr. Clifton–Brown, who was then the hon. Member for Cirencester and Tewkesbury, was clearly fed up with the possibility that the then Government's privatisation proposals would not move fast enough. With views like that, I am not surprised that he has been promoted to the Opposition Front Bench. Also contributing to that debate was Mrs. Browning who said that the second delivery was

"a bit of a luxury".—[Hansard, 12 July 1994; Vol. 246, c. 902.]

I shall return to that shortly.

Clearly the subtext of today's debate is that the Conservative party still wants the complete privatisation of the Post Office, yet it just cannot find the words to say it. It is wrong now, just as it was wrong eight years ago. There are sound reasons why the Post Office should remain a publicly owned business. My right hon. Friend Peter Hain set out some of those reasons in 1994, and his arguments still stand. They show that the impact of privatisation in the Post Office will inevitably lead to profitable work being creamed off, leaving all the costs to be picked up by what is left of the privatised Post Office.

The effect of that will be fairly obvious to all hon. Members. I shall start with sub-post offices. Despite closures over the past decade or two, we still have one of the highest ratios of sub-post offices to population anywhere in the world, but now, because of the much-hyped pressures of competition, a banker is advising the board of Consignia that up to half of those sub-post offices will have to go. I am sure that it is easy for the big cheeses at bankers UBS Warburg to recommend that; I doubt whether any of them use sub-post offices.

Perhaps the bankers will respond by saying that in Sweden, where the system is being radically changed, vast improvements under privatisation are materialising. Sweden has something like 1,200 sub-post offices compared to our 18,000 or 19,000. In Sweden, many of the functions performed by sub-post offices are also to be delivered at 3,000 new outlets, in petrol stations and the like. In Sweden, that may be deemed appropriate; in this country, it would be entirely wrong. Such an approach would rapidly lead to the attainment of UBS Warburg's prescription, which is to close half the sub-post offices in this country. That is what privatisation means and it is what Conservative Members support, but they cannot bring themselves to say it.

Another alleged benefit of privatisation in Sweden is that its post office now delivers mail to up to 25 per cent. more remote locations than it did when it was in public ownership. We should remember, however, that in this country the Post Office delivers to 100 per cent. of remote locations, although once again recent press reports suggest that Consignia is trying to wriggle out of that obligation for such places as the outer Shetland Isles. We know why: it is the benefit of getting ready for liberalised, privatised markets.

I mentioned what the hon. Member for Tiverton and Honiton said about the second post being a bit of a luxury. Under the pressures of liberalisation, we shall not have to worry about that any more. Recent press reports claim that the 9.30 am target for deliveries has already slipped to 10 am, and worse is to come. A spokesman for Consignia has been quoted as saying:

"Most people are out of the house nowadays by 8am and so it does not really matter to them whether their post arrives at 9am or 3pm."

The second delivery would indeed become a luxury. If it came at all, it would arrive presumably to be read with the evening cocoa and the bedtime story. The later delivery of mail will come about, but only because of market pressures. That is the price that we will have to pay if we allow the market to determine the standards in what should be a public service.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I have two points to make. The first is to say that the hon. Gentleman has been trying to describe Conservative policy when no Conservative Member has promoted the idea of privatisation in this Parliament yet. The second is to ask whether he does not recognise that the deterioration that he is describing is happening now. We are interested in what the solutions are for the deterioration that is happening now under a publicly owned company.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

The hon. Gentleman will hear one or two of my suggestions as I conclude my speech. On his first point, I am describing the effects of privatisation in other countries.

Let me deal with price. That is what the Conservatives want. They are fixated with pounds, shillings and pence, or perhaps I should say euros and cents. We might ask why it is that we have some of the cheapest postal rates in Europe. A National Audit Office report makes that clear. In the UK, it costs just l9p to post a 60 g item; in Germany, it costs £1.08p. Full privatisation would bring the joys of many price hikes. It has been suggested that privatisation would lead to many services that we accept as standard—such as early morning delivery—becoming premium rate services. We would have to pay more for them.

How long would it take for a case to arrive at the European Court of Justice brought by the competitors of a privatised Post Office asserting that the value added tax exemption was illegal? A row is already taking place in Germany over whether the partially privatised Deutsche Post should have certain tax exemptions. It would not take the Post Office's competitors any time at all to realise that the VAT their customers had to pay was placing them at a disadvantage. So there would be another price rise for everyone to pay, but without any extra benefit.

Where is all the competition coming from? It is possible to believe from some reports that tomorrow morning, or perhaps tomorrow afternoon, people will wake up and find that some of their mail is to be delivered by a Dutchman. Perhaps a German will then come cycling down the street with direct mail, followed by a Swede with a stocking filler from Stockholm. Indeed, it is generally agreed that in recent years it is direct mail, or junk mail as some people cruelly call it, that is the driving force in maintaining postal volumes. I can believe that, having just torn up the 20th credit card offer that I have received since Christmas. The message of the market is: "You owe it to direct mail that you have a service at all, so do as we say, or the Post Office gets it."

I do not buy into that, and I suspect the vast majority of the British people still do not buy into that. We want a Post Office that delivers for all, equally. That is why it is natural for it to be a monopoly and, as such, the public interest is best protected by its being in public ownership.

Half of the reasons that are driving market change in postal services, which are summarised on page 23 of the NAO report, are specious. They are assertions that can and should be challenged; for example, that legislation must lead to liberalisation. Much of the time legislators are accused of lagging behind, but the underlying assumption, whichever way round the equation works, is that liberalisation can bring only benefits. We should be grown up enough to say that sometimes it does and sometimes it does not. This is a case in which, as I have made clear, it does not.

We have to address what action the European Union is taking to ensure that citizens' interests are protected. I am afraid that it is not the direct mail industry, for all its undoubted benefits, including credit card offers, that will be the ultimate protector of people's interests; it is the Government. That is why we should be challenging the EU's objective of complete liberalisation of postal services by 2009. To achieve that objective, each country's postal service will have to relinquish more and more of its restricted area to competition. The EU is effectively telling us that our Post Office should be just like any other business, be it Joe Bloggs express deliveries or a transnational corporation, which can decide, from some remote headquarters, how our national interest in this essential service is to be upheld.

Finally, I have no doubt that the management of the Post Office can be improved, just as the management of any organisation, including the Conservative party, can be improved. Thankfully, we are not considering the latter today. The Government are clearly not responsible, nor should they be, for the day-to-day operational management of Consignia, but I urge them, as shareholders, to ask Consignia what are its plans to broaden the business.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire

My hon. Friend is right to say that the Government are not responsible for Consignia's day-to-day decisions. Nevertheless, should not our colleague on the Front Bench have a word with Consignia's management about its approach to industrial relations, following the casual announcement in a television interview of the probability of 30,000 redundancies? Is that the way to motivate the work force on whom Consignia's reputation depends?

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I agree with my hon. Friend that that is not the way to operate. Having said that, a reading of the 1994 debate to which I have referred reveals that even then, eight years ago, it was claimed that 27,000 job losses could be the cost of liberalising postal services.

It is clear that, privatised or not, other countries' post offices are moving into other areas, such as logistics, which add to their profitability. In preparation for this speech, I did a survey of the websites of other national post offices, privatised or not. They offer a greater range of services than the British Post Office is willing to offer. I would like our Post Office to work with the British printing industry, for example, to send a message abroad: "The British are coming. Our product is excellent." We will win business on that basis, not by decimating our Post Office.

Photo of Michael Weir Michael Weir Scottish National Party, Angus 8:32, 29 January 2002

It goes without saying that Post Office deliveries are vital in Scotland and Wales, but that is especially true in more rural areas such as the highlands and islands, which get deliveries because of the universal service obligation. We in the Scottish National party and Plaid Cymru believe that that should be protected at all costs, and we do not believe that it will survive under privatisation. On that basis, we cannot support the Opposition motion, as we believe that they are seeking full privatisation. That does not mean that we are completely happy with the Post Office, or Consignia, as it is at present—far from it. I agree with much of what Conservative Members have said about the rural sub-post office network. However, the universal service obligation is important to rural Scotland.

We have heard much in the debate about e-business and the threat from text messages and e-commerce, but although we can order goods over the internet and even pay for them electronically, until we get our hands on Star Trek's transporters, someone physically has to move goods from one place to another. In most of rural Scotland, that service is provided by the Post Office. The universal service obligation ensures that those in remote areas of Scotland and Wales can get packages delivered at the same cost as those who live in more central or urban areas. Under privatisation, or even part-privatisation, that service will be chipped away.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith

I note that the hon. Gentleman praises the universal postal service, and I join him in that, but does he accept that as Scotland has a higher percentage of rural areas than England and Wales, an inevitable consequence of independence would be higher postal charges for people living in Scotland?

Photo of Michael Weir Michael Weir Scottish National Party, Angus

After independence Scotland will have a much more efficient postal service.

At the moment, however, no one else will provide that universal service in Scotland. It is interesting that many other carriers already refuse to deliver to the highlands and islands or will do so only at a much greater cost than that charged by the Post Office. Indeed, that includes the carriers praised by Mr. Whittingdale that are owned by continental post offices. If the universal service provision is withdrawn by Consignia, or amended in any way, that will inevitably lead to greater costs for people living in remote areas and contribute to the cycle of rural decline.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

Does the hon. Gentleman agree that in areas such as mid-Wales, the fear that those services may be withdrawn is having a practical effect on people's outlook and quality of life?

Photo of Michael Weir Michael Weir Scottish National Party, Angus

Indeed, it is the same in rural Scotland, where there are great fears about the future of the rural economy.

Mr. Hoyle, who is not here at the moment, made a good point about the cross-subsidy of postal services and the danger of cherry-picking under privatisation. To some extent, cherry-picking is already with us. Many businesses have entered into agreements on mail deliveries outside the postal system to ensure that they get next-day delivery and so on; Hays DX and the Legal Post are two examples.

Consignia has already said that it is thinking of moving away from the universal service obligation. I was encouraged to some extent by what the Secretary of State said about the Government's reaction. Inevitably, however, if there is privatisation or part-privatisation, the obligation will not survive because of the implied need to cut costs. Consignia has already signalled that an increasing number of homes, mostly in rural areas, do not receive a service direct to their door. It is claimed that that is coming to light only because of better record keeping, but there are obvious concerns that the universal service obligation is already being diminished.

Only the other day, it was reported that Consignia was proposing to dispense with morning deliveries to domestic addresses to concentrate on business mail. Again, the justification is to achieve savings; in an otherwise excellent speech, Mr. O'Neill failed to pin that down. There are serious difficulties with the proposal, especially in rural areas in Scotland and Wales. How is a business address to be identified? In many areas, business and residential premises are mixed. What about those who rely on postal deliveries? The Federation of Small Businesses has warned that the proposal would be a disaster for more than 1 million businesses based at residential addresses. It is vital for them to get cheques, contracts and other documents first thing in the morning. If they do not get them until late afternoon, they will effectively have lost a day because they cannot bank cheques until the following morning, which will affect their cash flow and could be disastrous.

Whatever happened to the concept of working from home—telecommuting—which has been pushed in the past few years? As I have said, it is not possible to do everything over the telephone. The move to restrict delivery services would seriously damage any chance of extending home working and have a disproportionate impact on rural and remote areas, where many of those businesses have set up. In a rural village, how is one supposed to differentiate between business and domestic addresses, or are all the addresses in the area to suffer a downgraded service? It must be remembered that in many of those areas, there is effectively only one delivery at present.

Consignia's defence of that policy was breathtakingly arrogant. It reported:

"The delivery service offered in the UK is still far better than in most other European countries. In the UK it costs 27p or 19p to send a 60 g letter. In Germany it costs £1.08"

That translates as, "It doesn't matter if our service deteriorates and increases in price; it is still better than some." That is hardly a ringing endorsement of Consignia's business acumen.

Above all, in many rural areas in Scotland and Wales, including my own, the fate of sub-post offices is causing huge concern. In June 2000, the Prime Minister's performance and innovation unit published "Counter Revolution: Modernising the Post Office Network" on the future of the network. Over a year later, sub-post offices are still closing at a reported rate of two a day, depriving whole communities, especially already deprived rural areas, of a broad range of services.

That will only be exacerbated by the Government's determination to press on with the payment of benefits by automated credit transfer, which could spell the end for many sub-post offices in Scotland. If no alternative sources of income are found—frankly, it is difficult to see how many sub-post offices will find such sources—it is calculated that some 80 per cent. of surviving rural post offices could go. Post offices rely on benefit payments for 40 per cent. of their revenue. If that is lost, it has been calculated that, over the next five years, Scotland could lose around one quarter of its post offices. Again, that is a real worry for rural areas.

According to a report in the Financial Times, some 5,000 to 8,000 post offices throughout the UK could become non-viable by 2003 when ACT for benefits is introduced. I am sure that in his reply the Minister will point to the universal bank as an alternative. I asked the Secretary of State earlier whether she would assure us that the universal bank will be in place by the time the ACT regulations are introduced. She did not give me that assurance. Unless the universal bank and the regulations are introduced at the same time—if the Government insist on going ahead with ACT—there will inevitably be a massive reduction in business in rural post offices. If a service is not immediately available, people will make alternative arrangements. They must do so to secure a regular flow of income.

The PIU recommended:

"the post office should see the universal bank as a major new business opportunity. It should urgently develop the concept of partnership with the High Street banks and others".

What exactly has happened? I appreciate that the Minister may not any longer be the Minister in charge of the universal bank, since responsibility for it was reported to have been transferred to the Department for Work and Pensions, but a year after the so-called big four banks signed undertakings to provide the cash support required, I must ask what progress has been made on its introduction. Banking sources suggest that there has been no appreciable progress.

I also understand that it will probably take a minimum of a year to implement systems that will allow the smooth transfer of those without bank accounts to an electronic system. If that is so and the universal bank is not ready to be put into operation now, it will not be in place by the time that ACT is introduced. That will lead to chaos, both for those looking for their benefits and the sub-post offices that rely on providing them. That will lead to a further round of rural sub-post office closures.

We on the Scottish National party and Plaid Cymru Bench find ourselves in a difficult position. We are not afraid to put our position squarely on the record: we oppose the privatisation of the Post Office. For that reason, we cannot support the Tory motion. It is clear from what Conservative Members have said in this debate that that is the way that they wish to go. At the same time, we find it difficult to support the Government unless the Minister can give some answers to the various questions about the universal bank, ACT and rural sub-post offices and the universal service obligation.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central 8:43, 29 January 2002

We have had an interesting debate, which the Tories opened with a ragbag of political opportunism, conveniently forgetting that 80 per cent. of the profit in their time was syphoned to the Treasury and that they closed 3,500 post offices. They did not pledge any additional funding for the extra deliveries that they want and were unclear about their commitment to privatisation, although as we drew out Tory Front Benchers it became obvious that in their hearts that is what they want. The former right hon. Member for Henley, Mr. Heseltine, came unstuck over his popularity for that policy, not least among his Back Benchers, who in their hearts wanted privatisation but realised in electoral terms that it would be political suicide.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The hon. Gentleman says that we want funding for extra deliveries: nothing could be further from the truth. All we are doing is pointing to the fact that parts of the existing service on which people have relied for years are being stopped—the morning collection, the second delivery and the morning delivery to private addresses. We are looking to maintain the status quo, rather than bringing in anything new.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Implicit in the comments that were made was the idea that if current services were reduced, the timing and frequency of deliveries would be reinstated by the Conservatives—otherwise their argument would be hollow. I heard no commitment to provide extra funding from Government subsidy to Consignia to make that possible. If Mr. Waterson wants to illuminate his position, I shall be happy to give way. Apparently, he does not. That is a big surprise.

The Conservatives' position is clear. They want privatisation, a system of regulation that is RPI minus X, and cherry-picking in respect of competitive access. As the NAO report makes clear, that will threaten the concept of universal provision of services to rural and urban communities throughout the country. The Conservatives know that the situation would have been much worse under privatisation. The key prospect for the Government to break out of the traditional nationalised industry and stay clear of privatisation is to manage a mixed economy that balances service delivery, public interest and some degree of commercial enterprise.

I was interested to hear the Liberal position, which is a rather stark exaggeration of the prospects envisaged in the NAO report. I shall return to that report later. I was pleased to hear Mr. Weir set out the position of the Scottish and Welsh nationalists. They would devolve control of the Post Office to Scotland, where average unit costs are obviously much higher because the community is much more rural. They would stick a massive tax on the people of Scotland and Wales, or increase prices, which is the logical consequence of devolution. What the Welsh and Scottish people do not want—of course, I am ethnically Welsh—is more costs heaped on them by people who do not understand the economics of more and more devolution.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

The hon. Gentleman misrepresents the policy. Do not the people of Scotland and Wales have much more interest in the rural communities there—[Interruption.]

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Before Mr. Williams leaves the Chamber, may I say that the House takes a very strong view on mobile phones going off in the Chamber?

Photo of Michael Weir Michael Weir Scottish National Party, Angus

The part-privatisation or full privatisation proposed by Members on both sides of the House will damage the service to rural communities.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I understand the argument that privatisation and cherry-picking would undermine the viability of rural communities. My point is that if the responsibility for and financial management of the Post Office were devolved, the average unit cost would, other things being equal, go up.

In my brief contribution, I shall deal with two aspects—first, the general analysis of the pressures that face the Post Office and, secondly, East Croydon post office, which is threatened with imminent closure. I shall do so not merely because I have a constituency interest, but because some of the factors and opportunities there illustrate the commercial opportunities for the Post Office elsewhere in Britain, which I hope the management will take up, rather than be fixated with making cuts to balance budgets. The other way to achieve that is to generate revenue, as anyone who has been in business, as I have, would know.

No one has spoken about the marketplace in general. Hon. Members may know that 20 billion letters are sent in Britain every year. The Post Office is not in chronic decline, partly because of the increasing amount of business post: 86 per cent. of letters sent are from businesses, and 67 per cent. of received letters are for domestic addresses. There has been an enormous increase in what some call business mail, and others regard as junk mail. Issues about relative pricing are also involved in that context.

There has certainly been a growth in the number of letters, but, set against that, many people who used to write letters use telephones more, and many people who use telephones communicate increasingly by e-mail. That change in the marketplace obviously needs to be embraced by a modern Post Office. A key area for growth is parcel delivery; a lot of that business is generated by e-mail and does not even involve the Post Office. The Post Office does not have a good history in parcel delivery, and quite a lot of profit is being made by new companies entering that marketplace.

My hon. Friend Mr. O'Neill has already mentioned relative prices in the European context. It costs 26p to send a 20 g letter in Britain, compared with 39.3p in Germany and 24p in the United States. Our stamp costs are far below those of France, Italy and the Netherlands. Our charge for a 60 g package is 26p, compared with 50.6p in Germany; in this case, America is more expensive than us, as are France, Italy and the Netherlands.

In relative terms, the prices charged to the British public and businesses are low. To a certain extent, that explains the fact that there was rapid revenue growth between 1995 and 2001, with the Post Office's turnover increasing from £6 billion to £8 billion, while profit margins went into decline; it is now making a loss. The National Audit Office has asked whether the regime of RPI minus X is sensible in terms of our wish to have decent service delivery at a time and price that consumers think fair. Consumers do not want a regulator to come along and hammer down the price, leaving the Consignia management no option but to cut services. I would like the Government to consider those issues.

The economics of cherry-picking dictate that if the marginal revenue is greater than the marginal cost, the private sector will move in. Obviously, the private sector is not interested in operating in the kind of market that is depicted on the front of the National Audit Office report. It shows a man in a strange sort of truck going across a field to deliver one or two letters. Such activity is not exactly profit-making, but it is part of the universal service that we ensure. The problem that we face is that the universal service obligation is challenged by the niche entry into the market of those people who pick off certain types of business, particularly urban business and business-to-business transactions. The NAO report states:

"RPI-X price control is not wholly appropriate in this instance."

It is worth noting that 73 per cent. of the public say that the postal service is very good or good value for money, and that only 40 per cent. know the cost of a stamp. At a time when nine out of 10 people are satisfied with post boxes, post offices and postal services generally, it is worth considering whether, if the public will is to pay a higher price and have a better service, that should be accommodated in the regulatory regime.

Instead, we are beginning to see a downward pressure on prices, the level of some services is beginning to decline in terms of multiple delivery and delivery times, and, in theory, the universality of the service is being challenged. We have seen the beginning of market entry being allowed by Postcomm, with licences being issued, but the problem for Consignia is that about 40 per cent. of its costs are fixed. As it competes at a marginal level, the situation will be more painful.

As a result of the European proposals for liberalisation more of the Post Office's core services will be open to competition. In particular, from 2003, the delivery of any item above 100 g will be open to competition; by 2006, that will extend to any item over 50 g. The Government need to consider the business's profile as we move forward.

Like other Members, I am concerned about the reliability of the first-class post. The Post Office has been condemned for not meeting its target of delivering 92.5 per cent. of first-class post by the following day. In fact, it achieves a low of 89 per cent., which is only marginally less. If a manager is told, "You're priority is to improve from 89 per cent. to 92.5 per cent. or above," one response might be to cut one of the two deliveries to ensure that at least one gets through later in the day. If the objectives and incentives do not embrace service frequency and timing—we are talking about value judgments—the machinery of devolved management will produce results that might be undesirable from some points of view.

I understand that only 7 per cent. of letters arrive by second post, but they absorb about 40 per cent. of the cost. From a business management perspective, one can see the point of changes such as those that have been discussed on the "Today" programme and elsewhere. However, my feeling is that the regulatory framework should enable us to understand and embrace outputs, which are, in fact, predictable.

There are clearly tensions to balance between the public service and the profit motive and commercial viability. There are also tensions between universal service provision and a cherry-picking competition. It is important to factor in not only the obvious commercial saving arising from post office closures, but the wider social cost—two different sums. We must establish not only the potential commercial and operational saving of reductions in service frequency, but the wider externality in terms of economic value.

Perhaps such balances have already been struck, and one can argue that they have, but questions of fine tuning need to be addressed if we are to pursue a mixed-economy approach. Neither reverting to a traditional, state-run monopoly, nor exploring the vagaries of privatisation are in the consumer and public interest. It is difficult to strike a fine balance, and I respect the fact that the Government are doing well in that regard. The fact remains, however, that a guaranteed first-class delivery rate of 92.5 per cent., RPI minus X, universality and market entry can result in operational decisions that some people do not want.

We need to review the parameters, constraints and opportunities. My colleagues on the Public Accounts Committee and I look forward to quizzing representatives of Postcomm about the way in which its regime is influencing management behaviour and public service.

The Government need to strike the right balance—not a state monopoly or a privatised monopoly—and encourage a regime that tries not simply to drive down costs, but innovatively to generate commercial revenue. With that in mind, I want to discuss briefly the case of East Croydon Crown post office. It is on East Croydon station, which, as many hon. Members may know, is the fourth busiest public transport interchange in the country. The trains and the new tram system—as leader of the council, I was involved in its introduction—transport some 18 million passengers along the tracks. In addition, there is the bus centre.

Given the enormous number of people milling around the station, why is the post office not breaking even? One reason is that it is not open when people are travelling to and from work, which is extraordinary. Moreover, the profile of the business is aimed at a declining market—the unemployed and pensioners—rather than commuters. I suggested that the post office change the range of available products, and perhaps provide a sign to show that the post office is there, given that it is 10 yds from the main terminus. I have been negotiating with the unions, whose representatives say—contradicting the picture painted of them—that their members are willing to stay open outside normal working hours to serve those going to and from work who may want, for instance, to collect internet-ordered products that cannot be delivered to their houses because they will not be in.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Has my hon. Friend suggested to the Minister that there should be signs showing the location of all post offices throughout the country, not just Crown post offices? If so, I support him.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I agree. It is remarkable that most of the millions of people who go to East Croydon station do not even know that there is a post office there.

Our local council, a very good council, has offered to man one of the counters at the post office, offering services and marketing them by means of colour literature for every household, on a regular basis. As a result, more people will go to the post office, pick up products and provide more revenue.

The development of the site behind East Croydon station will have enormous implications for retail and other sectors. The simple point I am making is that there are opportunities for new products and new consumers. Such opportunities, which will certainly be realised at railway stations, should be taken up elsewhere in the network to preserve the existing service.

In the case of East Croydon station, many people will have to walk an extra mile to visit a post office. I hope to present a petition to Parliament tomorrow signed by 4,000 people who do not want that to happen. I hope that the council and, indeed, the larger retailers who have joined forces to help the post office will succeed. I understand that they plan to work with Connex in the first instance to set up more innovative outlets providing services involving tickets, travel in general, retail and finance—a sort of network reinvention scheme. Sadly, however, the signals I am receiving suggest that closure is imminent and unstoppable. I fear that that is because management mentality is focused entirely on cutting costs rather than on generating revenue innovatively.

As I have said, I think that the opportunities offered in East Croydon can provide national lessons relating to relationships with unions, links with the private sector and links with councils and train companies. The Post Office should consider those lessons.

We live in a mixed economy, in which the wider public interest must be balanced with commercial viability. We do not want to end up with the free market that the Tories wanted. Indeed, their legacy of 3,500 closures would be dwarfed by the carnage that would result from the implementation of their economic and social policies. We need to get the balance right between service levels, prices, universality and fair competition if we are to obtain the right output in the public interest. We need the right regulatory system, promoting service, innovation and efficiency to ensure that a new commercial freedom can make the Post Office secure in the Government's hands.

Photo of Ian Liddell-Grainger Ian Liddell-Grainger Conservative, Bridgwater 9:03, 29 January 2002

I shall try to be brief, given the time.

I was interested to read the executive summary of "postal services", which refers to the exercise of

"functions in a manner first calculated to ensure the provision of a uniform postal service at an affordable and geographically uniform price. This is their primary statutory duty".

I was also interested to see the figures relating to post office closures in the United Kingdom since 1997. The total number is 1,568, but there are also figures relating to rural and urban closures: in 1999, 167 rural post offices closed, but only 18 urban post offices shut. In 2000, the figures were 271 and 92 respectively.

My constituency is nearly 50 miles long. If the definition of a main post office is one that serves a population of 10,000 or more, only one in my constituency fulfils that criterion. If we bear in mind the fact that sub-post offices are to close, we have some idea of the problems that the constituency faces. It puts things into perspective when we remember that Consignia spent £2 million on a name change. As was said earlier, when we take into account changes to stationery and so on, the figure is much greater. We are witnessing a great waste of money by a company that should spend more wisely, especially to try to maintain services for people who can least afford to lose them. That is disgraceful.

The harmonisation of the Horizon system is another problem that I have encountered in rural areas. Many of the postmasters and postmistresses in my constituency are elderly. They are not technically aware and they find it difficult to understand the way in which the Horizon system works, or its purpose. Training for any changes is never carried out locally; it always happens a long way away. Once, it happened in Bristol. It takes much more than an hour and a half to travel from Minehead to Bristol. How on earth is a fairly elderly person expected to do that?

Many rural post offices are located in houses. Some have had to be rewired, costing up to £30,000 a go, for the Horizon system. Rural postmistresses cannot afford that. In one case in my constituency, a post office could not obtain a link to Horizon. A satellite had to be placed in the garden and no one was allowed within five metres of the transmission box. The postmistress had young children and when Consignia refused to move the transmission box she had to close the post office. That is unacceptable. My predecessor, now Lord King, and I fought the closure, but Consignia was not sympathetic, and the lady and the post office have gone.

As my hon. Friend Mr. Bellingham said, the police, local tourist boards, social services and many other organisations use rural post offices to get their message across to villages that have no pub and no other shop. We have managed to open a post office, but Labour Members should not get too excited because the building was donated by a wealthy landowner and is staffed by volunteers who work from hand to mouth to keep it open. It not only stocks local produce but provides a place for the organisations that I mentioned to present their ideas and views.

There is an enormous explosion of e-commerce in this country. It is all-encompassing, and even Sir Elton John has said how marvellous it is. Why cannot Consignia use that as a way forward and boost people's ability to utilise it in rural areas? Many people in my constituency shop by e-mail because they have no choice. What will happen in 2003? What is the future of the rural post office? I have asked many people about that. I have also worked in two post offices, and it is incredibly hard work.

I asked the elderly ladies what they would do if they had to use bank accounts, swipe cards and so on. Most looked horrified. They are of a generation who are not used to that; they are not accustomed to going to banks that are not in their local villages. How will they use the service? I ask the Government to bear in mind people who are ill equipped to deal with modern technology and the vagaries of modern life. Labour Members may shake their heads, but I assure them that one group, whose capabilities they know, is running a campaign on the matter: the National Federation of Women's Institutes. It has only just begun; Labour Members should therefore be careful. If it keeps going, they should start to quake.

Rural post offices matter in rural areas. If they are allowed to go, that is it. There is nothing else to which many villages can turn.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith 9:09, 29 January 2002

I apologise to the House for missing some of the earlier speeches, as I had to attend a Standing Committee sitting. However, I was able to hear the opening speeches, so I have an idea of the gist of the Conservative party's attack on the Government and heard the contribution of my right hon. Friend the Secretary of State.

I am grateful for the opportunity to contribute to this debate, especially because, like many hon. Members, I have been very concerned about postal services since I was elected last year. I have received a fair amount of correspondence from people who are anxious about the postal service and have also had much contact with people with such concerns in my constituency office and surgery. Concerns have also been expressed about the sub-post offices in the area. In the Stockbridge area of my constituency, both sub-post offices were closed down during the latter part of last year, causing particular difficulties for a community with many thousands of elderly residents. It is not only rural areas that suffer from post office closures; sometimes urban areas can be affected just as seriously. The closures have caused great difficulty for many of my constituents.

I have raised those issues in the House, with Ministers and with Consignia, and I make no apology for doing so. Labour Members who are keen to see high-quality services also recognise that it does the public service no favours not to point out failings, as it is only by pointing out failings that we can improve the services. At the same time, I am also happy to pay tribute to them when they are successful. In the two cases to which I referred, there have been a number of improvements during the past few weeks. I would not be so arrogant as to claim the entire credit for such improvements, although for the purposes of a constituency newsletter, I may claim some of it. I know that the letter delivery service has improved markedly in a number of areas in my constituency. Indeed, a number of the businesses that complained to me about the quality of service last year have written back to say that it has improved. Hon. Members throughout the House will agree that it is not too often that people come back and make contact to say that a service has improved after having made complaints.

On the sub-post office closures in the Stockbridge area, I am pleased at the way in which Post Office Counters has been trying to provide alternative premises to replace those that have closed. I take this opportunity to pay tribute to the former postmistress at the Stockbridge sub-post office, 83-year-old Pat Burford, who delayed her retirement for some weeks to allow the service to continue. I pay tribute to her public-spiritedness, which I know is typical of many of the people who run sub-post offices throughout the country.

I mention those improvements in the service and the provision of sub-post offices in my constituency because I think that it is important for those of us who make complaints about public services also to recognise improvements from time to time and to make it clear that a positive response has been made to complaints when we manage to achieve one. Such positive stories about the Post Office are also a reminder of the fact that, although criticisms can rightly be made about its services, there is still a lot that is good about the postal services in this country. My hon. Friend Mr. Hoyle pointed out that some of the European examples have not been too successful for the consumers, postal workers or Treasuries of the countries concerned. Most consumers in most European countries can only dream of a service that allows them to post a letter at 5 pm in one part of the country and have it delivered 400 miles away, more often than not the next day if it is first class. That is a standard of service of which people in most countries can only dream.

Although a lot can be said for the postal services in this country, it cannot be disputed that the previously high standards of UK postal services have begun to slip. It is perhaps precisely because we have a history of a high-quality postal service in this country that our constituents expect the services to meet such high standards.

I regret that the Opposition motion does not contribute substantially to the debate about how we improve postal services. I am a new Member, but I understand the reality that Opposition day debates are usually knockabout affairs where every crime that can be dredged up is thrown at the Government. That is something to which one becomes accustomed in this place. Even by those standards, the negativity of Conservative Members' contributions has been staggering.

Perhaps that is not surprising, because the Conservative party, when in government, was responsible for many of the problems in today's postal service. There was the failure of the then Government to grant the Post Office the commercial freedom that had been sought for years by unions and management. That lies at the heart of many of the problems affecting postal services.

No doubt that explains the evident contradictions in what Conservatives say they want to do with the Post Office if they ever have the chance to get their hands on it. There is a coy refusal to tell us whether they favour privatisation. Some Conservative Members tell us that they do not know what their party's policy will be. Others say that they are not in favour of privatisation. Hon. Members who read Hansard tomorrow will be able to check for themselves and see that there was a clear indication from the Opposition spokesperson that privatisation was something that he wished had happened earlier and something that he would no doubt try to introduce were he to get his hands on the service in future.

Combined with a wish to see a hands-off approach, as Conservative Members would describe it, there are calls from Conservative Members for day-to-day interference in the management of postal services of the type that would more commonly be associated with the command economy of Stalin's Russia. The Conservative party cannot for ever sit on the fence and claim that it is in favour of privatisation and commercial freedom on the one hand but wants to see day-to-day interference in the way in which the Post Office is run on the other.

Like many Members who have contributed to the debate, I pay tribute to the thousands of postal workers throughout the country who have kept the service going through rain, wind and snow. I have not been uncritical of some of the actions taken by trade unions in the Post Office, but I recognise the frequent pressures on staff in the Post Office and the provocations that they face. The record of local management in many areas has not been good. It has certainly been responsible in many instances for bringing about a negative reaction from the work force.

Whatever else we see in the future of the Post Office, there must be a new relationship between trade unions and management. There must be a relationship that leads to a constructive approach for the benefit of the community. That is essential if the challenges of the many market threats that face the Post Office are to be successfully met in the years to come.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk 9:19, 29 January 2002

I have enjoyed listening to the debate.

First, there is the nature of the market that we are facing. It has been said that the Post Office is facing competitive threats from new technologies, industrial relations and heaven knows what else. Although that is the case, it is important not to forget that there is a growing market. Growth was not as large last year as was predicted, but as the sub-postmaster at Mulbarton in my constituency said this morning, 15 years ago there would be six or seven sacks in the morning, and now there are 30 to 40. So there is a growing market with an exciting future.

The Post Office has 28 million footfalls through the doors of its premises every week. Most retailers would kill for that. In the over 350 g market, more than 4,000 companies are competing. We have seen the improvement in service that has resulted from that. We do not necessarily have anything to fear from greater competition so long as it is handled in the right way.

Secondly, there are some serious questions to ask about the management of Consignia. Geraint Davies, who is no longer in his place, said that the income of the Post Office has risen considerably, from £6 billion to £8 billion. He could have added that Consignia's management has let the costs of the business run out of control. Costs are up by £1.2 billion, and that is the main reason why Consignia is in a hole. The problem arises not because there is no market or because Consignia is not getting increased revenues, but because the management is completely unable to control costs.

Reference has been made to poor industrial relations. I am not surprised that they are poor, given that 30,000 people were told just two weeks before Christmas that they would be sacked. My experience is that companies with good managements tend to have good industrial relations, and that companies with poor managements tend to have poor industrial relations.

My third point is that there is only one shareholder—the Government. The NAO report referred to several times in the debate states:

"The relationship between the Department and Consignia may affect the company's commitment to improving efficiency"

Later on, the report continues:

"It is highly unusual for a shareholder to direct a company's management to pay a guaranteed minimum dividend."

In most businesses, the management decides whether to pay a dividend, and the amount involved. I accept that, during the 1980s, the Treasury sucked a lot of money out of the Post Office, but the Post Office was at least making a profit at the time. I should prefer the people working in the Post Office to have more control over the amount of money to be paid in dividend.

The hon. Member for Croydon, Central referred also to the fact that maintaining a universal service would cause conflict in a profit-maximising organisation. No one in his or her right mind would suggest that a universal service delivering light letters at a uniform price was a profit-maximising activity. It has been argued that having a universal service obligation could provide a market attraction to some players, but no one would suggest that such a service was, in itself, a profit-maximising activity.

I was interested in the speech of Mr. Lazarowicz. It was interesting that he did not refer to his own private Member's Bill on employee share ownership. I speak for no one but myself, and I certainly would not want to commit my Front-Bench colleagues on the matter, but my contention is that the best way to transform the business, which has potentially exciting prospects, is to hand it over to the 200,000 people who work in it. If they became the majority shareholders of the business, they could help it find its feet—and the markets that would ensure prosperity.

Photo of George Osborne George Osborne Conservative, Tatton 9:22, 29 January 2002

I, too, shall be brief, so that others may speak. I congratulate my hon. Friend Mr. Whittingdale, the shadow Secretary of State, for persuading the powers that be to hold this timely debate on the Post Office.

I recently received a letter from the Post Office, which stated:

"Dear Mr. Osborne,

Re. Ollerton Post Office . . . The above post office closed in April 2000."

I knew that. It went on:

"The purpose of this letter is to ask if you . . . may help us identify a prospective candidate" to

"restore a service to our customers . . . If you are aware of any such person please contact myself within one month from the date of this letter . . . If we receive no new information, we will regard this as a permanent closure."

It seems a rather odd approach if the Post Office is asking Members of Parliament to find sub-postmasters in their constituencies.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith

Instead of dismissing such approaches from the Post Office, should not the hon. Gentleman recognise them as well-intended efforts to obtain the sort of information that Members of Parliament often have? Certainly, I was happy to assist the Post Office when I received a similar approach.

Photo of George Osborne George Osborne Conservative, Tatton

If the hon. Gentleman ever passes through Cheshire, he will know that I advertised the post in the Knutsford Guardian, and that I have spoken to Ollerton parish council, among other things.

The Government amendment rests on the fiction that the Government have given the Post Office commercial freedom. Consignia is not free, and it does not operate in a commercial environment. It is not free, as the Government are the only shareholder: they appoint the directors, and the watchdog that supervises the Post Office. Moreover, Consignia does not operate in a commercial environment, as it has a monopoly on all letters below a certain weight or at a certain price.

It is clear to me, having listened to Labour and Liberal Democrat Members, that they need a lesson in market economics. One had thought that new Labour had taken root, but the debate has revealed that those roots are thankfully pretty shallow. Time and again, Labour Members have said that we need to keep postal services as a nationalised industry and keep the Secretary of State for Trade and Industry in control. Have they learned nothing from the privatisations of British Telecom and British Gas, which have driven down costs for consumers and have increased service provision and the products available to consumers? Those privatisations are generally a very good thing and have been copied around the world. Indeed, the National Audit Office report, which has been bandied around this afternoon, makes it absolutely clear:

"The incentive on Consignia's management to secure efficiencies is relatively weak in the absence of pressure from private sector shareholders and the stock market and is further weakened by the knowledge that efficiency gains would give Postcomm room to introduce more competition and to set tougher price controls."

That is the truth of the arrangement that the Government have set up through the Postal Services Act 2000. We are living with the consequences as services are cut, jobs are lost and unions hold strike ballots.

We live in a world in which ways to communicate, whether by e-mail, telephone, the internet or text messaging, have proliferated. All sorts of methods of communicating are provided by private operators and they operate in a highly competitive market environment. Surely it makes sense to bring the private sector into the provision of snail mail, as people who use e-mail call the Post Office service. Surely it makes sense to bring private sector discipline into Post Office management.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 9:26, 29 January 2002

It is regrettable that after such a long time and so many debates we are still discussing concerns about sub-post offices and the Post Office. It is also regrettable that the Conservative party seems to have amnesia. The core issue, which has been alluded to by a number of right hon. and hon. Members, is that the Conservatives had the opportunity in the early to mid-1990s to tackle this issue and make investment which would have saved us from the problems that we face today. It takes a certain amount of cheek for them to criticise the Government. I am not against criticising the Government, of course, and frequently do so. However, the Conservatives talk about dividends and funding, yet in 1995 they took away £1 billion from the Post Office services.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

For the next two and a half years, they took away another £1 billion.

Photo of Robert Key Robert Key Conservative, Salisbury

It was very profitable.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

Profitable, indeed, but what was required at the time was investment, and yet the Conservatives criticise the Government.

As my hon. Friend Dr. Cable said, the Government are failing to give Consignia the necessary freedom to operate as an independent publicly owned corporation. Consignia makes that point frequently. Mr. John Roberts, the chief executive of Consignia, told the Select Committee that he had serious doubts about whether the existing model was working.

Another executive from the company told the Financial Times on 13 December:

"The public sector monopoly model is no longer fit for the environment in which we operate . . . We don't have the degree of flexibility that our rivals have, particularly in bringing down our cost base."

Many points have been made in this debate. It is regrettable that the Government brought in the hare of ACT two years ago without thinking it through clearly. It has caused concern about the sub-post office system not being viable. Because of that, we are still looking for a firm commitment from the Government that the lost revenue will be replaced. From 40 per cent. to 50, 60 and 70 per cent. of revenue comes from that source.

We have had so many assurances from the Government, yet many of us wonder whether there is real meat in them. My hon. Friend the Member for Twickenham referred to a scheme that the Government have put forward as part of their programme to save the sub-post offices. They allocated £2 million to the scheme, yet after a considerable period there have been only five call-offs: £13,200, £1,600, £208, £10,200 and £3,860. Why? It is either because people do not feel that the scheme is really what they want, or because it is difficult for them to access it.

I am conscious of the fact that little time remains for the debate, but we need an answer from the Minister. What real opportunities will people be given to obtain funding support? How will the "Your Guide" scheme work? Will it be funded by the Government? It would offer sub-post offices another framework for progress, based on the Government's proposals.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 9:30, 29 January 2002

This has been a timely debate. We have heard much about the problems that beset our postal services, but another theme that has come through loud and clear is the considerable affection in which ordinary postmen and women are held by the British public. Despite the problems, the Post Office is a strong brand. It is thus all the more puzzling that it was thought clever to spend £2 million on changing its name to Consignia—a point made by my hon. Friend Mr. Bellingham.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Let me make a little progress, before we hear about East Croydon post office for the fifth time.

The Post Office is yet another example of a great British public service in trouble. In some ways, it has a greater impact on the public than the national health service because almost everyone in the land uses the Post Office for one reason or another every day—even if they only receive a delivery of mail. It matters very much to all of us if our Post Office is failing.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does the hon. Gentleman realise that the reason for the branding change was to open up European markets? Research showed that people in Europe would understand the word "Consignia", but "The Post Office" is an English brand name.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

So the fact that the word ends with a vowel will produce more business in Europe. Well, I have heard everything now.

The Post Office's failure is also the Government's failure. As the chief executive of Postcomm, Mr. Martin Stanley, said in his recent report:

"the company takes less care of its customers, is less innovative, is less efficient and therefore provides a generally worse and more expensive service than might otherwise be the case".

He referred to

"a management and workforce who have a well developed ability to resist change, including a good deal of political clout".

We have seen some of that this evening.

Mr. Stanley concludes that many voters regard the company

"as a public service for which they will hold Ministers accountable".

Photo of Nick Gibb Nick Gibb Conservative, Bognor Regis and Littlehampton

Has my hon. Friend read page 40 of the NAO report which refers to postal services in the south and south-west? In those areas, some customers receive no delivery for four days in a row, including people in the town of Bognor Regis which I represent. I know only too well from constituents of the appalling postal delivery service experienced by some people in Bognor. Is that what is meant by the universal service?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

My hon. Friend is right to draw attention to Bognor—one of the country's black holes as regards postal deliveries.

As we have heard from several hon. Members, a record number of 547 sub-post offices closed last year. Those closures continue week in, week out, up and down the land. The National Federation of Sub-Postmasters says that sub-post offices are still closing at the rate of two a day.

Then there is the growing mystery of the UBS Warburg report on the strategy for Consignia. In Standing Committee, the Under-Secretary of State, Miss Johnson, said that there was no such report. This afternoon, the Secretary of State said that she had not seen it. In an answer only today to my request that the report be placed in the Library, the right hon. Lady replied that it was subject to commercial confidentiality rules. We still want to know whether the report exists. If the Secretary of State has not seen it, who at the DTI has seen it?

The chief executive of Consignia has admitted in evidence to the Select Committee that up to half the network could be uneconomic. The only certainty in life for the sub-postmaster or sub-postmistress is that, from April next year, the payment of benefits through post offices will cease, removing more than £400 million of their business.

I hope that, in responding to the debate, the Minister will not forget the specific question that was asked about Paymaster's recent letter to war pensioners that referred to payments by payable order books being withdrawn from April this year, not April next year. We would like to hear a clear answer to that, please.

All Members know from our constituency experience the very real worries that arise when local post offices are threatened with closure. They are often the heart of the community, and their closure impacts most on the vulnerable, the poor and the elderly—points made by my hon. Friends the Members for West Derbyshire (Mr. McLoughlin), for Poole (Mr. Syms) and for Bridgwater (Mr. Liddell-Grainger).

I had the benefit yesterday of visiting the demonstration of the "Your Guide" pilot scheme in Portcullis House. I recommend it to all hon. Members; it is very impressive and has been very well received. Only today, I received a copy of the interim evaluation report on the "Your Guide" pilot scheme in Leicestershire, which, I understand, has already been sent to Ministers. The conclusions in the interim report are clear:

"The concept has high consumer appeal, users are satisfied and perceive real benefits".

The report also states that, in a practical sense,

"the service can be delivered."

That is a very ringing endorsement of that pilot scheme, but I put it to Ministers that a prompt decision is now needed on a national roll-out; otherwise, for many local post offices it will come too late. Much the same goes for the universal bank.

In its briefing for this debate, the National Federation of Sub-Postmasters states that it fully supports the idea of the universal bank and believes that

"the post office card account should be available to every pensioner and beneficiary in the land without any form of cap."

Perhaps the Minister can confirm in his speech that that will be the case. The NFSP goes on to say:

"We share the concern of many parliamentarians that the Universal Bank may not be in place by April 2003, as scheduled" so this is not some concern got up by the Opposition for our debate today.

The NFSP concludes:

"it would be disastrous for sub postmasters if there was any delay in the operation of the Universal Bank."

The Secretary of State was a bit weak in her endorsement of the April 2003 date for the bank's being ready to roll, so I hope that the Minister will be much more positive in his winding-up speech.

It is ironic that the Office for National Statistics has only just proposed to stop collating statistics on strikes, when we are witnessing a resurgence in militant union activity. The commuters who use South West Trains need no reminding of that. The Post Office is already responsible for half of all the days lost in Britain through industrial action, and the union is currently balloting for a national postal strike. We know the sort of power that the union wields over such matters.

For example, the former Secretary of State's proposed phasing out the Post Office's monopoly over letters costing less than £1 in December 1998. A statutory instrument was laid before the House, followed closely by another to revoke the first because the Government had to back off from their proposal to reduce the monopoly to 50p to avoid defeat on a CWU-backed motion at the 1999 Labour party conference in Bournemouth. That is the sort of political clout to which the regulator referred in the quote that I gave earlier.

We have tonight seen some more examples of the CWU's reach. We heard some rather ill-advised interventions from CWU-sponsored Members, including Mr. Laxton, who happens to be a Parliamentary Private Secretary at the very Department involved in the debate. Labour Members should be very careful because I read in the Evening Standard today that the RMT is now threatening to withdraw sponsorship from Labour Members, including no less a figure than the Deputy Prime Minister, who have been less than helpful in relation to the recent industrial action. Nor should the British people expect any help from the Government.

There was a time when a large part of new Labour's electoral appeal was its willingness to stand up to the so-called forces of conservatism in the public sector. That is no longer the case. In his speech on the national health service a few days ago, the Prime Minister signalled that Labour was returning to its uncritical support for the producers and public sector unions. That does not bode well for users of postal services.

The plain truth is that, when it comes to the Post Office, this Government are not part of the solution, but part of the problem. Consignia may have only one shareholder, but it is the shareholder from hell. It is not a little old lady checking the value of her investments over tea and biscuits, and perhaps attending the annual general meeting. The Secretary of State, who is not in her place, is, I guess, a sort of ultimate Postman Pat.

Ministers glibly say that they have given the Post Office commercial freedom. They have done nothing of the sort. They interfere in the running of the Post Office at all levels almost daily. As my hon. Friend Mr. Osborne said, they will simply not allow management to manage. As in every other field, they are an interfering, nannying, finger-wagging, hectoring, lecturing bunch of know-alls who have never run a commercial organisation in their lives. [Hon. Members: "Here she is."] Here she is; the Secretary of State has arrived.

That culture of interference reached its nadir when the Secretary of State informed the House in Trade and Industry questions a few weeks ago that she was, in effect, sacking the then chairman of Consignia—what power for one shareholder to wield. The headhunters have now embarked on the search for a new chairman. In the meantime, Mr. Allan Leighton is kindly standing in as interim chairman for one day a week. The union commented:

"We would like to think that the chairman of the Post Office would show more commitment than turning up one day a week."

I stumbled on the advertisement for the new chairman recently. It refers to 50 million customers—those customers do not have much choice—and says:

"The challenges facing Consignia are well publicised."

We are certainly doing our bit to publicise them.

What are those challenges? They include a consistent failure to meet basic delivery targets; the scrapping of the first collection and the second delivery; plans to deliver first-class mail to private addresses in the afternoon; mounting financial losses; appalling industrial relations and a looming national strike; a million items of mail lost each week; the continuing cull of local post offices; losses on its overseas acquisitions; and pressure from the regulator and from Europe for greater competition.

However, the new chairman—whoever he or she is—will not be short of advice from Ministers. In answer to a recent written question, I was informed by the Secretary of State that, in a six-month period, she and the Minister for E–Commerce and Competitiveness had had five meetings with executives of Consignia, that 12 items of correspondence had been sent and that there had been a number of telephone conversations—I wonder how many.

In typically guarded language, the recent National Audit Office report is damning about the relationship between Consignia and its sole shareholder. That point was made by hon. Friend Mr. Bacon. The report says:

"There is a risk that the Department of Trade and Industry, as the principal shareholder, may not apply sufficient pressure on Consignia to improve its performance and respond constructively to competition."

It also says:

"The absence of private shareholders may limit the pressure on Consignia to improve its efficiency".

To add insult to injury, in the "Alice through the Looking Glass" world of the modern Post Office, Ministers are still considering whether they can extract a dividend this year from a company that is losing money hand over fist. As my hon. Friend Mr. Page said, the Secretary of State has the effrontery to suggest that this situation is somehow the fault of the official Opposition, conveniently forgetting that the Post Office made profits in every year that the Conservative party was in government. It is preposterous for the Secretary of State to claim that it is the fault of the last Conservative Government for not privatising the Post Office. I do not remember her manning the barricades for greater commercialisation and lambasting the Conservatives because we were not privatising. If that was her view, she kept it remarkably quiet.

I am indebted to Mr. Tim Row for providing evidence of the Secretary of State's real views. He is with an organisation called Action for Solidarity and is the Leicestershire CWU political officer. He says:

"Our branch donated £400 to Patricia Hewitt's campaign"— we are obviously not in Enron territory—

"on the basis of a letter she had sent me two months before the election pledging her opposition to Post Office privatisation. Now that she is Blair's DTI minister . . . we are in a better position to run a serious campaign against privatisation".

The plain fact is that the Post Office is not working, and it is not working because it is trapped in a limbo between public and private sectors which was designed by the Government. Ministers must do the right thing by the Post Office and all the people who work in it and who depend on it. That means granting the Post Office the commercial freedom it so clearly needs if that great public service, founded in the early 19th century, is to survive and prosper in the 21st century. I urge all hon. Members to support our motion.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry 9:46, 29 January 2002

The debate has demonstrated the strength of support for the post office network in the House and the wider country, but I am sorry that support has not been unanimous among hon. Members. The motion is about mismanaging the Post Office. The Conservatives are experts on that.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

On a point of order, Mr. Deputy Speaker. Will you instruct the Serjeant at Arms to investigate whether the monitors are working? I am sure that Labour Back Benchers would like to come and support their Minister.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

The Conservative party gave Britain record post office closures in the 1980s and 1990s and starved the network of investment. It is the party that saw industrial relations in the Post Office plunge to an all-time low. It is the party that today seeks to divide the House against the Post Office instead of rallying to its defence. The National Audit Office this week said that the Post Office gives high levels of satisfaction, good value for money and a lower cost than postal providers in other countries. We are not complacent, however, because we saw what complacency and inaction did before 1997. We do not claim that Consignia is perfect or that our radical reform package has achieved all that we want it to, but we have seen unprecedented investment go into our postal services at a pace of which the previous Administration could only dream.

The Conservatives have a new dream, though, as explained on the "Today" programme this morning. On their new policy, the shadow Secretary of State for Trade and Industry, Mr. Whittingdale, was asked whether he supported customers paying extra to get a better delivery service. Jim Naughtie asked him whether his message for the future was:

"if you had the cash to pay, you could buy a better delivery?"

The answer was "yes."

The Conservatives know how to peddle the private health service and more private education; now they advocate a premium postal payment that would threaten the universal service. Our key priority is to secure investment for the universal service that meets the expanding needs of customers by providing a wide choice of services to give our citizens a postal service that is fit for a new era.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

Will the Minister stop ranting about the Opposition and answer a question about the Government's responsibilities? On what date last year did the Post Office first contact his Department to ask whether it was the intention of Ministers to reappoint Neville Bain as its chairman? Will he confirm that several months elapsed before Ministers made an announcement on 29 November and that on that date, the Department had put no measures in place for someone to succeed Neville Bain as chairman to ensure continuity of leadership and management in the Post Office

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

Neville Bain agreed to an extension of his contract, and the hon. Gentleman and the House know the subsequent results.

The shadow Secretary of State opened with four assertions: that deliveries are falling short of targets; that many days are lost through strikes; that there are many post office closures, and that Consignia is operating at a loss. It will be pleasure to deal with all of them. Let us consider what the National Audit Office says about deliveries falling short of targets. I can confirm that the NAO found that 89 per cent. of first-class mail arrives the next day—the target is 92.5 per cent—which is 3 per cent. up on the figure under the last Conservative Government. I can confirm also that 98.4 per cent. of second-class mail arrives within three days, which is just below the 98.5 per cent. target and 2 per cent. up on the 1997 figure.

I turn now to the number of days lost through strikes, which is another subject on which the Opposition are experts. In the past five years, 195,000 days were lost through industrial action. During the previous five years, the figure was 933,000—nearly five times higher. The shadow Secretary of State spoke with great historical accuracy when he briefed Ceefax today and said that industrial relations were a shambles. Of course we are concerned about industrial relations problems, which at the moment are running at a fifth of their level in the last year of the Conservative Government. Management and the unions have been in talks with ACAS, and I urge both parties to take full advantage of arbitration and conciliation to obtain an equitable solution and avoid disrupting the service.

Poor management has been mentioned. Yes, there has been poor management, but it lay at the heart of that Conservative Government, when Secretaries of State failed to meet their 1992 promises to invest and to give the Post Office commercial freedom. Conservative Governments took £1.7 billion from the Post Office to pay for unemployment and other prices of failure. We, however, have strengthened the management with a new financial director and a new acting chairman, Allan Leighton. We have given the Post Office commercial freedom and invested £750 million.

I turn now to the concerns of all colleagues about post office closures. The House knows that between 1979 and 1997, 3,500 post offices closed; 16 were lost every month—almost three every week—for 18 years. Opera fans familiar with the Don Giovanni catalogue aria will have been interested to hear Conservative Members giving a list of post offices that have closed, but they were noticeably silent on the matter before 1997, when the post office network most needed their help. We are spending £270 million on modernising and sustaining the network, with more to follow. We welcome the reopening of 169 post offices between April 2000 and March 2001, which my hon. Friend Siobhain McDonagh outlined.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

The Minister will know that benefit availability lies at the heart of the issue of whether post offices will stay open. Has he seen the letter from the Paymaster General to war pension recipients? Is it the case that payment through order books will be withdrawn from April this year? If so, how does that square with the Prime Minister's pledge on the continued availability of payments through post offices?

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

I understand that that is not a state benefit but an occupational benefit. I am grateful to the hon. Gentleman for raising it because that gives me the opportunity to explain the time scale for deploying that procedure, about which several hon. Members asked. That will start in 2003, and be phased in over the next couple of years; that has always been the policy, and I am pleased to reiterate it to the House.

The hon. Member for Maldon and East Chelmsford spoke about Consignia's operating loss. He said that it was astonishing that such a great institution could be brought so low in such a short time. However, the Post Office was not brought low in a short time; it took the Conservatives 20 years to bring it to its present parlous state, and it has taken us five years to start reversing the decline. We have not heard one word of apology from the Opposition for years of neglect and underinvestment in our postal service. There is a history of low investment.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

Does my hon. Friend agree that the long run of profitability in the Post Office began in the middle of the Wilson/Callaghan years? We started it; the Conservatives milked it.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

My hon. Friend provokes me to say that profitability in the Tory years was gained at the risk of investment; the drive was for profits, not for letting investment go ahead. The history of low investment could not be seen more clearly than in automation and computerisation. In 1997, not one branch of the Post Office was computerised; two years later, a Labour Government had invested £450 million and connected all sub-post offices—[Interruption.] Yes, I am addressing the very issue raised by Mr. Liddell-Grainger.

Photo of David Heath David Heath Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

One initiative that is supposed to be taking place at the moment is the introduction of automated telling machines in sub-post offices. Is the Minister aware that when an ATM is put in a sub-post office, not only do customers pay a premium on every withdrawal, but the sub-post master as to put his own money into the machines to provide the service? Does the Minister think that that is right?

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

The programme has been warmly welcomed by the National Federation of Sub-Postmasters, and we are grateful for all its support. We are also grateful for the extension that the NFSP has proposed to the computerisation; Mr. Waterson referred to that, having seen it in Portcullis House. The extension will involve 260 post offices in pilot areas participating in a programme in which Government information is immediately accessible to people via the computerised network.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

I am afraid that my hon. Friend came to this debate rather late; I am sure that he will find in Hansard that his point was covered.

We welcome the support that we have had from the NFSP and its positive proposals. We are wary of the criticisms made by Opposition Members, which have been condemned by the NFSP. We now aim to ensure that the unforgivable attack by the Opposition on another valuable service does not ring true with the general public, especially as that attack came from people who starved the Post Office of investment, presided over record closures and unprecedented bad relations with staff. Today, the Conservatives advocate special charges for people who want their mail on time. Why should we be surprised, when their record was one of chronic underinvestment every step of the way in schools, hospitals and now in our postal services?

We have heard today how the Conservatives dithered over the request from Post Office managers and trade unions for greater commercial freedom. They spent £1.5 million on consultants and, five years later, they did precisely nothing.

Photo of David Maclean David Maclean Shadow Chief Whip (Commons), Opposition Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House proceeded to a Division.

The House having divided: Ayes 185, Noes 324.

Division number 147 Post Office

Aye: 185 MPs

No: 324 MPs

Aye: A-Z by last name


No: A-Z by last name


Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 312, Noes 191.

Division number 148 Post Office

Aye: 312 MPs

No: 191 MPs