Royal Mail

Part of Opposition Day — [5th Allotted Day] – in the House of Commons at 4:18 pm on 11 February 2009.

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Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee), Shadow Secretary of State (Business, Enterprise and Regulatory Reform), Chair, Tax Law Rewrite Bills (Joint Committee) 4:18, 11 February 2009

There should certainly be a level playing field, and the consumer benefits from such competition. It will be extended across Europe and I hope that Royal Mail will be a powerful contender in wider markets, if it can be modernised and reach the standards of efficiency of its competitors. The Government introduced that competition. We agree that it is of lasting benefit to business and the ordinary user of the service in this country, but competition is not responsible for the present difficulties.

Royal Mail's long-standing difficulties are being compounded by the change in the medium of communication. Far more revenue has been lost—the threat to the taxpayer from Royal Mail's current state is considerable—from the introduction of new technology and the steady loss of traffic than has been lost to competition. Hooper is right that the loss of volume—the amount of letters and parcels to be delivered—is speeding up. It could be 7 to 10 per cent. next year without any difficulty, and that is leading Royal Mail in an ever-more downward direction. Other problems include the fact that it has not adopted the modern technology of its competitors in Europe, the enormous pension deficit hanging around its neck like a millstone and the lack of change over the past few years. As Hooper rightly said, it also suffers from extremely bad industrial relations. As we all remember, there was a most unfortunate strike in 2007, which weakened the business still further. Many small and medium-sized businesses joined their bigger competitors in deciding that they could not longer trust Royal Mail, and they turned away from it.

I have merely summarised the analysis set out in Hooper. I have not left myself time to repeat it, but it has been accepted completely by the Government and I think that it is unanswerable. The status quo is not tenable in any way at all.

These problems are familiar to anyone who has ever followed Royal Mail. Similar discussions have gone on for a very long time, and I am sad to say that Hooper's analysis and the litany of problems that he sets out remind me of when I was the Minister in charge. That was a very long time ago, but the problems have actually got worse and worse in the past 10 or 12 years.

Lord Mandelson's clarion call to action before Christmas came after 12 years of inaction or pointless action, and when one looks at the state of the business one realises that it is getting nowhere fast. In 2001, the Government gave Post Office Ltd commercial freedom, but none of the reforms that have been tried has worked. Over and over again, the Hooper commission refers to the political background that has inhibited the management's ability to take decisions. It is obvious that a succession of Ministers—until these men of courage came along—have been intervening, slowing down the management and giving in to pressure in trying to make sure that the changes do not take place.

I believe that the time has come for a genuine consensus about action. Does the Government amendment mean that, after two months of failing to produce any detail, they are now buckling at the knee and deciding to leave the matter for a bit? If they are going back to the 12 years of pretty useless inactivity that has been their policy so far, the message of the Hooper report is that the Royal Mail may not survive, as it says that the universal service obligation depends on the changes that it recommends.

I hope that the Minister will correct my misunderstanding and that he will make it clear that partial privatisation—not even full privatisation—is an option. That is quite a concession from someone who was in the Thatcher Government, but the Opposition are not pressing for anything other than a minority partner to enter into a mixed public-private sector partnership. I hope that the Minister will confirm that that is the Government's policy, and that progress is being made with it.

I leave the Minister to make the case for private capital. Where else is the capital going to come from, given the state of the public finances, the needs of the Post Office and the circumstances of the next few years? Does anyone really believe that the Post Office will be able to compete successfully with health, education and defence for the capital that it requires? As Hooper argues compellingly, private sector competitors that are prepared to come in as partners in Royal Mail will be able to bring with them the experience of change and of management that will help the transition to go smoothly. They will be able to deal with the understandable fears of staff and stakeholders, and the understandable need to win back confidence in the business.