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Clause 79 — Guarantees where postal administration order is made

Part of Dairy Farming – in the House of Commons at 6:40 pm on 12th January 2011.

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Photo of John Denham John Denham Shadow Secretary of State for Business, Innovation and Skills 6:40 pm, 12th January 2011

I understand those remarks, but I believe that it would be possible for a Government who wished to do so to resolve the need to bring in additional investment in future through measures that fall short of selling a majority shareholding in Royal Mail. Some of those measures have been proposed by my party in the past, while other mechanisms have been proposed from outside. The truth is that the Government are driven by the desire to raise the albeit relatively paltry funds that they will get from selling as quickly as possible. That is fundamentally why they have refused to provide the safeguards on future business that many Members have been seeking. The highest price will come from giving the buyer the greatest freedom to make money through eroding the quality of service by closing post offices and transferring functions elsewhere.

If the Bill goes through this House today, and if it succeeds in another place, that is not the end of the story, because uncertainties still exist. First, there are the state aid discussions that will have to take place with the European Union. That arises from the need to deal with the Post Office deficit, and it will arise, if not in exactly the same form, if Royal Mail remains in public hands. We do not yet know whether any restructuring of Royal Mail will be required or whether profitable subsidiaries will need to be sold off, as the press have speculated, so we do not know what would be available for sale.

Secondly, there is still uncertainty about the regulatory regime. There is agreement about the transfer to Ofcom, but there is a crucial question about whether it will review the regulatory relationship between Royal Mail and its private sector competitors. Royal Mail has argued, most recently in a letter from the chief executive this week, that the current arrangements are commercially unfair, and that many of the letters that we all saw being delivered on our Christmas visits to post offices were, in effect, costing Royal Mail money because of the terms of the agreement. The crucial question on the proposed privatisation is whether Ofcom will review that relationship and, if so, when. Clearly, any change, particularly if it conceded Royal Mail's argument, would make a very big difference to the future financing of a publicly owned Royal Mail and a huge difference to the price that could be obtained from a privately owned Royal Mail. We must begin to say that a final decision on whether to sell can be made only once it is clear whether Ofcom will investigate this issue, what the time scale of such an investigation will be, and after there is an indication of the likely outcome. That is the second reason to say that there is great uncertainty.

The issue over the universal obligation has been debated this afternoon, and I will not take it further.

The final area of uncertainty is the future of the post office network. The major argument today has been about the inter-business agreement, but there are other questions about the amount of business that will go to local post offices. I welcome the Government's promise of substantial investment in the network. In some ways, that is a bold decision, because if they are wrong about the future business that goes to local post offices, that will be public money not well spent. Capital investment cannot of itself secure revenue from the Royal Mail. Promises of other work are slim and not tied down. Our plans for a Post Office bank have been dropped, and the promises from other Departments are vague.

The National Federation of SubPostmasters has supported the principle of the Bill, but the briefing it has circulated to right hon. and hon. Members for today's debate could not be more explicit. It states that

"ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy."

It goes further and states that if adequate levels of new Government work at post offices are not secured, it believes that the separation of Post Office Ltd and Royal Mail, and the sale of Royal Mail must be "indefinitely delayed".

The House has rejected the first thing that the federation asks for, which is a long term deal. The Government have failed, as yet, to deliver the second thing that it asks for, which is a clear commitment for future levels of other Government work. The argument over indefinite delay is, I think, the battleground on which the forthcoming campaign to save our postal services will be fought.