Royal Mail Privatisation

Oral Answers to Questions — Business, Innovation and Skills – in the House of Commons at 9:30 am on 7th February 2013.

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Photo of Ian Lavery Ian Lavery Labour, Wansbeck 9:30 am, 7th February 2013

What discussions he has had with Royal Mail regarding its privatisation; and if he will make a statement.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills

I regularly meet Royal Mail and the Communication Workers Union to discuss a future share sale. Since Parliament decided to secure the universal postal service through the Postal Services Act 2011, we have relieved Royal Mail of its historic pension deficit and established a new regulatory regime. The final step is to give Royal Mail access when it needs it to private capital and to honour Parliament’s commitment that at least 10% of the shares will be made available to employees.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

Royal Mail is the jewel in the crown of this nation, and it is cherished by millions. There are grave concerns about the privatisation of Royal Mail in terms of price hikes, job losses and a reduction in services. May I urge the Minister to withdraw the privatisation plans and invest heavily in a publicly owned Royal Mail?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills

It would be very odd to deny Royal Mail—a business with a turnover approaching £9 billion—access to the capital markets that other large, successful companies enjoy, and which it will need in order to innovate and invest for the future. It would also be wrong to withhold from its 130,000 staff the chance that Parliament has given them to own shares in the company.

Photo of Robin Walker Robin Walker Conservative, Worcester

Having served on the Committee that considered the Postal Services Bill, I welcome my right hon. Friend’s determination to implement the will of this House and to succeed where the previous Labour Government tried and failed. Is it not clear that for Royal Mail to benefit from the enormous growth in online retail, and consequently in its parcels business, it needs to be free to invest without competing for scarce public money?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills

My hon. Friend puts it very well. Royal Mail, like any business, needs capital to be sustainable over the long term in order to continue to improve its efficiency, to invest, to innovate, and to seize the opportunities presented by new markets, not least those arising from online retailing. It should not have to compete for scarce public capital against other services such as schools and hospitals.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills

No decision has yet been taken on the timing and size of any share sale. The key is to ensure that a big, successful company is no longer denied access to the capital markets.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

This week Royal Mail reported that it had selected a number of agencies to assist in the

“largest privatisation since British Rail”.

The Ofcom consultation, “End-to-end competition in the postal sector”, has stated that that is not relevant to its primary duty of protecting the universal service obligation as regards rival operators cherry-picking profitable Royal Mail work without having to meet its high standards of same-price, every-place, six-days-a-week delivery. What guarantees can the Minister give that Royal Mail’s service standards will not be put at risk? Does he share my deep concerns about Ofcom’s stance on end-to-end competition?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills

Only the ideologues on the Labour Benches could possibly want to continue to block the access of this company to the private capital markets. Let us be clear: Parliament gave Ofcom a clear statutory duty to secure the provision of the universal service six days a week, and we expect it to carry that out. Ofcom’s consultation on delivery competition has now closed, and it will issue its guidance in the spring, subject to that duty to safeguard the universal service.