Royal Mail — Statement

Part of the debate – in the House of Lords at 3:19 pm on 16th December 2008.

Alert me about debates like this

Photo of Lord de Mauley Lord de Mauley Shadow Minister, Cabinet Office 3:19 pm, 16th December 2008

My Lords, I thank the Secretary of State for his Statement and for giving me sight of it a few minutes ago. We welcome Richard Hooper's report, which confirms what everyone has known for a long time: Royal Mail's working practices are inefficient, competition is intensifying, industrial relations are poor and sorting machinery is outdated, while the fixed price of a stamp and a huge pension deficit seriously limit room for manoeuvre. All this has been clear for a decade, but for all that time the Government have done nothing to curtail a precipitous decline in Royal Mail's fortunes.

Today we learn that the Government are trying to strike a desperate deal to see them through the next election. They are trying to look like the saviour of Royal Mail but are doing so in a barely disguised breach of their election manifesto. Even though his own party will not do so, we broadly welcome the Secretary of State's intention to introduce a new commercial partner. It is a step in the right direction, although the details remain unclear.

Will the Secretary of State confirm the status and details of the plan? What exactly are private partners being offered in exchange for their investment? Will he insist on a commitment from them to invest in new sorting technology? Can he confirm whether the opportunity to buy a stake in Royal Mail will be put out for competitive tender? Has he already been assured that a deal would comply with EU state aid rules? By what commercial method might he sell a stake? Can he guarantee that the revenues from any sale will accrue to Royal Mail and not to the Government?

The Government have had over 10 years to deal with the problems that Hooper identifies but have completely failed to do so. In 1998, in his first attempt in this role, the Secretary of State said that the Government's policies would,

"lead to greater investment in and strengthening of the local post office network, resulting in improved services to ordinary people in every part of the country".

He said:

"Everyone stands to be a winner".—[Hansard, Commons, 7/12/98; cols. 24 and 36.]

Since then, almost 40 per cent of all post offices have closed. Rather than creating innovative solutions to the problems facing the business, the Government have concentrated on managing its decline.

During those 10 years, the Government could have cut costs, done deals, forged partnerships or part-privatised the business, but they have singularly failed to do so. They have failed to drive through efficiencies in Royal Mail management. They have failed to invest in new technology. They have failed to deal with the pensions deficit. Just as the Government have wasted 10 years mismanaging the country, they have wasted 10 years mismanaging Royal Mail.

Having read Hooper, will Secretary of State decide to keep the pension fund intact, with the deficit made good by the Government, or does he intend that Royal Mail should dispose of the fund to the Government, with the Government assuming ongoing responsibility for pension payments? In other words, will the Government resort to raiding the pension fund in order to try to plug a black hole in the public finances, dumping the cost of a multibillion mortgage on future generations? The seizure of £22 billion from Royal Mail's pension fund might make the Government's woeful borrowing figures look a little better, but it would saddle future generations with an almost open-ended bill. The whole process would look as if it had been engineered to make a quick buck for the Prime Minister, kill the issue until after the next election and pass the biggest financial problem on to the next Government and many that will follow them. It would be nothing short of an asset-stripping scam.

What does the Secretary of State estimate that the long-term pensions liability to the taxpayer will be? Will the Royal Mail's pension liability be included in the Government's borrowing figures? If the Government take over the pension fund, what will happen to the Royal Mail's agreement with the trustees to make up the pension deficit over 17 years? Will it still have to pay several hundred million pounds a year to the Government?

The other elephant in the room is the unions. As we know, Royal Mail workers are already planning strikes. What does the Secretary of State expect will be their reaction to today's proposals? We believe that any restructured ownership package must include the full involvement and incentivisation of the staff. What will the pension terms and conditions be for future joiners and for agency workers? Thousands of post offices have already closed; large-scale sorting-office closures would be a further blow to the workforce. What is his estimate of job losses resulting from any deal? What is his estimate of the effect of a reconstituted Royal Mail on post office income? Can he rule out any weakening of the universal service obligation?

Proposals for serious reform of the Royal Mail are welcome. Private capital to fund improvements in services is welcome. After a decade of missed opportunities, however, the Government's last-ditch attempt to dangle the prospect of part-privatisation must not distract us from the real worry—a cheap accounting trick that would dump a huge bill on every family in the country for generations to come. That would steal the funds that would have paid most of the pensions and place a new obligation on future generations to pay the bills that those funds would have covered. Yet again, the Government would be stealing everyone's tomorrow for their own today. For future generations, we fear that the bill is in the post and that it has the Prime Minister's stamp all over it.