Royal Mail — Statement

Part of the debate – in the House of Lords at 3:33 pm on 16th December 2008.

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Photo of Lord Mandelson Lord Mandelson Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform 3:33 pm, 16th December 2008

My Lords, I thank both noble Lords for their responses to the Statement. Despite the somewhat churlish and ungenerous nature of the remarks of the noble Lord, Lord De Mauley, I think that I am right in noting that he did not reject Hooper's report or recommendations; nor do I think that he rejected the fact that in principle the Government accept the recommendations. Therefore, despite the harshness of language, we seem, broadly speaking, to be in the same place on Hooper—I think that he is indicating his agreement to that statement.

I should like to take the opportunity again to rule out any weakening of the universal service obligation. The whole point of what we are doing here is to secure the Royal Mail's future to enable it to see off the pressures and challenges that the Hooper report has described and to give it a viable future so that that universal service, which the country has grown used to and depends on, will be sustained indefinitely in the future. We cannot do that without accepting the recommendations and carrying out the actions that Hooper and his colleagues are recommending. That includes taking over the historic pension fund liabilities.

It is not fair to the Government to say that we have not helped the Royal Mail over the past 10 years or so. We have not exactly been hiding our chequebook or sitting on our hands doing nothing. Back in 2001, we made available £500 million in loans to purchase companies comprisingaGerman parcel company and the Royal Mail's European logistics and parcels arm. A little over a year later, we provided debt facilities of over a billion pounds, but these were not taken up and used by the Royal Mail. They were then effectively rolled over into debt facilities that we renewed in 2007, which amounted to £1.2 billion to assist the Royal Mail's modernisation plans, plus the use, incidentally, of £850 million additional reserves on the Royal Mail balance sheet to support the pension fund. So we have not exactly been doing nothing.

The harsh truth is that—and this goes to the heart of the issue—despite these debt facilities that the Government have made available, Royal Mail has drawn down only £85 million. By March this year, Royal Mail had spent only approximately one-third of what it had intended to spend in its original master modernisation plan. This highlights the need to make progress with modernisation to meet the challenges of the market. It is not the Government who have been at fault. We have not held back. We have been willing partners up to the extent of our ability and capacity to be so. It is more a failure of drive, confidence and unity within the Royal Mail, which have meant that the facilities and resources that have been made available to the Royal Mail have not been taken up in order to bring about the modernisation and efficiency raising for which they were originally intended.

I will not go into greater detail about the discussions that we will have with private and other postal operators that may be coming forward to indicate an interest in taking a stake in the Royal Mail. I have only just received the first indication from the Dutch company and I have to meet the management to discuss this. We will take this forward in the coming weeks. I will of course report back to the House on the detail that is emerging.

The noble Lord, Lord Razzall, may not have properly understood what I said in my Statement. When I referred to our manifesto commitment, I went on to say:

"Bringing in a partner through a minority stake in the Royal Mail's postal business will help us to deliver that goal"— as set out in our manifesto.

"It will bring the Royal Mail fresh investment and new opportunities to grow in Europe and internationally".

There is no secret about what we are intending to do. We are intending to accept the recommendation of Hooper, to find another postal operator to come in and partner the Royal Mail, and to take a minority stake, thus leaving the Royal Mail within the public sector on a continuing basis but using that investment, expertise and experience, as well as that fresh confidence and vigour in the company, to bring about that very modernisation that in our view has been lacking for so long.