Clause 5: Power to direct issue of certain securities

Amendment 15

Moved by Lord Hunt of Wirral

15: Clause 5, page 3, line 6, leave out paragraph (c)

This is a very simple probing amendment on the impact of the privatisation on the subsidiary companies that will remain under Royal Mail Group Ltd. Clauses 5 and 6 deal with the transfer of securities from the various companies to and from the Government and presumably, therefore, to and from each other as well. The diagram I referred to earlier which was so helpfully sent out by the department shows no sign of any change in those subsidiary companies. What transfer of securities does the Minister imagine might be necessary? That is really my main question.

One of the concerns that many have about the government method of privatisation is that they will happily sell off control of the most profitable part of Royal Mail's business—possibly parcels—leaving the rest of its business to continue in its current unsatisfactory way. These clauses appear to make that concern a very real possibility. Therefore, I look forward to hearing what the Government intend to do with the powers in these clauses.

There is also a concern that requiring these securities to be deemed fully paid up in cash may cause some problems from an accounting perspective. Can the Minister provide any reassurances on that front as well? I beg to move.

Amendments 15 and 16 relate to the Secretary of State's powers to direct the issue of, and to acquire, securities under Clauses 5 and 6. Clauses 5 and 6 mirror powers under Sections 63 and 64 of the Postal Services Act 2000. Due to other changes in the Bill, it was considered clearest to introduce these new clauses rather than to amend the existing powers. That is the essence and substance of my argument: they are in the Act. To amend them because of the changed terminology in the Bill would be messy. We therefore felt that it would be clearer to put in two new clauses.

The amendment would prevent the Secretary of State directing a company in the same group as a Post Office company or Royal Mail company to issue securities to the Secretary of State, the Treasury or their nominee, or to acquire securities in a company which was in the same group as a Post Office company or a Royal Mail company. Examples of such companies are Royal Mail Holdings plc, which is the ultimate holding company of the group, Royal Mail Estates Ltd, which is the group's property company, and General Logistics Systems Ltd, which is the European logistics business.

The powers of direction in Clause 5(1)(c) relate to the potential reorganisation of the Royal Mail group of companies. We do not envisage the need to use them in relation to the reorganisation of the group now being contemplated, but we do not see any reason to curtail the powers, given that Section 63 of the Postal Services Act 2000 currently provides them.

The power to acquire securities in a company covered by Clause 6(4)(c) could be helpful to those companies. For example, under the working capital facility currently provided by the Secretary of State to the Post Office, loans are provided via the issue by the Post Office of debt securities, which are acquired by the Secretary of State under the provisions of Section 64 of the Postal Services Act 2000. Clause 6 of this Bill mirrors Section 64 of the Postal Services Act 2000.

It is perfectly possible that, at some point in the future, the Secretary of State might want to come to a similar arrangement with, for example, the holding company of the entire group, Royal Mail Holdings plc. The amendment to Clause 6 would prevent that. We see no reason to restrict that ability.

The clauses are designed simply to put back the existing powers. We do not envisage any transfer of securities which has not been laid out already in our policy statement. We do not envisage a particular handling of the parcels businesses by virtue of these clauses. We make no commitment to parcels in any sense other than that already stated in our policy documents. We certainly do not foresee any movement on that until we have completed our discussions with our potential partner and we have an agreement.

It would be foolish of me to suggest that I understand the accounting point raised by the noble Lord. I shall write to him on it and I hope that I shall be able to give him the assurances that he seeks.

Could I hear that again, as it might help to avoid some of the rumours currently going around in Royal Mail and among the employees who have worked so hard to make GLS a profitable part of the business? Did I hear the Minister say that there are no plans to sell off GLS and the parcels business?

Can I ask my noble friend to repeat his question?

With the greatest of pleasure. Am I to understand from the Minister's reply that there is no suggestion that GLS or a parcel business is being prepared for sale to another company offshore; namely, TNT? That is the rumour that I am asking him to dispel so that people can go about their business without worrying about the Dutch coming along—they have their own problems as has been mentioned. If the Dutch post office is going to be encouraged to take that profitable part of the Post Office's business, it would be a big psychological blow to people in the industry.

The amendment that we are discussing makes no difference one way or other to that position. GLS will be part of the Royal Mail Group, as it is now, and that will be owned by the ultimate holding company. The powers with respect to GLS's shares are unaffected by these provisions as far as I understand them. However, I shall write to the noble Lord to be more precise about the extent of their effect. Our position is unchanged from that which we set out in our policy statement with regard to GLS.

With due respect to my noble friend the Minister, I heard his reply—I listened very carefully to it—but my noble friend Lord Clarke of Hampstead is asking about the subsidiary companies that are part of the Royal Mail, including GLS. Let me put the question very plainly. What my noble friend Lord Clarke is saying is that recently there was a row about a Dutch company that has been described as a possible buyer. That company was saying that it would take over the European parcel service of Royal Mail. From the discussions that are happening, can the Minister give us an assurance that that company cannot take over that service? I believe from what his colleague said that it has already been said that that would not happen. That is all my noble friend Lord Clarke is asking—that it will not be taken over. What we are disturbed by is the probability that, as part of the deal that may be struck, the parcel division, and particularly the European side of it, will go to a private investor—or the predator, as I would term it.

There are no current plans for the Royal Mail Group to sell its stake in GLS, which will be included in any partnership as part of the Royal Mail Group. We are inviting participation in the Royal Mail Group; we are not inviting participation in terms of selling off a particular part of that group.

I am a little bit confused, but I think that noble Lords opposite have raised some important points. They have come back to what I was saying before—that all sorts of rumours, worries and concerns are going around. That is probably because there is no deal and we do not know what the deal is going to be. That is why it is so important—and it is why I tested the opinion of the Committee a little earlier—that the Government should give us some sort of undertaking that we will be kept in touch on developments and that, if there is some fundamental change in the assurances that are now being given, the Secretary of State will come to the House and explain so we get an opportunity to debate it.

As the Minister knows, we are very strongly in support of the Bill in principle. It is this sort of detail that is causing us some considerable concern. However, I am very grateful to the Minister for saying that he will get in touch with me. Presumably, he may also get in touch with all noble Lords who have participated and place a copy of his letter in the Library on the point that I raised on whether dealing in shares that have been fully paid up in cash is likely to be problematic from an accounting perspective. A number of other issues have been raised and we look forward to further detail on them. In the mean time, I beg leave to withdraw the amendment.

Amendment withdrawn.

Clause 5 agreed.

Clause 6: Government investment in certain securities

Amendment 16 not moved.

Clause 6 agreed.

Clause 7 agreed.

Schedule 1: Transfer schemes

Amendment 17

Moved by Lord Clarke of Hampstead

17: Schedule 1, page 40, line 7, leave out paragraphs 15 and 16 and insert—

"15 Where paragraph 16 applies, the transfer of property, rights or liabilities of or in relation to the transferor, or the cessation of interests, rights or liabilities over or in relation to that property or those rights or those liabilities in favour of or in relation to the transferee, by virtue of a transfer scheme, shall be treated for all purposes as a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246) (whether or not those Regulations would apply apart from this paragraph).

16 This paragraph applies where, immediately before a transfer scheme takes effect, one or more persons were employed by the transferor for the main purpose of carrying out those activities.

16A The date of the relevant transfer shall be deemed to be the date on which the transfer scheme takes effect."

As most people still in the Chamber will realise, TUPE is a valuable part of good industrial relations. If you can take worry from a worker, it will make life easier. Amendment 17 would leave out paragraphs 15 and 16 of Schedule 1 and insert the words in the amendment.

As I say, TUPE is very simple but very valuable. Under Clause 8, TUPE will apply only where an agreement provides for the transfer of staff. My amendment provides that TUPE will apply whenever activities cease to be carried out by one person and are carried out instead by another regardless of whether there is an agreement for the transfer of staff.

My Amendment 19 is also in this group—as is Amendment 18, which deals with consultation and I have some sympathy with. Amendment 19 would leave out Clause 8 and insert the new clause headed "Transfer of employees". I do not want to bore the Committee at this time of night, so I simply draw attention to the paragraphs I suggest should replace Clause 8. I beg to move.

I support my noble friend in these amendments. As he rightly explained, his proposed wording enormously strengthens the protection for employees in the event of transfers and in a number of other situations as well. As he rightly says, TUPE regulations are acknowledged by everybody in the labour relations world as providing very necessary support for employees faced with transfers of one kind or another. Indeed, I can remember a long while ago when the TUPE regulations were first introduced and how a number of us in the trade union movement had fought for those regulations. They made an enormous difference to employment in all sorts of ways. It means that employees have been willing to go along with transfers when they would not willingly have done so because they had been assured of protection for their terms and conditions of employment.

My noble friend's amendments seek to extend and deepen the protection offered by TUPE. I commend them to the Committee. I am sure that they will help things enormously. As a number of us have said, whatever is done in this Bill, you have to take the employees with you. You have to have the confidence of the employees whatever you do as far as this Bill is concerned. Therefore these amendments should be supported.

The noble Lord, Lord Clarke of Hampstead, and the noble Baroness have just given us a clear picture of the potential effect that a reorganisation of Royal Mail might have in the current economic climate. We all know from experience that that can often mean some rationalisation of the workforce, which is why the issues raised by the noble Lords and the issue in Amendment 18 are vital. As I understand it, these provisions apply TUPE regulations to any transfers or cessations of contracts. That therefore goes some way to ensuring that any rationalisation that is carried out is done with a mind to the impact that it will have on the employees.

But I must tell the Committee that one thing is clear to me—the drafting of Schedule 1, in particular, is extremely difficult to understand. There appears to be some inconsistency between what is specified as falling within a transfer scheme in Schedule 1 and the initial definition in paragraph 7(2). There appears to be no mention of the accounting basis of the value of any transfer schemes. Does the Minister not feel that that would be a useful addition?

I understand that there has also been some surprise among outside stakeholders, who I believe have expressed their concern to officials in the Department for Business, Enterprise and Regulatory Reform, that the disapplication of directors' duties and some Insolvency Act provisions were in one draft of the Bill but have now magically disappeared. There may be a good reason for that but I think that we are owed an explanation. Can the Minister indicate why this has happened? Has any other way forward been found to overcome some of the legal issues around transfers that does not involve giving the Secretary of State power directly to issue a transfer scheme and so circumvent these duties?

I have inserted in Amendment 18 a requirement that any direction to make a transfer scheme must first be consulted on with the companies involved and the employees. I would hope that paragraph (a) of my amendment would be unnecessary. I cannot imagine that any transfer would take place without long discussions with the relevant companies as to what is being moved where. Paragraph (b), of course, would ensure that the affected employees were consulted also.

As ever, uncertainty reigns supreme over what will happen on the ground as opposed to what is apparently happening in the minds of those writing the policy papers. Giving the employees the assurance that they will be consulted before any great change is made to their contracts of employment would provide some much needed reassurance in this area. I look forward to the Minister's reply.

The sentiment behind these amendments is to ensure that employees get the best protection possible from any transfers that take place as a result of any company restructuring. While I agree with this sentiment, I disagree that the amendments signify the best way to do this. I will deal with Amendments 17 and 19 first and then turn my attention to Amendment 18.

The Transfer of Undertakings (Protection of Employment) Regulations, or TUPE, provide that where there is a transfer of an undertaking, or part of an undertaking, from one person to another then the effect of that on the contract of employment of employees working in that undertaking, or part thereof, is that those contracts are not treated as terminated by the transfer. They are instead treated as though they were originally made between the transferee and the employee concerned.

TUPE also applies to the same effect in a situation where activities cease to be carried out by one party on behalf of a second party and are then carried out instead by the second party on his own behalf. This is similar to what will be happening with the reorganisation of Post Office Ltd staff. Currently, those working for Post Office Ltd are actually employed by Royal Mail Group but seconded to Post Office Ltd. As part of the internal restructuring, the secondment agreement between POL and RMG will be ended. Consequently, Royal Mail Group Ltd will cease to carry out activities on behalf of Post Office Ltd and instead Post Office Ltd will undertake those activities itself. Applying TUPE to this situation will ensure that employment contracts of the staff seconded to Post Office Ltd will transfer so that they are formally employed by Post Office Ltd once the secondment agreement ends.

TUPE is designed to facilitate a smooth transfer of employees. It is in the interests of both employees and the effective implementation of the internal restructuring of the Royal Mail Group for TUPE to apply and we believe that the Bill achieves this. However, I do not believe that Amendments 17 and 19 meet that goal. I believe that there are two key problems with them; namely, that they would increase uncertainty for employees, and that they are impractical to implement.

Amendment 17 is much wider than the provision it seeks to amend. Schedule 1 currently applies TUPE to a transfer of rights and liabilities under a contract of employment transferred under a transfer scheme. Amendment 17 applies TUPE to the transfer of any property, rights or liabilities under any transfer scheme, with no reference to a transfer of employment contracts. This amendment could therefore apply TUPE to cases where it clearly does not normally apply. I am unclear about exactly how this would work in practice.

Our intention is to give employees comfort that TUPE will apply to any employment changes necessary as a result of the internal reorganisation. However, it is not our intention to extend TUPE to circumstances where, for good reasons, it would not normally apply. For example, it is not in the employees' best interests for their rights and liabilities to transfer to the transferee—likely to be the Post Office—if their role remains with the transferor—likely to be the Royal Mail Group. This is the effect we believe this amendment could have, and therefore, while well meaning, we believe that it would create confusion and uncertainty for the very employees we are trying to help.

Again, Amendment 19 is much wider than the provision it seeks to amend and could lead to the application of TUPE in circumstances where TUPE clearly would not normally apply. As I said before, that is not our intention and it is not in the employees' best interest. This amendment also seeks to remove two key aspects of Clause 8. The first is that the employee-restructuring matters must be documented in a written agreement and the second is that the Secretary of State may designate contracts or employees under that written agreement. The effect of that designation is to confirm that once the agreement comes into force TUPE will apply in respect of the designated arrangements. Without this designation power, TUPE would continue to be applied to any circumstances falling within Amendment 19 after this restructuring is complete. While we want to provide employees with certainty during the upcoming group restructuring, it is not our aim to change employment law for these companies for ever. By contrast, the proposals in the Bill ensure that all employees who will be transferred, whether or not they are being transferred through a transfer scheme, will know that they are being transferred and what the process will be. This will reduce uncertainty for employees as it will be clear who is moving and that TUPE will apply to them.

Again, while the sentiment behind Amendment 18 is worthy, we think that it is unnecessary and burdensome. It seems that there may be concern that those who are affected by a transfer of employment will be disadvantaged by the application of TUPE, and therefore that the Secretary of State should consult the company and employees before making any designations under this clause. This consultation is not necessary, however, as consultation on any transfers of employment is already required under TUPE. This consultation is carried out by the relevant employer. This is the correct level for such consultation. To require the Secretary of State to consult the company and its employees over and above this would only cause unnecessary delay and uncertainty for those affected.

The application of TUPE to designated contracts or employees will facilitate a smooth transfer of the employees properly assigned to Post Office activity from Royal Mail Group to Post Office Ltd. For the following reasons, it is in the interests of both those employees and the effective implementation of the internal restructuring of the Royal Mail Group for TUPE to apply. TUPE will apply to transfer the employees on the same terms and conditions of employment as they enjoyed before the transfer in all respects, save in respect of pensions, full details of which are dealt with in Part 2. The employees will also benefit from protections by virtue of TUPE which they would not otherwise have had, such as certain protections in relation to any transfer-related changes to terms of employment. They will enjoy continuity of service and will have a right to be consulted in relation to the TUPE transfer.

In summary, I remain unconvinced that the amendments would help to smooth the transfer process and create greater clarity or certainty. The clause is designed to avoid any ambiguity that there may be some situation where TUPE would not apply. We do not believe that there is one, and this assures employees that in transfers TUPE will apply. This is a comprehensive cover, and TUPE as it is now is satisfactory both in terms of the transfer of rights and in its consultation provisions. We are not proposing to give greater rights than the TUPE regulations as they work today and as they have successfully worked over recent years. TUPE is good and it is properly balanced.

In so much as the noble Lord, Lord Clarke, is concerned that there may be some holes or concerns in this provision, we are happy to have detailed discussions with the noble Lord and his advisers to see whether there are any remaining concerns or holes. The amendments make TUPE work less well and less clearly. That would be best left to further discussions, if it were felt necessary. On consultation, TUPE has consultation rights intrinsic in it. They have worked well in other industries, and they should remain unchanged as they are in TUPE and not be modified by virtue of Amendment 18.

The Minister may well be about to answer the questions that I raised about the inconsistency between what is specified as falling within a transfer scheme in Schedule 1 and the initial definition in Clause 7(2). There appears to be no mention of the accounting basis of the value of any transfer schemes. I thought that the Minister might agree that would be a useful addition.

I also asked about the concern that the disapplication of directors' duties and some Insolvency Act provisions included in a previous draft of the Bill have now disappeared. It would be helpful to know why they have disappeared. Has any other way forward been found to overcome some of the legal issues around transfers that do not involve giving the Secretary of State power directly to issue a transfer scheme and so circumvent those duties?

Finally, having been involved in consultation a great deal in the past, I must say that I am concerned by the Minister's response to Amendment 18. He might just try again on that, because he may call me worthy in wanting to have consultation with the employees, but the situation at the moment is such that it would be a pretty inexpensive olive branch to meet those concerns, and I cannot quite understand why the Minister cannot give me that assurance. Those are just some of the questions that he may have been about to come to, and I will have to decide what to do with my amendment once I have heard his further comments.

I was about to apologise for not answering those questions. I cannot recite that level of detail. I believe that we have reassuring answers for all of them but, because they are so precise and so important, it will be much more satisfactory if I write to the noble Lord and copy the letter to other Members of the Committee.

We will reflect on what the noble Lord said about consultation, but in my experience the consultation requirements in TUPE work very well. I have been involved in them in my own business and they have been around for some time. I believe that they are of sufficient depth. I hope that the noble Lord will come to that conclusion.

Before the noble Lord, Lord Clarke, concludes on what he intends to do about Amendment 17, it may be helpful if I indicate that I am dissatisfied with the Minister's response. Unless the Minister wants to come back again to try to persuade me, I want to test the opinion of the Committee on Amendment 18. I give way to the noble Lord, Lord Clarke, on his Amendment 17.

The temptation to sit down and talk to people about the interpretation is of course a great thing, because I believe in consultation. If what the Minister said was in the spirit of consultation, I do not see why we are arguing about Amendment 18. It is paradoxical for a member of the Labour Party like myself, with a long history of being a member of a trade union, to find that the Government resist Amendment 18, which simply calls for consultation. That is difficult to understand.

I know that I have been around for a long time, but one of the things that we have always complained about is lack of consultation. Here we have a straightforward proposal in Amendment 18, which I shall deal with first, because the noble Lord, Lord Hunt, talked about testing the opinion of the House. I do not know whether he will do that after what I have to say, but I should mention one or two things. It is always a pleasure to hear a practitioner who has worked in industrial relations such as my noble friend Lady Turner. People would say that she has worn the shirt and done the job admirably well for many people in her union and the TUC. When someone like me gets support from my noble friend, it is a great fillip, because I have felt a bit lonely on this Bill, especially among my colleagues on this side, some of whom are only too pleased to shoot down anything that suggests that a trade union principle is at stake.

Amendments 17 and 19 simplify the Bill to the point where the words are reduced, certainly as regards deleting paragraphs 5 to 7. I should have thought that the Government, with all their determination to force this Bill through, would see that this is a chance to sit down and accept logic. The logic of TUPE is simplicity. The logic of the amendments is to create equality whereby people are treated in the same way. For the Minister to suggest that this is going round China to get to Chatham is a bit disingenuous, if that is the right word—I am not used to using such words, but it will do at this time of night.

My amendments are the right ones. By all means, I will sit down with anyone at any time. I was a practitioner of industrial relations and I know the value of consultation. I hope that in the spirit of what the Minister said, and given the suggestion of the noble Lord, Lord Hunt, that he may divide the House at this time of night, there is certainly a case for all of us to look at this point. If consultation is not there at the end of this exercise, I shall be walking shoulder to shoulder, as someone said at Second Reading. TUPE should be explained clearly for the workers—and what I heard from the Minister complicates the position. You should ask your postman or postwoman when they deliver tomorrow, "Who is your employer?". There is all this business about saying that you work for the Royal Mail but you are really an employee of the Post Office; when they get up at 4.30 in the morning to go down to the sorting office to pick up their mail, they do not say, "I am working today for the Royal Mail". They are working for the Post Office. It is a brand name in this country that we ought to defend.

I certainly will withdraw the amendment on the basis that there is room for discussion between us, and I hope that the noble Lord, Lord Hunt, will be part of those discussions. I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Schedule 1 agreed.

Clause 8 : Transfer of employees otherwise than under transfer scheme

Amendment 18

Moved by Lord Hunt of Wirral

18: Clause 8, page 5, line 2, at end insert—

"( ) A designation under this section may be given only after the Secretary of State has consulted—

(a) the companies within subsection (3); and

(b) the employees."

I have listened carefully to what the—

Before the noble Lord speaks, I listened to the questions that he posed, and he wished to hear the Minister's response to them. I was particularly taken by the point made by my noble friend Lord Clarke concerning consultation and the fact that there should be an opportunity for consultation. I understand that the Minister has undertaken to write to all the parties involved on the specific issue that the noble Lord, Lord Hunt, raised. As we are in the mood for consulting and for endeavouring to reach agreement round the table, so to speak, it seems to me that we should wait to see what the response is and then, when we reach Report, see whether anything remains that needs to be resolved by way of a vote.

If it helps the noble Lord, Lord Hunt, I will respond on the point about consultation, specifically with respect to transfers. We are giving the assurance that TUPE, with its consultation provisions, will apply. I am not giving a general statement on the extent to which there will be wider consultations with employees when the restructuring takes place. That is obviously something that we will consider in the light of this debate and in the light of how the project develops. I hope that that allows the noble Lord to delay seeking to test the opinion of the Committee until we have a clearer view of the total consultation issues with respect to employees.

I listened very carefully to what the noble Lord, Lord Brooke, said. However, the Minister has just replied and has pointed out that there is no way in which he can accept the amendment in my name and that of my noble friend, and therefore I want to test the opinion of the Committee.

Division on Amendment 18

Contents 52; Not-Contents 57.

Amendment 18 disagreed.

Amendment 19 not moved.

Clause 8 agreed.

Clause 9 agreed.

House resumed.

House adjourned at 9.52 pm.