Postal Services Bill

Public Bill Committee, 11 November 2010.

Jimmy Hood (Labour, Lanark and Hamilton East)

We will now hear oral evidence from Consumer Focus and the Association of British Credit Unions Ltd. For the record, could you please introduce yourselves to the Committee.

Jimmy Hood (Labour, Lanark and Hamilton East)

Before calling on the first member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill. We must stick strictly to the timing in the programme motion that the Committee has agreed. I hope that I do not have to interrupt mid-sentence, but I will do so if need be.

Gordon Banks (Labour, Ochil and South Perthshire)

How strong are the Bill’s provisions for protecting consumers? Link your answer to the universal service obligation, which from the point of view of many consumers is a legitimate thing to protect.

Gordon Banks (Labour, Ochil and South Perthshire)

I wonder if I could follow up on that with two points. You mentioned that there are some provisions in the Bill that you think would potentially reduce consumer protection. It would be great if you could expand on that. Secondly, you welcomed the separation of the Post Office and Royal Mail. Could you comment on how important you think the inter-business agreement and getting longevity on it would be in ensuring that post offices survive and that consumers will therefore be protected by having facilities close at hand?

Damian Collins (Conservative, Folkestone and Hythe)

My questions are principally directed to Mark Lyonette, but I welcome comments from any members of the panel. There are already some credit union transactions taking place through the post office network. What are your views on the Bill in relation to the way in which the Post Office and Royal Mail can work with credit unions? Do you think there is an opportunity to extend the option of using credit unions through the post offices?

Damian Collins (Conservative, Folkestone and Hythe)

In Consumer Focus’s submission to the Committee you touched on the future relationship between Post Office Ltd and Royal Mail, should the Bill be passed. The submission particularly said:

“There are strong arguments against seeking to maintain the contractual relationship between Post Office Ltd and Royal Mail for perpetuity.”

You touched on that earlier, but could you say a little more about it? You said in your submissions that in the short term it is very important that that relationship exists to help support post office branches that are not financially viable on their own. I am interested that you do not think that the relationship should stay in place in perpetuity; so what are your views for the longer term?

Nia Griffith (Labour, Llanelli)

Continuing that point, I think there are two aspects to this. First, what number of outlets would you be looking at—because we know that only about 4,000 post offices are financially viable—in order to provide proper access, a proper cover of the country? Secondly, how do you see that being put in the Bill? Do you simply want to see something about the number of outlets, or do you want to see something stronger? You have talked about trying to have a stronger indication, beyond the warm words of Moya Greene: “Oh, yes, well of course we’ll use the post offices.” What sort of stronger provision could you have that would make an agreement stick in the long term?

Nia Griffith (Labour, Llanelli)

So, you would like to see written into the Bill something similar to the requirement that 90% of people live within a mile or whatever of a post office?

Nia Griffith (Labour, Llanelli)

So, you would like the access criteria to be strengthened?

Nia Griffith (Labour, Llanelli)

You would like the access criteria to be higher than they have been, as you put out in the document on Tuesday, and formally formulated next year?

Nia Griffith (Labour, Llanelli)

Then you would say that that is the way to preserve an inter-business agreement with the Post Office, because it would be quite difficult for them to find other outlets that would actually provide the same level of access for consumers?

Nia Griffith (Labour, Llanelli)

Is that sufficient in terms of an agreement? Should there be something stronger?

Nia Griffith (Labour, Llanelli)

And you are effectively saying that you cannot actually put in legislation what a private company has to do in terms of whom it chooses for its outlets?

Michael Weir (Scottish National Party, Angus)

In your submission to the Committee you state that 93% of businesses say they will always need to send some things by post. You also raise a concern later on that the definition of the USO does not include a packet delivery or a pick-up on a Saturday. Could you expand on that? Of these 93% of businesses, is there a split between how small and large businesses see Royal Mail? Again, with the packet delivery, is that a demand that comes more from small businesses or from any particular group?

Michael Weir (Scottish National Party, Angus)

I take it from that that you find both business and individual consumers have expressed a desire for a package delivery service on a Saturday?

Priti Patel (Conservative, Witham)

In your submission you mention that the USO in its current form is sustainable for the immediate future. Earlier in the week, we heard evidence from the Mail Users’ Association and the Mail Competition Forum, and they were sceptical about the sustainability and viability of the USO. Do you think that the Bill goes far enough in safeguarding the USO? Do you have any concerns about its sustainability and viability in the long term?

Priti Patel (Conservative, Witham)

Do you think that that is captured adequately in the Bill as currently drafted?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

May I go back to the issue of post office numbers? Is it your understanding that, as things stand, if the Bill proceeds, the only protection for post office numbers following privatisation will be the set of informal criteria that the Government have said they will retain?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

If I understood your previous evidence, those criteria could be met by 7,500 post offices?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Do you think, for people who are worried about their post offices, that that informal non-statutory provision is adequate?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

What you are saying is very interesting. Maybe a pithy way to put this is that it is a question of whether you can buck the internet. Would that be a fair way to characterise the challenge facing the post office network?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Why do central Government and local government often not use the post office network?

Graeme Morrice (Labour, Livingston)

I am not sure whether I need to declare an interest in being a proud member of the Livingston credit union. I want to ask some questions of Consumer Focus, but I suppose, with the questioning that we have had already from Mr Weir and Ms Patel, that they have stolen my thunder to a certain degree. I was going to ask about the research that you have done with consumers. I think, to an extent, that you have adequately answered that in relation to the USO and whether people are relaxed with the six days going down to the five days.

May I ask you, in particular, about the commitment to provide, through first class, next-day delivery and about consumers’ views on price. It was suggested, in evidence given on Tuesday, that people were relaxed about next-day delivery and price.

You mentioned earlier that as an organisation you were quite relaxed about whether Royal Mail remains in public hands or becomes a private entity. What are consumers’ views on that, and on the future ownership of Royal Mail? Are people relaxed about its ending up in foreign hands, and about profits going into foreign countries?

Graeme Morrice (Labour, Livingston)

I think, Mr O’Connor, that you were suggesting that privatisation was the only game in town. We all accept that we need to see a major capital investment into Royal Mail, but the trade unions and the work force would take a different view; certainly, based on the evidence given earlier this week, they would feel that privatisation should not necessarily be pursued. Have you taken the views of the work force and trade unions into consideration on this issue?

Andrew Stephenson (Conservative, Pendle)

May I pick up a point of clarification on some of the research that you have talked about? When you talk about “consumers,” does it relate to mail sent from private individuals to other individuals or businesses, because ordinary letter business is only 5% of what Royal Mail do? Or is “consumers” a much broader term?

Andrew Stephenson (Conservative, Pendle)

Obviously, the interests of each different group of consumers will diverge slightly, so I just wanted to clarify that. Returning to the post office network, it is estimated that about 7,000 branches are currently economically unprofitable. Do you believe that if the Government, in addition to the provisions in the Bill, looked rigorously at involving credit unions and other ways of making the network profitable, all 7,000 could, one day, become profitable? Or do you believe that a further contraction of the network is inevitable?

Andrew Stephenson (Conservative, Pendle)

Have you done any research on what one aspect in particular consumers most value about the Post Office? Is it face-to-face? Is it universal reach? Or is it a spectrum of different issues?

Andrew Stephenson (Conservative, Pendle)

Hopefully, the same objective could be achieved by working more closely with credit unions, rather than a post bank.

Richard Fuller (Conservative, Bedford)

I have a couple of questions for Mr Burrows about maintaining the size of the post office network. You write in the submission about the existing access criteria. Is there a concern that there is something wrong with those criteria? Is that a long-standing issue of concern for Consumer Focus?

Richard Fuller (Conservative, Bedford)

So, if I hear you correctly, it is not a concern about access per se, but about the numbers.

Richard Fuller (Conservative, Bedford)

Do you know where those additional 4,000 that currently exist are located? Are they peppered into urban areas? Do you know whether they tend be ones that are more profitable or the ones that are less profitable, or is it difficult to say?

Richard Fuller (Conservative, Bedford)

Forgive me, but if it is an issue of numbers—you were asking here for a statutory provision stating a numerical requirement, going beyond the access issue—is it not reasonable to expect that most of those additional offices are in areas where there is already adequate provision in terms of access, and that they are likely to be there because they are actually quite profitable?

Jimmy Hood (Labour, Lanark and Hamilton East)

I am afraid that this will probably have to be the last question.

Karl Turner (Labour, Kingston upon Hull East)

If the Bill remains as it is, what do you think will happen to the 7,000 non-profitable post offices?

Jimmy Hood (Labour, Lanark and Hamilton East)

Order. I am afraid that that brings us to the end of the time allotted to the Committee to ask questions of these witnesses. I thank them on hon. Members’ behalf. Can we have the next witnesses, please?

Jimmy Hood (Labour, Lanark and Hamilton East)

Welcome to our meeting. Could you briefly introduce yourselves? Then we’ll get into questions.

Gordon Banks (Labour, Ochil and South Perthshire)

Will you say whether you are satisfied with the pension provision in the Bill, amplifying what the consequences are of transferring the pension fund to the Treasury? Will you also comment on what you think are the reasons for the substantial deficit that exists just now and whether you agree with—dare I say it?—a statement made by the Secretary of State, which I cannot refer to exactly, mentioning poor investments made in the past?

Gordon Banks (Labour, Ochil and South Perthshire)

You haven’t actually touched on whether you are satisfied with the provision for pension provision in the Bill, and what you see as the consequences of transferring the pension fund to the Treasury.

Gordon Banks (Labour, Ochil and South Perthshire)

So the arrangements in place just now to pay the deficit off over 37 or 41 years—I can’t remember, but something like that—

Gordon Banks (Labour, Ochil and South Perthshire)

Do you think those arrangements are unsustainable?

Andrew Stephenson (Conservative, Pendle)

I am reassured by what you said about protecting existing members’ benefits and welcoming some of the aspects of the Bill. I should like you to touch on the future and whether you have had any discussions with the Government about the assets that will be left with the pension plan. Assuming that the Bill passes into legislation, are you confident that you will be able to meet the cost of the pension obligations for current and future employees who will still be covered by the plan?

Andrew Stephenson (Conservative, Pendle)

Yes. I just wanted to see whether you were comfortable with going forward. Obviously, you have said that you are fairly satisfied with the solution being proposed in the Bill for the existing member benefits; it is just really for the sustainability of the pension plan in the future.

Nia Griffith (Labour, Llanelli)

You mentioned that you would be happy for the Bill to go through, given what is in the Bill and what has been said in the way of statements. Is there anything that you would like to see that would strengthen your confidence in the Bill? Is there anything that would improve the Bill in terms of ensuring that pensions are secure?

Nia Griffith (Labour, Llanelli)

Am I right in understanding that there are some people who will end up with a pension that takes a bit from one pot and a bit from another point because of the cut-off date to contributions? How will we ensure that that is managed effectively?

Nia Griffith (Labour, Llanelli)

Does that need to be in the legislation?

Jimmy Hood (Labour, Lanark and Hamilton East)

If Members have no further questions for the witnesses, that brings us to an end of our evidence session this morning.

Sir David Amess (Conservative, Southend West)

Good afternoon everyone. I welcome our witness, Mr Hooper, to the Committee. We are greatly looking forward to asking you questions and getting your evidence on record, which will help the Committee with its deliberations when we discuss the Bill in detail next week. Will you introduce yourself and make some opening remarks on how you feel about the legislation?

Graeme Morrice (Labour, Livingston)

May I ask a simple question? Do you believe that full wholesale privatisation of Royal Mail is the solution to what is perceived as being the problem?

Graeme Morrice (Labour, Livingston)

Just as a supplementary, are you suggesting that an injection of private capital could still be successful under a public ownership model?

Andrew Stephenson (Conservative, Pendle)

I want to pick up something that was said by some of the Communication Workers Union representatives whom we were speaking to on Tuesday. They seemed to be of the opinion that they could almost pick and choose some of the measures suggested in your report. That suggests that if we address the problems with regulation and look at pensions—if the Government were to sort out pensions separately—that would be sufficient. Can you elaborate on why you think or do not think that the measures in your report should be treated as a package and should be implemented in full?

Andrew Stephenson (Conservative, Pendle)

Do you see a share sale as the best way to get private capital into the Royal Mail?

Gordon Banks (Labour, Ochil and South Perthshire)

In your latest report, you talk about improved industrial relations since your first report in 2008. Could you tell us why and how you think there has been such an improvement?

Gordon Banks (Labour, Ochil and South Perthshire)

So top management and the unions started to speak and engage in a much more grown-up way. I take it that that is a synopsis of what you have said. Do you see privatisation creating any particular challenges to good industrial relations in a privatised Royal Mail?

Gordon Banks (Labour, Ochil and South Perthshire)

Do you see any problems that privatisation could deliver in industrial relations, and therefore in continued modernisation?

Damian Collins (Conservative, Folkestone and Hythe)

In your report, you talk about the “technology wedge” and the gap between GDP growth and the decline in postal services. Will you say a little more about that? Concerns were raised in Tuesday’s sittings about the problem you have just identified of people using online services. The relative cost of using post means that there might be a dramatic fall-off in business use of the postal market. Your report suggests a 25% to 40% decline over the next five years. Do you think that even that estimate might be conservative depending on the way in which markets develop?

Damian Collins (Conservative, Folkestone and Hythe)

I have one further question. I am sure that when post offices have closed, colleagues will have had experience of the important role they played in supporting the parcel function of small businesses that buy and sell goods online. At what point do you think that the growth in online retail, and parcels being delivered to support that process, will start to make a significant impact on the business, and address some of the long-term decline issues that the bigger businesses are dealing with?

David Wright (Labour, Telford)

Can I draw you back to your comments on the modernisation programme? Clearly, you had another bite at the cherry. Basically, you reviewed your report for the coalition Government and it was published recently. You said that the process had got worse, that modernisation had got to be accelerated and that problems had intensified at the Royal Mail. Is that right?

David Wright (Labour, Telford)

Let me wind you back.

David Wright (Labour, Telford)

So we have to continue to press on modernisation. The reason why I asked that question is that Moya Greene basically said that there had been a two-year process when modernisation had gathered pace. You have clearly talked this afternoon about agreements between the unions and the management moving that forward. I am driving at when you think will be the best point at which the business should go to market and draw in private investment. Should we be doing it as quickly as possible? Should we be concluding particular elements of the modernisation process? How does it fit together?

Priti Patel (Conservative, Witham)

Mr Hooper, to what extent do you feel that the Bill addresses many of the points you have raised in your successive reviews? Do you have any particular concerns about the proposed regulatory framework from Postcomm to Ofcom? Do you think that will satisfactorily meet the obligations that will be incumbent on them?

Nia Griffith (Labour, Llanelli)

Can we go back to the business of modernisation? Do you agree that it has been relatively successful, as Moya Greene has said? It has taken place under public ownership. She seemed to have a different view from you. Perhaps you are modest about what the British system has achieved compared with those abroad, but she told us that she thought that modernisation was going very well. Is that simply because, over the past two years, it has speeded up so much?

When you talk about a minority stake—leave aside whether you think it is the right or wrong thing to do—is it still a potential option that a stake could be sold to the private sector and that the rest of the money could then be raised by issuing corporate bonds?

Nia Griffith (Labour, Llanelli)

You speak very warmly of post offices in your report. Clearly the idea is that the Post Office would remain in public ownership but Royal Mail might be privatised. How do you see the survival of the post offices if there is no longer an automatic inter-business agreement between the two and is there any way of tying a private company into using the post office network?

Nia Griffith (Labour, Llanelli)

But how easy will it be to sell Royal Mail, depending on how long you want to make that IBA? You are talking about five or 10 years. If you are a sub-post master with the money invested or you are hoping to realise your assets after you retire, 10 years is not very long. You may not be able to sell later on. If it were longer than that would it still be feasible to sell?

Richard Fuller (Conservative, Bedford)

Mr Hooper, the Bill contains quite extensive provisions on extending employee ownership with a minimum of 10% of the shares in the Royal Mail and mutualisation of the Post Office. Have you any comments on that approach generally? Also, given your work with the Royal Mail, what do you think that form of participation would do to help to overcome some of the problems that the Royal Mail has had historically?

Richard Fuller (Conservative, Bedford)

May I ask a supplementary question? There have been representations for other forms of employee participation and specifically for designated worker or trade union representatives on any privatised Royal Mail board. Do you think that that issue should be considered as part of statute in the Bill or is it better left to any prospective owner to work out themselves?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

You talk about the need for a large capital injection into the Royal Mail. Can you estimate the size of the capital injection required?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Is there not a ballpark figure?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

The reason why I ask is that the Business and Enterprise Committee asked you that as well, and you said that you had not done the analysis on the issue. That Committee raised the fact that if the pension deficit were removed, it would give Royal Mail Group an additional £280 million a year, and if access pricing were set at a level that covered Royal Mail’s overheads as well as its marginal costs, that would give it another £100 million a year. Do you not think those elements could give a better outlook into where the capital could come from, and how much is needed?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Do you see how it is hard from my position hearing you say that we need extra capital investment, but not actually getting a figure?

Priti Patel (Conservative, Witham)

Earlier, you made the remark that with private sector capital come private sector disciplines. That would mean quite a cultural change in the Royal Mail, in the way of working not only with management but with employees. What is your view so far? Do you feel that Royal Mail has a real understanding—across the board, with management and employees—of what the Bill will actually mean for the cultural change that will come to Royal Mail?

Michael Weir (Scottish National Party, Angus)

Earlier, you talked about how, by bringing private capital into Royal Mail, you will not get any political intervention in commercial decisions. However, do you not accept that in Royal Mail there is a major political intervention in the shape of the universal service obligation, which is there for a reason? Are you satisfied that if there was a sale of 90% of Royal Mail to a private buyer, it would continue to operate the USO in a satisfactory manner for all the areas outwith central London that you referred to earlier?

Michael Weir (Scottish National Party, Angus)

However, do you accept that operating the universal service in rural and island areas, for example, is a considerable cost to Royal Mail, and will be on a private operator? Other providers get the benefit of that—the last-mile service, or whatever it is called. I just wonder whether we will not find, in a privatisation, huge pressure from the privatised company for a reduction in the terms of the USO as part of its cost-cutting measures.

Michael Weir (Scottish National Party, Angus)

On a final point, the Bill gives power to Ofcom to effectively levy other operators to contribute to the cost of the USO. Do you think that that is likely to be of use in bolstering the USO? Is it likely to happen?

Michael Weir (Scottish National Party, Angus)

Except in rural areas where you cannot get a signal.

Karl Turner (Labour, Kingston upon Hull East)

Just picking up a point that I think you have intimated already, we know that currently there are 11,900 post offices and that 4,000 are profitable. That leaves 7,900 that are not profitable. My question is in two parts. First, is there a minimum requirement of access points to make the universal service obligation work, and secondly, what will happen to the 7,900 non-profitable post offices, if there is no protection in the legislation? I cannot find any protection in the Bill for those post offices.

Karl Turner (Labour, Kingston upon Hull East)

I think that clause 30 in part 3 of the Bill obliges Ofcom to ensure a collection and delivery service, but it does not seem to oblige it to protect post offices. Do you think that that is required? To assist with universal service obligations, you are required to protect the access points as well as collection and delivery.

Karl Turner (Labour, Kingston upon Hull East)

It strikes me that the reason why the first part is protected is for small business. It is essential for small businesses to have collection and delivery for six days a week, but, in my view, the social aspect has not been considered enough. Would you agree with that?

Sir David Amess (Conservative, Southend West)

Colleagues, we potentially have five minutes left if anyone else wants to ask a question, but, that not being the case, I thank Mr Hooper, on behalf of the Committee, very much indeed for the time that he has spent with us. I now ask our two Ministers to take their places.

Sir David Amess (Conservative, Southend West)

I welcome our witnesses. I had initially thought that we were just going to have the two Ministers, but I have just been advised that we have two civil servants as well, so I wonder whether everyone could introduce themselves. If they feel it appropriate, perhaps the two Ministers will make some sort of opening statement.

Gordon Banks (Labour, Ochil and South Perthshire)

I want to speak to the ministerial team about the inter-business agreement. We have heard, through the evidence process, that Consumer Focus said this morning that it would like to see that for as long as possible. We have heard the National Federation of SubPostmasters talking about 10 years, and, indeed, we have heard Richard Hooper mention five years in his evidence to us. We have also heard it said that, when the prospectus for the sale goes through, there will be a statement in the prospectus about the IBA. Why is there no time scale in the Bill? Linked to that, why doesn’t the Bill oblige the universal service provider to utilise Post Office Counters as part of that universal obligation? I am sure that I will have some supplementary questions to your response.

Gordon Banks (Labour, Ochil and South Perthshire)

But if it is unthinkable, as Moya Greene has said, that the link will not be broken between Royal Mail and Post Office Ltd, why not put it in the Bill? You have talked about non-viable post offices. Surely, a long-term IBA is a potential solution for those post offices that are not viable. A long-term business arrangement would be very important to the many small and medium-sized enterprises that run post offices and need to invest in their businesses, at the same time as having a contract of this nature. A long-term IBA would, therefore, be a further encouragement for these businesses to invest in their businesses and improve the quality of the service that they provide. Would you agree with that?

Are you able to confirm that the private Royal Mail would be able to insist on renegotiating any IBA that might exist with Post Office Ltd? Although it is not quite the same situation as with Serco and its suppliers, in such a position you have a major player and somebody who is dependent on the major player. Royal Mail will have all the cards in its hand at that point, so it is very important to understand whether Royal Mail will be able to insist on the renegotiation of the IBA.

My final point is whether the Government have done anything to establish what the impact would be of utilising a variety of service providers instead of the Post Office. What impact would that have not only on post offices, but on customers?

Gordon Banks (Labour, Ochil and South Perthshire)

Can I press you further on that? The impression that you have given, or are leaving me with, is that you do not see the IBA as being the lifeline to post offices. You see new product development as being that lifeline. Is the IBA, in your opinion, of lesser importance? And, on that link as well, we have talked about 10 years, five years, 15 years or whatever; how long do you think that the IBA should last for?

Gordon Banks (Labour, Ochil and South Perthshire)

I do not want to labour the point, because it is important that other people get in, but the Minister did not answer all my questions. I asked whether you thought that the IBA was less important than new product development, and how long you think the IBA should be for. You did not answer either of those questions.

Andrew Stephenson (Conservative, Pendle)

I want to pick up the evidence that we heard on Tuesday from Billy Hayes. I put to Mr Hayes the point that as well as the shared ownership part of the Bill, we are also dealing with the historic pension deficit. I told him that on the face of it, I thought that the Bill represented an exceedingly good deal for the employees of Royal Mail. He seemed to disagree. I want to get your opinion. Have you been disappointed by the union’s response to the Bill?

Andrew Stephenson (Conservative, Pendle)

Staying on share ownership, we have had good debates in some of the evidence sessions about the different forms it might take and whether it will be the John Lewis model or a kind of trust. Do you know when there will be more information on what form the Government think it should take or the value of the shares? Is it going to be 10% or will it be more? Have you got a timetable for that information?

David Wright (Labour, Telford)

On that specific point, if we just look at process, in past disposals and privatisations we have seen a paving Bill. How are you minded to report back to Parliament? What you are saying is that you want to see the Bill progress, but—in answer to Mr Stephenson’s perfectly reasonable, in my view, question—there has to be some flexibility and discussion around that.

How are you going to report back to Parliament? There is a process issue. Do you see a second piece of legislation coming forward? How do you envisage this working? Parliament may give you authority to pursue the Act—if it becomes one—but how do we know how you are implementing it and how do we stop you from doing something that we do not want you to do?

David Wright (Labour, Telford)

How do you envisage the report being laid?

David Wright (Labour, Telford)

Are you just going to pop it in the Vote Office?

David Wright (Labour, Telford)

So, are you just going to pop it in the Vote Office?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Why are access points different from pick-up-and-delivery, which will be protected by statute?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Yes.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

But it could be for you to put into statute provision criteria on access points.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I am still unclear as to why the Government consider access points to be different from pick-up-and-delivery, which will be protected by statue. You referred to the 2009 Bill, but that would have led to both companies remaining in Government ownership, but in this case there will be a privatised Royal Mail. Why are access points less important than pick-up-and-delivery, which will be part of the universal service obligation?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Can I ask a second question somewhat related to that? Am I right in saying that the Secretary of State will have the power to remove services from the universal service order?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I would never suggest that. Can I present a scenario to you, which you may find a somewhat cynical view of the provision? We have a situation in which the Minister can exclude services from the universal service order, but cannot add them. In theory, Ofcom will make a decision on the universal service order independent of any interference or influence.

Do you not agree, however, that it is human nature not to like to be second-guessed? It may be possible that Ofcom will want to know discreetly how the Secretary of State’s mind is moving as regards the universal service order and the exclusion of services from it. Once that mechanism is in place, where the Secretary of State can remove services but not add them, you could end up with a situation where Ofcom announces the removal of services from the universal service obligation and the Minister comes to Parliament, or the media, and says, “My hands are tied—there is nothing I can do about it. I cannot add services, I can only exclude them.” Is that not a potential problem?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Is there not a danger of unintended consequences? Your intentions are obviously admirable, but consequences are what matters.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Okay. I am glad that that is on the record.

You mentioned subsequent universal service orders and Parliament’s role. Am I not right in saying that the second universal service order and subsequent universal service orders will not receive parliamentary assent in terms of access points? Access points are not part of the Bill in that sense. Is that right?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

As of now?

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

That has gone on the record. Thank you.

Damian Collins (Conservative, Folkestone and Hythe)

I want to continue with the regulation theme. On Second Reading, the Secretary of State said that the present

“deregulation provisions do not give the Royal Mail sufficient protection against unfair competition.”—[Official Report, 27 October 2010; Vol. 517, c. 350.]

I was disturbed. I would welcome the Minister’s comment on the provisions contained in schedule 3 of the Bill and how they may be helpful in ensuring a fairer level of competition with providers accessing the service that Royal Mail provides.

Damian Collins (Conservative, Folkestone and Hythe)

I have one final question. The conclusion to the Hooper report sets out the development of new digital businesses as an opportunity for growth for Royal Mail. I would welcome your views and the views of the Minister for communications on that and on how you think the Bill will facilitate that process.

Karl Turner (Labour, Kingston upon Hull East)

I wonder whether I could press the Minister a little further on universal service obligations, which are composed of all sorts of things but which have two important elements—first, collection and deliveries and, secondly, access points. We know that the Bill protects the first, but it does not protect the second. I wonder why that is. I wonder whether that is more about ideology than anything else. On Second Reading, in answer to one of my hon. Friends, I think you described access points as “old-fashioned socialism”. Is it more about ideology than anything else?

Karl Turner (Labour, Kingston upon Hull East)

Can I clarify a point? The question was in relation to regulating access points.

Karl Turner (Labour, Kingston upon Hull East)

I think that that is right. Minister, only one post office has been given unfettered ability to close post offices, and that is Sweden’s. Will you comment on a report published by the UK National Audit Office in 2004? It states:

“However its attempts to reform its post offices network were drastic, poorly thought out, and initially were most unpopular. It is clear that Posten was acting freely and without government interference until the unpopularity of the changes introduced in 2000 onwards became apparent. At this point political pressure was brought to bear.”

I know you have a great deal of knowledge about that, given your background. Can you comment on it?

Karl Turner (Labour, Kingston upon Hull East)

Can you guarantee that there will be no closures of post offices?

Karl Turner (Labour, Kingston upon Hull East)

I am bound to be suspicious, Minister, given my legal background—the Bill definitely protects the first part, but not the second. I am confused about why the Bill cannot provide a mechanism for Ofcom to ensure a minimum requirement for post offices to be kept open. Why can that not be in the Bill?

Karl Turner (Labour, Kingston upon Hull East)

Finally, on the Swedish model of Posten, am I right to say that it was only possible to mop up any difficulties, because that was still state-owned? Is that right or not?

Karl Turner (Labour, Kingston upon Hull East)

But the Government were able to intervene and to mop up the difficulties, because they had a stake in it. Is that not fair?

Sir David Amess (Conservative, Southend West)

Just before we move to Rebecca Harris, Gordon Banks wants to make a quick point.

Gordon Banks (Labour, Ochil and South Perthshire)

If I can just take the Minister back a couple of moments to when he talked about the £1.34 billion investment, does he envisage any similar kinds of investments in the post office network in the future, or is this it?

Rebecca Harris (Conservative, Castle Point)

I want to talk about the pension deficit and the Government’s commitment to take it on. It is clearly a great deal for Jane Newell’s pension plan members and for Royal Mail, because it is already holding it back. Can you talk about how this will also be a good deal for the taxpayer? A lot of people would like their pensions propped up by the Government, and they are going to be paying for this. Moreover, given that you are looking to privatise Royal Mail, do you have any idea of the time frame you will set out to make the division between the new Government scheme and the Royal Mail pension plan?

Sir David Amess (Conservative, Southend West)

Before we move to Tom Blenkinsop, Priti Patel wants to come in on that point.

Priti Patel (Conservative, Witham)

On the pension deficit—particularly on the long way it still has to go, because it still has to go to the European Commission—what are the potential implications for the pension plan should the European Commission say no to transferring the pension deficit or transferring the liabilities?

Sir David Amess (Conservative, Southend West)

We have eight minutes left, and four colleagues want to make points.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Thank you, Mr Amess. I will be as brief as possible. What is your estimate for the capital requirements of Royal Mail once the pension deficit is dealt with and the regulations are put on a fairer basis?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

So you still do not have a definite amount?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

That is my second point. Is there not a distinction between access to private capital and privatisation? There are examples in Canada where they could raise private capital in the Canadian postal system while remaining a public sector body. There are also domestic examples like local authority airports, Welsh Water, Network Rail. There is a distinction between access to private capital and privatisation is there not?

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

That would be the same for a private owner as well.

Sir David Amess (Conservative, Southend West)

I think this is the fairest way of proceeding: three Members all wish to put their points, so if they could do so then the Minister or Ministers could respond. So it is Mr Mike Weir first, Graeme Morrice second, and last, but not least, Nia Griffith.

Michael Weir (Scottish National Party, Angus)

I seek clarification on the point about the universal service obligation. The Bill talks about the financial stability of the provider of the USO and gives Ofcom the power to look at it. Can you clarify for me where the balance is between the terms of the USO and the financial stability? In other words, if Ofcom thinks that the USO provider is not financially stable with the current USO, can it reduce the terms of the USO or is this where the financial scheme comes in?

Graeme Morrice (Labour, Livingston)

Minister, do you favour the sale of Royal Mail en bloc to an experienced post provider like TNT, to a private equity company or a general sale of shares? How much do you expect the sale of Royal Mail would raise? Has your Department made any estimates of this? If not, why not? Finally, would the sale price be increased if future USO and IBA commitments are weaker than they are currently?

Nia Griffith (Labour, Llanelli)

Could you tell us a little bit about the assessment you have made of the interest in buying a share in the post office mutual? What research and consultation have you done? Can you tell us a little bit about how you envisage that mutual working? You talk about people who have an “interest in”: how would you define that more specifically?

Sir David Amess (Conservative, Southend West)

Unfortunately, we cannot.

Sir David Amess (Conservative, Southend West)

Sadly, the programme motion does mean that we have to finish our proceedings. If the Minister feels minded to write to any members whose questions he felt that he did not have the time to answer, that would certainly be appropriate. I thank our witnesses very much indeed for the time that you have spent with us this afternoon. The Committee is very grateful. I remind members of the Committee that we meet again next Tuesday at 10.30 am in Committee Room 9.