Postal Services Bill

Public Bill Committee, 23 November 2010.

Clause 3

Nia Griffith (Labour, Llanelli)

I beg to move amendment 22, in clause 3, page 2, line 22, leave out subsections (2) to (4) and add—

Jimmy Hood (Labour, Lanark and Hamilton East)

With this it will be convenient to discuss amendment 23, in clause 3, page 2, line 22, leave out subsections (2) to (4) and add—

Nia Griffith (Labour, Llanelli)

The amendments seek to strengthen the employee share scheme and increase the opportunity for employees to access shares. Ever since the Trojan war and the unfortunate incident of the Trojan horse, we have been warned “Beware of Greeks bearing gifts.” I yield to no one in my admiration for Hellenic civilisation, so I happily change the warning to “Beware the coalition Government bearing gifts.”

The Opposition favour employee share ownership in principle. I see the pain on the faces of Government Members at the mention of the word “principle.” It reminds me of the pained wince that afflicts Dracula whenever a corner of a curtain is raised to let in a beam of sunshine.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am delighted that the hon. Lady bases her approach to employee share ownership on principle. Given that the Opposition now claim that they favour it in principle, why did they not include it in the 2009 Bill? What has happened to their principles between last year and this year?

Nia Griffith (Labour, Llanelli)

I do not wish to repeat myself, but I have said several times that there are differences between the 2009 Bill and this one, the most important being the public ownership stake. The 2009 Bill clearly kept the majority stake in public ownership while seeking a private partner to inject cash at some point. That is totally different from a completely privatised Royal Mail. The circumstances are very different.

We need more information. What happened in the 1980s left people cynical about the way shares were dangled around with the idea of enticing people to buy them who had perhaps never bought shares before. It was seen by many––and who can blame them?––as a way to make a quick few pounds. How many employees still possess shares in the companies that they work for? What is the average length of time that employees kept their shares? I can see that few members of the Committee are old enough to remember the “Tell Sid” campaign. It was characterised by a worm-like creature with its head held high. I see that puzzled look on the face of the hon. Member for Folkestone and Hythe, so he is clearly far too young to remember. Unfortunately, all that left us with a slightly cynical view. We very much hope that this employee share scheme will be very different and much more positive.

Richard Fuller (Conservative, Bedford)

Is the hon. Lady aware that Sid is in fact the uncle of the hon. Member for Worcester?

Nia Griffith (Labour, Llanelli)

I learn things by the day. I always admired the father of the hon. Member for Worcester, who of course had a very important role in Wales. Let us return to the detail of the Bill, or perhaps rather the lack of detail.

We accept the principle of employee shares, but employees need to know a lot more about exactly how any scheme would work. We would like a proportion larger than 10% in the employee share scheme and greater certainty about the eligibility criteria. Who would be entitled to shares or share options and what would it mean in practice? In fact, there is still much that we need to know about the scheme.

Let me turn to subsection (2) of our amendments. Clause 3 says that it is only when nothing is left in public ownership that the employee share scheme will be at least 10% of the privatised Royal Mail. What if only part of Royal Mail is sold off? Supposing a proportion was left in public ownership, what would happen with employee shares? Amendment 23 proposes a sliding scale so that at least 10% of what is privatised would go to an employee share scheme; amendment 22 proposes a figure of at least 20%. I shall consider the question of 10 or 20% later.

The purpose of subsection (2) in each amendment is to enshrine the principle of employee shares no matter what proportion of Royal Mail is sold off. We could envisage the Government retaining only a small proportion in public ownership, perhaps as little as 10%, 5% or 1%. As the Bill is drafted, that would mean not having an employee share scheme. We would like a much clearer indication that if a small proportion of Royal Mail were privatised, there would still be an obligation to have an employee share scheme.

We know from our previous debates that there is as yet considerable uncertainty as to exactly how privatisation of Royal Mail will proceed. Whatever the intention is, the amendments provide an option that would ensure that there were still employee shares if less than 100% was privatised. Amendment 23 proposes a sliding scale so that 10% of whatever is privatised would go to an employee share scheme; the figure is 20% in amendment 22. This is about enshrining the principle of employee shares no matter what proportion of Royal Mail is sold off. Subsection (2) is important to ensure that there are no excuses for not setting up a scheme. No matter how small a proportion of Royal Mail is sold off, we expect to see one. To us, that is very important. Any change in the status of the ownership of Royal Mail should provide an ideal opportunity for setting up a scheme.

Our preferred amendment, amendment 22, specifies that the employee share scheme should consist of at least 20% of the proportion of the company that is not owned by the Crown. Over the past 20 years in the industrialised world, there has been a significant increase in the proportion of employees who own shares in their own firms. That has happened in the UK, other European Union countries and the USA. By 2004, a fifth of British workplaces had share ownership schemes, covering a third of all private sector employees. The benefits of such schemes have been widely recognised. They can include motivating employees to become more productive, helping to align the employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover.

Of course, employee share schemes cannot do that on their own. They have to be part of a wider approach to good industrial relations. Given the more generalised benefits of such schemes and the very significant efforts made by employees to implement the modernisation programme, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. That is why the amendment proposes that 20% of the company be made available for such a scheme. We know that any privatisation of Royal Mail will inevitably entail a lot of change and upheaval. Its success will rely heavily on the good will of the work force and on improved industrial relations—and on those relations remaining improved. It would therefore be appropriate to try to give a greater proportion of the company shares to the work force.

The amendment is still a relatively modest proposal. It would not radically change the balance of power between employee shareholders and other shareholders. I would be interested to know what consideration the Minister has given to allowing proportions of employee ownership that are higher than 10%. If such levels have been considered, why have they been rejected in favour of keeping the maximum as “at least 10%”? Of course, that phrase leaves the door open to keeping the level at only 10%. It allows for more, but we are left wondering why the level has been set at “at least 10%” and not higher.

When the Committee heard evidence, Carole Leslie, policy director of the Employee Ownership Association, told us:

“I am a bit disappointed at 10%, because 10% to me is small, which means that you have to put more effort into giving employees that real voice in the company so that they do feel that it is theirs—they do feel that that ownership, if you like, is real and it is not a token.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 71, Q151.]

Peter Stocks, a fellow member of the Employee Ownership Association and managing director of Baxi Partnership, echoed her remarks:

“I want to reinforce that point. I think that 10% is quite low and I think that there is a danger that if it is just shares and there isn’t a participation culture that goes with it, it won’t change a lot. We see real results in companies where the whole of the company feel that they have a sense of ownership. They feel that they participate in decisions. They discuss decisions and when they make a decision they stick with it. It was interesting watching some of our members through the recession. Employee-owned companies are affected the same as everybody else. They would have gone through an awful lot of agony about how you manage through different times but, because those decisions were made in a very participative way, once the decisions were made they were stuck to, and bought into, by everybody. Our members have gone through the recession in a very resilient way and I think that is down to the way you manage the company.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 71-72, Q151.]

Carole Leslie later went on to reinforce the benefits of such a scheme:

“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding, as Peter said, the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 76, Q156.]

There are very strong reasons for strengthening the employee share scheme by allowing it a proportion of “at least 20%”, as the amendment proposes. If the Minister is not willing to consider that option, perhaps he will tell us what figure he might be willing to consider.

Richard Fuller (Conservative, Bedford)

Clearly, there is general agreement that this Bill, in contrast to earlier Bills, tries to enshrine some employee share ownership, which is welcome. Obviously, however, whether the level is 10% or 20% would affect the amount of value transfer from the taxpayer to employees. Does the hon. Lady expect that, if her amendment were agreed to, employees would have to contribute to that transfer of value, which would have increased from 10% to 20%, or would they be given it for free?

Nia Griffith (Labour, Llanelli)

That is one of the many questions that arises. At the moment, there is not a great deal of clarity on how the arrangement would work, including on who would be eligible or entitled to participate and what proportion of costs would be borne by whom. There is a huge amount to clarify, and I would welcome some information from the Minister in his winding-up speech.

Nia Griffith (Labour, Llanelli)

The point is that, as I said, I would like the Minister to give some indication as to whether he has considered levels of up to 20%. If not, what percentage might he be willing to consider, taking into account the information to which he is privy on the likely financial context of the sale?

Proposed new subsection (3) proposes an equitable division of shares and the dividends that accrue from them. The amendment proposes that equal dividends must be paid to all participants. This may be obvious, but schemes can be set up in which the division is not so equitable and some receive more than others. There are various models. For example, a scheme can be limited to certain key employees, who may have scarce managerial or technical skills. Alternatively, the system could consist of a combination of schemes providing more favourable terms for directors. It is possible to have an enterprise management incentive scheme for directors and a share incentive plan for other staff.

We need to know what type of scheme is envisaged. We would like to see the most equitable type possible, in which people feel that they are being treated as valuable individuals no matter who they are, and in which no hierarchy is attached to the whole procedure. In terms of employee motivation and participation, that is an extremely important issue that will need to be thoroughly dealt with before any such scheme is acceptable.

Proposed new subsection (4) relates to the detail of the employee scheme. The clause provides very little such detail. It is also vague about how far advanced arrangements are for the establishment of an employee share scheme. Current legislation could, for example, allow the creation of an option-based incentive scheme restricted to management. In order to ensure that the employee share scheme performs as we should like to see it do and genuinely encourages share ownership across Royal Mail’s employees, more information on the scheme will be required. That is the reason why we have included proposed new subsection (4) in amendments 22 and 23. It would require the Secretary of State to make a report to Parliament which would include the precise terms of the scheme and the expected time scale for its introduction.

We need considerably more clarity and information, as there can be widely differing interpretations of what an employee share scheme means. Indeed, the witnesses whom the Committee heard in our evidence sessions touched briefly on some of the different models. As Carole Leslie told us:

“You need to think carefully about the model that you want to go for. The benefit of an employee benefit trust is that it is very stable. It is easy to administer, you do not have the turnover of shares, you do not have to think about people buying and then selling—it is very stable. It could be said that it is a bit more difficult to give people a tangible sense of ownership if they do not have the bit of paper that says that they are an owner of the company, but companies such as John Lewis Partnership and others do a great job with that. A lot of it comes down to how you enshrine the employee voice, and how governance of the trust is implemented...If you go for individual share ownership, there are mechanisms such as the share incentive plan, which gives tax benefits to employees. Even if you do not see a lot of growth in the shares, the tax benefits themselves can be rewarding and worth while. If you are going down the individual shareholding route, you want to think about who would be eligible to benefit from it. I would argue that you want it to be open to all employees of the organisation, not just executives and managers.”–[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 78, Q160.]

Proposed new subsection (4) seeks to ensure that the Secretary of State is obliged to comment on the details of the proposed employee share plan. First, there is the matter of eligibility. Obviously, some eligibility restrictions can be useful, to ensure the scheme’s smooth operation, for example by requiring a minimum period of employment or restricting its benefits to a subset of employees. To our way of thinking, that would be against the spirit of the type of scheme that we would like to see.

Another issue is what restrictions there might be on trading. If the shares are not publicly traded, what facilities will be available to employees wishing to buy or sell shares? If the shares are publicly traded or employees have decided to sell their shares to non-employees, will the scheme encourage long-lasting employee share ownership?

On tax treatment, what tax advantages are likely to result for Royal Mail and its employees? In particular, the choice of scheme will affect whether employees have to pay income tax, national insurance or capital gains tax on the income from participation in the scheme.

What exactly is on offer? Will the scheme be offering options or shares? Will the offers partly replace salary or be tied to performance? If shares were on offer, what types of share would be made available through the employee share scheme?

A large number of issues therefore need to be clarified, which is why our proposed new subsection (4) asks for the Secretary of State to report to Parliament on the precise terms of the scheme and the expected time scale for its introduction. The idea behind our amendments 22 and 23—we put them in order of preference—is to strengthen the employee share scheme and to ensure that full and proper information is provided to us before the commencement of such a scheme.

Karl Turner (Labour, Kingston upon Hull East)

I rise to speak in support of amendments 22 and 23, which are in the names of my hon. Friends the Members for Llanelli and for Ochil and South Perthshire.

I very much welcome the principle of an employee share scheme, but feel that amendments 22 and 23 strengthen the current Government proposals, much improving the employee opportunity of access to shares. As the Bill stands, there are significant problems. The objections could be seen by some as slightly cynical but, in the interests of proper scrutiny, it is vital that such issues are raised and debated.

Clause 3 is by no stretch of the imagination strong enough to ensure that the employee share scheme is effective. It does not go far enough, and it could be argued that it is nothing more than a mere token gesture to the members of staff. It seems illogical that the Bill provides no obligation to implement the scheme until state holdings are reduced to nil. The scheme is entirely dependent on privatisation profits following the sell-off.

Before moving on to each of those points, first I will say why I support the principle of employee share schemes. The benefits of such schemes are widely utilised and can be seen to be working well in other companies in this country. Indeed, as highlighted by my hon. Friend the Member for Llanelli, one fifth of British workplaces operate such schemes, which clearly shows their use.

There are specific reasons why the employee share scheme provisions in the Bill would benefit from being strengthened. I submit that employee share schemes are an effective tool for motivating staff. They provide a long-term and tax-efficient financial incentive. Their widespread use in businesses such as British Telecom, British Airways, Rolls-Royce and, most notably, John Lewis is proof of the benefits that they provide.

Share schemes, therefore, should be a serious consideration for many businesses. However, they are of particular advantage to Royal Mail, bearing in mind its long history of management and employee disputes. Share schemes afford employees a real stake in the company—I emphasise “real.” Such a scheme could be an aid in preventing possible future disputes.

Establishing an employee share ownership scheme is not only the sensible thing to do, but the right thing to do. Royal Mail employees have made significant efforts to modernise the business to secure its long-term future. They therefore deserve to be offered a stake in the business. Witnesses at the evidence sessions and hon. Members in their speeches have paid tribute to the hard work and the pride of Royal Mail staff in ensuring that all customers receive the best possible service. The proposals to privatise Royal Mail by 90% mean that there will be further challenges to overcome. Undoubtedly, employees will face further restructuring, which may put strain on the work force. It is therefore crucial that employees have access to a strong employee share scheme, under which they are afforded more than 10%, as proposed in the amendments. That takes into account the work force’s efforts in the past, present and future.

The Government propose an employee share scheme of “at least 10%” in the Bill. That seems small compared with the 90% to be privatised and might be considered patronising by Royal Mail employees who have invested their working lives in this public service. That point was intimated strongly in the evidence of the general secretary of the Communication Workers Union, Billy Hayes. I urge the Minister strongly to consider raising the figure to 20%. That would not shift the balance of power a great deal, but would greatly increase the benefits that employees receive. As I said in my opening remarks, a credible stake with proper benefits is the least that the Government should provide for requiring employees to undergo modernisation and upheaval. I agree with the argument of Malcolm Hurlston, the chairman of the Employee Share Ownership Centre, in an article dated 23 September 2010:

“Previous employees share models in privatisations have followed the BT model too slavishly but this must be avoided with Royal Mail. However, other models have been deployed where the employees received more meaningful stakes.”

My hon. Friend the Member for Llanelli mentioned that point. One wonders what the hon. Member for Worcester’s Uncle Sid would say now.

Not only is the amount too low, but the mechanism is faulty because there is no obligation on the state to implement the 10% employee share scheme until 90% is fully privatised. That provides for a situation whereby the state can keep a minority share and not transfer any ownership to Royal Mail employees. I beg the indulgence of the Committee and hope that hon. Members will resist the temptation to tweet, and instead concentrate their efforts on increasing the 10% that is on offer. I urge them to summon the strength to ensure that the mechanism for implementing the scheme does not remain as it is. It is illogical that the state will not be under a statutory obligation to implement the ownership scheme until it has completely privatised Royal Mail. The clause allows for the possibility that the employee share ownership scheme will never come to fruition. Ministers can promise to guarantee its implementation until the cows come home, but everyone would be more comfortable if it was enshrined in legislation.

I see no reason why the employee share scheme should not be implemented on a sliding scale, as my hon. Friend suggests, increasing every time a piece of Royal Mail is sold off. It seems to be the logical route. It ensures that employees are involved in the process rather than being dragged along by the Government and their private sector investors.

If the Minister is committed to the idea, why will he not consider placing in legislation a provision that ensures that the employee share ownership scheme rises relative to the percentage privatised? That would ensure a good relationship with management. It would also demonstrate to employees that this scheme is more than the token offer to buy them off. The employee share scheme should not be used as a substitute for ongoing and productive employee-management relationships. The employees of Royal Mail are its best asset. An employee share owner scheme, although a useful tool, is still heavily dependent on economic success. We know that TNT experienced heavy losses despite intensive modernisation and innovation. Employees are by no means guaranteed decent benefits as a result of the scheme. One can see that from looking at that model.

I should also like to support the provisions in the amendments that ensure that equal dividends must be paid to all of the scheme’s participants. I agree with my hon. Friend that this ensures fairness and guarantees that no group profits from the scheme more than another. My obvious fear is that the Bill lacks the regulatory framework to protect employees from the risk of privatisation because it does not specify that dividends are to be paid equally. It is clear that amendments 22 or 23 would enhance the ownership significantly and make it of real benefit to Royal Mail employees. It is vital that the amount offered is not just a token gesture but a substantive offer, a real opportunity for employees. The implementation must also be correct: it should seek to include staff on the journey to privatisation. It is for those reasons that I support the amendments and I respectfully urge hon. Members on both sides to do the same.

Gordon Banks (Labour, Ochil and South Perthshire)

Thank you for giving me the opportunity to speak in support of amendments 22 and 23, Mr Hood. I will not go into what they do in detail, but I will touch on that. Hon. Members could be forgiven for not noticing the subtle change in the amendments but, as the Minister will know, we are trying to be helpful as we go through the Bill line by line. The employee share scheme percentages in proposed new subsection (2) are at least 20% and at least 10% of the proportion of the company that is disposed of. That is very important and I will come back to that in a few minutes.

As we have heard this morning and in earlier contributions, the staff of Royal Mail are arguably its strongest asset. They have gone through a great deal over the past decade or so as Royal Mail has remained high on the political agenda for all of that time if not for longer. While the Opposition are anxious to see the Government retain a controlling share of Royal Mail and the subsidiaries, we are also keen to ensure that if the future business of Royal Mail is sold off, as the Bill proposes, the work force have as strong a voice as possible.

In earlier amendments we proposed that representatives of the work force should have a seat on the board. The Government saw fit to oppose that, but to facilitate strong employee participation in a fully privatised Royal Mail, without the benefit of those earlier amendments, we need a strong employee share scheme. As my hon. Friend the Member for Llanelli said, we have no direct problem with subsection (1) in principle, which sensibly places a duty on the Secretary of State to ensure that arrangements for an employee share scheme are made prior to the first relevant disposal. But subsection (2) onwards is where the problem lies because the rest of the clause does not strengthen subsection (1) in the way we would like to see.

As it stands, subsection (2) caters only for a situation of disposal to employees where the Crown reduces its interest to nil—a point made a couple of time this morning and one that I made a minute ago, but it is important. There is no provision to cover the possibility of the Crown retaining a proportion of its interest in Royal Mail or its subsidiary companies, and, at the same time, preserving the concept of the employee share scheme. The fact that the Government have not legislated for that possibility speaks volumes to this side of the House.

Quite sensibly, we have again sought to help the Minister; in the event that he sees the light and looks to retain Government interest in Royal Mail and its subsidiaries, amendment 22 will ensure that if the Crown reduces its interest in Royal Mail in any way, at least 20% of the shares sold, given away, disposed of or allocated—however it will be—would be allocated to the employee share scheme. The Committee asked my hon. Friend the Member for Llanelli about the cost and so on, and this is one issue. We do not know anything about the disposal of the shares. The employees will always have at least 20% of whatever level of shares are sold to big business or privatised differently.

In amendment 23, the Minister will notice that we are prepared to reduce that to at least a 10% share, should the 20% be too hard for him to stomach. However, we are not prepared to accept, in legislation designed to sell 100% of Royal Mail into private hands, a situation in which up to 99% of the Royal Mail is sold and no employee share scheme is operating. In amendments 22 and 23, the Minister has not only a choice over the percentage of the company, but a choice to show whether he is committed to keeping the employee share scheme percentage in line with the level of shares owned by the Crown at all stages in the disposal.

As we have heard, the sale of Royal Mail could take some time, and there is no requirement on the Government in the Bill to provide a functioning employee share scheme, unless the Government share is reduced to nil. It might take years to sell all the Crown assets in Royal Mail; we do not know because the Minister has not told us that yet. We want, as I am sure the Minister deep down inside wants, to keep the employee share scheme ownership in line with shares owned by other non-public organisations.

The Minister may ask, as my hon. Friend the Member for Llanelli was asked, how we arrived at the figure of 20% in amendment 23. In our evidence sessions, we heard from George Thomson, general secretary of the National Federation of SubPostmasters, who also seems to agree with the 20% figure, and, incidentally, he also agreed with amendment 16, on the location of the headquarters of the newly privatised Royal Mail. However, returning to amendment 22, we also heard from Mr Scott, assistant national secretary of Unite, who argued for 49% of share ownership to be in employees’ hands, to give them what he described as

“a real share in it”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 30, Q70.]

I am sure that the Minister has no intention of agreeing to such a percentage, and therefore we have been flexible—a word we keep coming back to—and tabled a compromise. The 20% is less than Unite wants and the same as the National Federation of SubPostmasters wants, but, as well as the percentage, the timing of ownership is important in the amendment. The Minister has refused all our other reasonable amendments, but this one has wider support than just that of the Opposition, so he could increase the share total to at least 20% and do it in line with share disposal to give this area of the Bill a degree of integrity.

Proposed new subsection (3) of amendment 22 would place in legislation the need to ensure that an equal share of dividend is paid from earnings to participants in the trust that we hope will be established to manage the scheme. I refer the Committee to proposed new subsection (5) of the amendment on establishing a trust. It may appear simple that all shareholders should be treated equally, as has been alluded to, but we know that they are not, and we heard this morning that there is nothing in the Bill to ensure that they are, which is what the amendment is designed to do. I am sure the Minister will want to engage and to accept the amendment to ensure that there is a fairness to this part of the Bill that is currently lacking.

It is my intention that not only all shareholders within the trust be treated equally, but all shareholders in the business be treated equally. I am sure the Minister can understand my reasoning on that. It cannot be acceptable that employee share owners, in any guise, could be treated differently from any other share owners. The Government need to embrace the amendment to show that they are serious about their plans for engaging the work force of the new company in such a way, especially as the Minister has refused to accept some of our earlier suggestions that would have strengthened work force engagement.

New subsection (4) of amendment 22 places what the Minister will, no doubt, see as a burden, but what my hon. Friends and I see as a duty on the Secretary of State to report to Parliament when suitable arrangements have been made for the establishment of the scheme. That report must state the precise terms of the scheme and the expected time frame for its introduction.

I will say a bit about each point if I may. First, there is a duty for the Secretary of State to report to Parliament on this matter. In the Bill, the Minister has already introduced a duty for the Secretary of State to report at various different stages. If he considers that to be an appropriate level of transparency, I am sure he will be able to support the amendment. Like Mr Sibbick of the Mail Competition Forum, I will be optimistic and hope that the Minister will see the error of his ways and accept the proposal as a duty, not a burden. If the Secretary of State has no responsibility to report to Parliament, MPs will have no basis on which to question him on the matter. I am sure that the Minister does not wish the role of Parliament to be sidelined on such an important matter.

Moving on to what the report must include, we have stipulated that it must contain details of the precise make up of the scheme. That is really important for us, as legislators, to understand. Hearing the directive from the Secretary of State first hand is the way that this should take place. The way in which the Bill is written means that the Secretary of State does not have to give anyone the details. I fear that if the Bill is passed in that form, any range of reasons, excuses or issues—call them whatever—may be used as reasons for not disclosing certain levels of information. That would not be acceptable. For the sake of transparency—that includes transparency about the terms of the scheme as it affects employers and businesses alike—it is vital that such a report is made to Parliament.

On the expected time scale of the introduction, the report has to be done in advance of the first disposal. The way the Bill currently stands, clause 2 may allow the delivery of some information on disposal. Our amendment would ensure that employee share schemes are delivered in line with all levels of disposal. That would mean the Secretary of State would have to incorporate the concept of the employee share scheme either into the report demanded by clause 2 or the report demanded by the amendment. If the Secretary of State has to comply with the amendment to subsections (2) to (4), it will ensure that he has to do so at the start of the process, rather than at the end, which we would find unacceptable.

Subsection (5) of amendment 22 would ensure that the employee share scheme was developed into a trust—this idea has not been developed much this morning—to hold the shares or the rights on behalf of the employees in the company. There is no mention of a trust in the Bill, and we feel that that is lacking. To protect the ownership of the shares in the scheme from being in the hands of employees, such a trust would need to be established. Otherwise, there would be no clarity on whether ownership would, indeed, be in the hands of employees or whether it would be held on behalf of employees. It could be that previous employees would have a right to hold shares or that employees could hold on to their shares when they leave the business. In theory, there is nothing wrong with either of those suggestions. However, there is something wrong if the scheme is meant to be an employee share scheme.

There is nothing wrong with employees having the ownership rights to shares, but there is if the Government consider employee share ownership to be some kind of counterbalance to big business investment. Unless a trust is established, there is a danger that the major shareholder could become the only shareholder. The employee share scheme could, to use a phrase already used in Committee, wither on the vine. If the Government are not prepared to preserve the long-term integrity of such a scheme by developing a trust, there will perhaps be people who will consider the Bill to be a mechanism simply to allow for the sale of Royal Mail in any way, shape or form.

As Labour Members have said, we would prefer Royal Mail to be in public hands. The work force are arguably its best asset and it is only right that they are allowed to have a major say in the future direction of the company. These types of schemes are designed to encourage staff loyalty, because only those working for the company are eligible for the benefits, and any employee leaving the scheme must leave their share behind in the trust for the common law benefit of those in the scheme. The Bill does not offer such protections to the scheme, and amendments 22 and 23 rectify that. We have given the Minister a choice between at least 10% and at least 20%, but the drive of both amendments is the same. There is not enough protection in the Bill for the employee share scheme, and either amendment—we prefer 22—would improve the situation.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am delighted with this morning’s debate because it is clear that Labour Members agree with the Government on the establishment of the scheme. We have some consensus on this key feature of the Bill, and can all get behind the notion that improving both employee engagement and the culture of the firm is good for Royal Mail and, indeed, good in principle for more companies. I welcome that, and also the sense that we wish to make more rapid progress, which is perhaps due to the consensus that is emerging over the Bill.

Although, because of the short length of this morning’s debate, I have had only a few minutes to think about how we should name the amendments, I have come up with some proposals. We could call them the U-turn amendments, but that would go against creating consensus, or we could call them the volte-face amendments. To get a feeling of agreement across the Committee, let us call them the clause 3 moment amendments.

Karl Turner (Labour, Kingston upon Hull East)

Does the Minister accept that the legislation proposed by my party when in government was very different from that which the Minister and the Government propose? The country would have retained a 51% stake of the company. Employees should be given a bigger share because they need it.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I have listened to the hon. Gentleman during the previous sessions, and I am not sure whether he has ever had a clause IV moment, but I am delighted that he is having a clause 3 one today. If he looks back at the 2009 Bill, he will see that it contained no provisions for employee share schemes. I was surprised at that, because one of his colleagues from Hull, the shadow Chancellor, when Secretary of State for Trade and Industry in 2005, said:

“The guild socialists, who formed the union of post office workers, believed in giving workers a stake in the organisation. I was looking for ways to do that when I was in the union, and I’ll be looking for ways to do that as a minister.”

Unfortunately, he was unable to deliver on that sentiment, even though he was Secretary of State. I am happy to give way to the hon. Gentleman; perhaps he can explain whether he is having a clause IV or a clause 3 moment.

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

The Minister will understand that I was a very young man when clause IV was being discussed.

I was struck by the Minister’s reference to guild socialism, because I am sure that he knows that guild socialists would have no truck with any plan that left up to 90% of the business in private ownership. A belief of guild socialism, of which G. D. H. Cole was the greatest exponent, is that there should be 100% ownership by the work force, and I am happy to discuss guild socialism with the Minister if he wants to go down that route.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I would really look forward to that, but the hon. Gentleman ought to have such a discussion with his right hon. Friend the shadow Chancellor, who quoted guild socialists—I did not—and failed to ensure that the 2009 Bill made reference to employee shares. In the other place, however, a proposal, which became clause 13, was passed after some pressure from Liberal Democrat and Conservative peers, and the Government at the time accepted it. It stated:

“The requirement that a Royal Mail company be publicly owned does not prevent the establishment of an employee share scheme provided the Crown continues to own (directly or indirectly) more than half of the company.”

In other words, under pressure from Liberal Democrats and Conservatives, the Labour party in government was prepared to discuss in vague terms the potential establishment of an employee share scheme, but said nothing else about it.

I will give way to the hon. Member for Kingston upon Hull East, but his point and that of other Opposition Members has been that their Bill was different in some way, meaning that there could not be an employee share scheme. How come clause 13—

Karl Turner rose—

Jimmy Hood (Labour, Lanark and Hamilton East)

Order. The hon. Gentleman must resume his seat while the Minister is speaking.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

How come clause 13 was in the Labour Bill, even though it was quite a weak clause, which accepted that an employee share scheme could have been established, had the political will been there?

Karl Turner (Labour, Kingston upon Hull East)

If the Minister has always been so in favour of the share ownership scheme, why will he not allow it to go up to 20%?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I assure the hon. Gentleman that I am coming to the Government’s position. I am just exploring the Opposition’s position because it is quite muddled. Perhaps my hon. Friend wants to help me.

Richard Fuller (Conservative, Bedford)

The Minister is making some good points. I applaud his reaching out on the issue of employee ownership. I am beginning to doubt the sincerity of Labour voices. The Minister has explained that when they had the opportunity, there was nothing in their proposals about employee stock ownership. We are hearing from Opposition Members that they like employee stock ownership only under certain conditions of state ownership. Will the Minister confirm that the Government are in favour of employee stock ownership because it is a good thing to do?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I give my hon. Friend that confirmation. I also confirm that clause 3 contains the strongest proposal to mandate an employee share scheme that there has ever been in a Bill that provides for the privatisation of a public company. It is a strong statement, given the precedents. Previous privatisations have not contained such schemes or have not mandated them in this way.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I take exception to the Minister’s lauding of the “at least 10%” proposal as the greatest employee share scheme ever. That was achieved in 1987 by the Rolls-Royce sale. In the Bill, the interpretation of “at least” is negative. The Minister said in the eighth sitting:

“We are not saying that the Secretary of State should report only once. If there are different tranches of sales…”––[Official Report, Postal Services Public Bill Committee, 18 November 2010; c. 270.]

The employee share scheme is dependent on the Crown not owning any shares in the company. If the sale is broken into segments, therefore, the negotiation of employee sales of more than 10% will not even begin.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am happy to come to the hon. Gentleman’s point, and to those of other Opposition Members, but I want to explore the Opposition’s position. It is only last year that their Bill was before the House and their position is muddled. The hon. Member for Llanelli spoke about principles in her opening remarks, but their principles appear to be mightily flexible. I, my party and the Conservatives have argued for employee shares for many years and we are delivering them in this clause.

The effect of the clause 3 moment amendments, amendment 22 in particular, would be to reduce the Government’s ability to attract private capital and their flexibility to get the right deal for the company and for taxpayers. We have designed the measures to ensure that there is flexibility. That is why there is a minimum commitment to 10% and why we are not being as specific as the Opposition want. It is important to retain flexibility in such complicated transactions in which the best way to make the sale to get the maximum value for the company and the most benefit for Royal Mail is not clear. It is only Labour Members who want to put shackles on the Government and to undermine the way in which we go about the transaction. That militates against the sensible decision making that is in the interests of Royal Mail and the taxpayer. I hope that the hon. Lady will explain why she wants to tie up this transaction so as to undermine the searches for value for the taxpayer and for the best solution for the Royal Mail.

Nia Griffith (Labour, Llanelli)

Will the Minister explain how he came to the figure of 10%? What made him come to that figure—what is the evidence base and what consultations has he done?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am coming to the size of the stake and am happy to answer that and some of the other questions that the hon. Lady and her hon. Friends have asked. In deciding the size of the stake going to employees, a number of things must be balanced. We want to ensure that we are giving a meaningful stake to employees, without getting in the way of attracting private capital—we have established the need for private capital, and we do not want to harm our ability to attract that.

The minimum 10% share requirement in the Bill is the largest statutory employee scheme of any major privatisation. In response to the hon. Member for Middlesbrough South and East Cleveland, I should say that I know about Rolls-Royce—I have looked at all the different privatisations over the years, and at the percentages of employee shares. We could have a long debate about that—I am keen to have that debate, if he wants it, but he should listen to what I said. It is the largest statutory employee share scheme: in other words, the Rolls-Royce scheme did not require 100% in the legislation, but we are putting a minimum—“at least”—in the Bill, and that is a strong statement.

There is no doubt that the share is meaningful. The hon. Member for Llanelli quoted some of the witnesses from our evidence sessions two weeks ago and tried to suggest that the 10% stake was not a large one, but I will quote back to her Alexy Armitage of ifs ProShare, who said several things suggesting that 10% was quite a good figure. For example,

“But to say that every company should have x amount for employees and x amount for executives does not really work as a model. It will depend on the company and where it is in its industry.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 79, Q162.]

She said later:

“That is what a lot of corporations do, to be honest. They will start at a level and then will encourage employees as the company grows, or as the industry market changes, to acquire more shares.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 83-84, Q171.]

Clearly, when looking across different companies that have employee shares—we have looked at them, in this country and elsewhere—different percentages have different impacts depending on the nature of the company and of the industry.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Will the Minister explain how we will get above “at least 10%” through the processes he explained earlier when seeking capital investment? As far as the Labour members of the Committee are concerned, we cannot see how the figure will get above 10% if the prime aim of the Bill is to get capital investment?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I will try to deal with some of the questions asked by the hon. Gentleman and his hon. Friends as I proceed. However, I want to stress that we need the flexibility because we must attract private capital—there will not be a company to work in, or for employees to have a share in, unless we have that critical private investment. We must ensure that what we put into law and hardwire into the transaction retains flexibility.

We must also consider value for money. As my hon. Friend the Member for Bedford made clear, it is important that taxpayers get a return on the money that they put into the business, as well as ensuring that the Royal Mail gets the capital it needs. There are several things to weigh up here. We have drafted the clause to allow us huge amounts of flexibility in making some of those judgments. At the same time, unlike in the Bill last year, the clause guarantees that employees will have at least 10%, which is a significant step forward.

The hon. Member for Llanelli, in one of her amendments, talks about employees owning at least 20% of the company, once the Government have sold all their shares. The danger of hardwiring the higher figure into the Bill is that it will reduce the likelihood of getting the investment that the company needs. It will be a difficult judgment. When we engage with investors, potentially as we approach an initial public offering, it is very important to have that flexibility. If engaging in a trade sale or with a private equity buyer, or preparing for an IPO, as soon as one starts thinking about the processes one would go through, one realises the need for flexibility.

Parts of the hon. Lady’s amendments, and some of the comments of the hon. Member for Kingston upon Hull East, were about the design of the scheme and what form it would take. Again, I am keen at this stage to keep open options on the design. When I gave evidence to the Committee, I made it clear that I see the attractions of an employee share trust, not least because such an arrangement ensures the longevity of the employee shareholding.

We have had references to BT and the “Tell Sid” campaign. One of the lessons from that was how quickly some employees sold their shares. Some of the benefits that we see in long-term employee share ownership were therefore lost. However, that is not to say that some BT employees do not still have their shares, so let us not speak too strongly against individual employee share ownership. That, too, has merits, but there is a balance to be struck. I made it clear in my evidence that to say now that it must all be in a trust or it must all be individual employee shares or there must be a mix—to hard-wire that into the Bill—is not the right thing to do. We need to develop our thinking on which of those options is correct. I have made it clear quite strongly that I see the attractions of an employee share trust, but hard-wiring that sort of thing into the Bill is not sensible.

Gordon Banks (Labour, Ochil and South Perthshire)

I am sure that the Minister will understand our concern that an employee share scheme may be an employee share scheme on day one, but by day 10 it may well not be an employee share scheme. It was to preserve and strengthen the concept of an employee share scheme—to do what it says on the tin—that the amendments were tabled. They are designed to preserve the employee side of the share scheme.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

There seems to be consensus about these provisions; we seem to be coming together on support for employee shares. Let me be clear that I think that some of the sentiments and ideas behind some of the amendments are very laudable and certainly attractive, particularly, for example, the requirement for the trust, if there were a trust, to pay equal dividends to all its members. That is a laudable approach, but again it would be dangerous to set in stone the form of the employee share scheme before we have more certainty on the nature and level of private sector involvement.

There are other worthy methods for determining the allocation of shares and therefore dividends. One could think of length of service. I am sure that if hon. Members have been round the delivery sites in their constituencies, or a sorting centre if they have one, they have talked to Royal Mail employees who have been employed in the business for 20, 30, 40 or even 50 years. We therefore want to ensure that we think about and weigh properly the different approaches to allocating shares without hard-wiring something in the Bill and restricting how we might go about that.

Gordon Banks (Labour, Ochil and South Perthshire)

We will come on to these issues later, in relation to other amendments, but if the Minister recognises some of the issues relating to long service and so on, Opposition Members would have no problem with, as he says, hard-wiring that into the Bill so that we have a clear understanding of what this employee share scheme stands for.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I hope that this debate is beginning to provide that. We are trying to give hon. Members and people who read the record of our proceedings—God bless ’em—clarity about the fact that we want to engage on the design of these schemes. We are not closed-minded. We have some thoughts, which I have been articulating today and which I articulated in evidence, about the best way of going about that. We do want to hear from the experts, be they at ifs ProShare or the Employee Ownership Association, and from other stakeholders. That is the right way to proceed.

This is the strongest commitment that I am aware of mandating an employee share scheme in a Bill. Given that, the clarity of direction could not be stronger and the strength of the Government’s commitment could not be clearer. The strength of my personal commitment could not be clearer. The commitment in the Bill is, historically, extremely strong. Some of the concerns of hon. Members have to be seen in that light.

I am trying to be as helpful as possible, so let me move on to talk about the requirement for a report that hon. Members wish to see. I am very keen to keep Parliament abreast of how we develop these ideas. That is precisely why we have provision for a report in clause 2. That would cover the issue of how shares are transferred or issued into a Royal Mail company, including an employee share scheme. The provision is already there and we are keen to do that. Again, there is shared ground.

I know that hon. Members have been concerned about how the proportion of shares will be allocated into the employee share scheme. Let me explain why we have phrased that part of the clause in such a way. We wanted to keep our options open while also making a strong commitment, and the phrase “arrangements in place” achieves the flexibility that we need. There may be a complicated sequencing once one gets to the transaction, but it ensures that no sale can go ahead until the arrangements are in place and clear.

Gordon Banks (Labour, Ochil and South Perthshire)

“In place” and “in operation” are two different statements. We would like to see the scheme in operation, not just in place.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am happy to commit to the hon. Gentleman and the Committee that we will put shares into the scheme on day one. We still want to retain flexibility on the question of how much, and of when we will arrive at the figure of at least 10%. That is a critical point. We are keen to get the scheme going from day one, but we must remember what is in the interests of the employees. That has been uppermost in my mind. I know that the hon. Member for Ochil and South Perthshire thinks that there is some sort of conspiracy to do employees out of their shares, but nothing could be further from my mind. I want to ensure that when the shares come from the Crown and go into the employee share scheme, we will get a good deal for employees.

If we committed now to putting all the shares, the whole 10%, in on day one, and wrote that into the Bill, the upside of private investment staged in phases, going into Royal Mail and improving its performance, could mean that the share values are reduced. I want to ensure that we get the best deal for employees. The flexibility in the legislation is not to do employees out of anything, but to ensure that we get them a good deal.

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful to the Minister for making that commitment to have the share scheme in operation from day one. We are not saying that the end result of however many millions or billions of shares—10%, 20%, or whatever—must be placed into the scheme on day one. The amendment would mean that if 20%—or whatever proportion—is disposed of from the Crown, and if we are talking about the figure of 10%, then 2% should be placed into the trust. We are not saying that all the shares must be up front, but rather that there should be a proportionate amount at every step along the way.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Let me also try to help the Committee: I do not object in principle to the concept of phasing in the introduction of shares to employees as we sell the shares in the company. That would be a sensible and transparent way of doing the transfer. However, I do not want to hard-wire that into the Bill because one can imagine situations where that could undermine value for employees. That is why I want to keep flexibility, not to try to create problems in some way. This will be a complicated transaction; lots of things are happening. We must deal with removing the £8 billion pension deficit. That is a complicated matter, as we will no doubt see when we consider the relevant clauses. We must ensure that the scheme is created in a sensible way that is in the best interests of the taxpayer, the company and the employees.

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful for the Minister’s comments. He alludes to being supportive of our objectives. Will he go away and come back on Report with something that will satisfy him but also satisfy my hon. Friends and me?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I cannot give the hon. Gentleman that commitment because when thinking about the correct approach—and I assure him that I have thought deeply about this clause—my overriding conclusion is the need for flexibility. For the record, I repeat that it is not flexibility somehow to cheat the employees. We are being pretty positive about the future role of employees in this business. We want them to be engaged, to take a share in Rail Mail’s future success and to contribute to Royal Mail’s better performance, better productivity and growth. That is why we have included the scheme in the Bill and opted for a minimum of 10%.

However, that is also why it would be wrong to include constraints. We could, for example, have said, “We want to give 10% to employees on day one.” I considered that option, but I thought that it would have been against the employees’ interests. As amendment 22 proposes, we could also have done things proportionally. I considered that option as well, but I did not think that it was in the employees’ interests. I hope, therefore, that the hon. Gentleman will understand the motivation and the intention behind the way we have structured the clause.

Gordon Banks (Labour, Ochil and South Perthshire)

I want to take the Minister back to something that he said a few minutes ago. He is backtracking on what he said. He said that he was quite happy to see a staged introduction of shares into the employee share scheme. Now he seems to be saying that he is not. I am a little confused. Will he clarify what he has said?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The import of the amendment tabled by the hon. Gentleman and the hon. Member for Llanelli is that the phasing of shares into the scheme would be directly in proportion. My point is that that could work against the employees’ interests. I am happy to repeat that I have seen no real objection to that concept, which seems sensible, but it would be silly to proceed with it were we, while engaged in this complicated transaction, to find that it militated against the interests of the employees, the taxpayer and Royal Mail.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister said that he could not bring anything back on Report, but can we not have something along the lines that it is his intention to have a staged introduction? That still gives him an opportunity to find a way out, for want of a better expression.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is tempting me, and I congratulate him on the way in which he is selling his side of the argument. However, I am going to resist temptation.

Gordon Banks (Labour, Ochil and South Perthshire)

I am going home.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I hope that the hon. Gentleman will understand that, in resisting temptation, I am not closing down the possibility that, at some stage in future, after the Bill has received Royal Assent and become an Act, as I hope it will, we will consider such an approach. I genuinely think—I hope that hon. Gentleman will understand where the Government are coming from—that flexibility is important to this company and the employees. The policy direction and intent of getting a good deal for employees could not be clearer.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

To a certain extent, the Minister talks in a paternalistic fashion about what is in employees’ interests, and it might be fruitful to talk to the employees now about what type of scheme they would be interested in, the amounts and how it would be distributed.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Paternalists are people who will not even trust employees with shares in the first place, so I am afraid that I will not accept that sort of language from the hon. Gentleman.

Perhaps I can deal with some of the other comments that were made in the debate. The hon. Member for Llanelli worried that employee shares might replace wages. Let me make it absolutely clear that employees would receive their awards, including any additional awards under the modernisation agreement, in line with their original terms of employment. Separately, employees would then receive their share of any dividends as owners of the company, depending on the way in which we decide to structure the employee shares. There is no intent to do what the hon. Lady mentions, so let me completely quash that idea, which comes out of neither the Bill nor the Government’s policy statement.

At one stage—I will have to respond to him on this—the hon. Member for Ochil and South Perthshire intimated that he supported Unite’s statement in favour of a 49% employee share scheme. The Opposition might really be doing a volte-face on these issues—this clause 3 moment is becoming quite dramatic. The hon. Gentleman has made it clear that he is an expert on arithmetic, but if he and his hon. Friends want to retain a majority stake, give 49% to employees and get private capital, they have a problem.

Gordon Banks (Labour, Ochil and South Perthshire)

I did not allude to any number other than the 20% included in the amendment. I quoted from an evidence sitting, during which 49%, as well as 20%, was suggested. The Minister would never have agreed to 49%, which is why we compromised and went for 20%, along with the national federation.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Sometimes, one wishes one could share all one’s thoughts about how one went about preparing this legislation, but I would probably get into trouble if I did that. I will simply say that we looked at a lot of different options in relation to what the level of employee shares should be, how they should be structured and so on. We have put a lot of thought and effort into it, which I hope will reassure colleagues of our complete commitment. This is not simply about Royal Mail employees and the future of Royal Mail, critical though they are to the Bill. Recent evidence includes reports, sponsored by the Employee Ownership Association and independent academics, such as the recent report by the Cass business school. Other evidence has pulled together all the published works that look at how employee shares can impact upon the performance and productivity of companies and upon things such as absenteeism, and how they can improve the sustainability of business performance over difficult economic periods.

Although one cannot say that they always work in all cases—business and the economy are not like that—there is a strong evidence base, not only in the UK or in recent years, but over the world and over time, that employee shares can help companies motor and can be very good for long-term productivity and performance. That is why I am so supportive of the provision and why I, along with my hon. and right hon. Friends, want to promote such an approach more widely in the economy. Moreover, making it such a big part of the Bill sends a strong signal of this Government’s longer-term policy intent. I cannot stress enough how strongly we support the provision and how determined we are to make it work.

It will only work if two things hold. First, it must be in the interests of employees, and we will make sure that it is. Secondly, both the current management, who are doing a very good job in this area, and the future owners must understand that the benefits of employee shares or profit-related pay and all the different incentive schemes will only work when they engage with employees so that they are involved and can participate in the day-to-day business of the company. That is why, when I gave evidence to the Committee, I talked about the world-class mail projects in a number of sorting centres, which are engaging employees in how they work. The employees in the Gatwick and Cardiff centres, which are the two leading exponents in the Royal Mail sorting network, think about their work in a completely different way and talk about enjoying it more than ever before. They are more committed, and that is even before employee shares. The combination of putting trust in employees, engaging them and giving them a financial benefit can be powerful for Royal Mail, corporate Britain and the UK economy, which is why I think this is an important economic development.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I agree with the Minister. When he says that employees feel better at work and more engaged, that is because the modernisation process—from its very inception through to its end—engaged with the employees. The problem with the Bill is that employee engagement appears somewhere in the mid to end-part of the process and not at the very beginning. Can the Minister conceive of a situation whereby applying a number without engaging with the employees at this stage means that employees do not actually buy into the share scheme later on down the line, unless they are engaged with it at the beginning?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I can confirm to the Committee that I have spoken to the general secretary of the CWU and his deputy about the share scheme. I am very keen to continue to engage, as I am in many areas of the Bill, with the CWU, as the representatives of employees, and indeed with other representatives of employees, such as Unite.

Taking employees along with this thinking is important. For now, however, as Royal Mail management get on with the challenge of modernising the company in anticipation that it will then also have access to private capital and the other freedoms that the Bill gives them, I think that they understand the need to take the employees with them. When I have spoken to Royal Mail’s senior managers, and of course to Moya Greene and Donald Brydon, I have been very impressed about how they see the employees being at the centre of their business plans. They know that they have some tough decisions to make about the future of the business, but they also know that they will only succeed if they engage and take the employees with them.

The type of question that I was asking of the chief operational officer, Mark Higson, when I went around the Gatwick site was, “Well, this is great, you’ve got a bit of a roll-out here at Gatwick, Cardiff and one or two other sorting centres. What about rolling out world-class mail and engaging with the employees on the delivery side?” In a way, one can see it more easily at a sorting site, because there are the machines and a type of factory process, but there is another aspect—where the actual labour is—and it is on the delivery side. We have to see these new techniques at that level and on that side of the operation too.

We actually have quite a long way to go with modernisation, and with engaging and involving employees. I believe that the Bill and this clause, particularly if we do not accept the amendments tabled by the hon. Member for Llanelli, will help to develop that process further, so I hope that the hon. Lady will withdraw her amendments and understand that the share scheme we are proposing is vital to the future of Royal Mail. It is something that she ought to welcome and I hope that she will join me in having a clause 3 moment.

Nia Griffith (Labour, Llanelli)

We have had a very interesting discussion about our amendments 22 and 23. However, I must say that we have not been convinced that everything that we want to see in the Bill will be put in the Bill. In fact, there seems to have been quite a lot of wriggling about and quite a lot of, “Well, you’ve got to trust us, we’ve got the best intentions in mind”, and so forth. That is one of those very difficult unknowns for people.

We want to press our amendments to a vote. As you will be aware, Mr Hood, the amendments are similar in their wording, and you will see that amendment 22, which is the first on the amendment paper, is our preferred amendment, because we would like to see at least 20% as the percentage available for an employee share scheme. Therefore, Mr Hood, with your leave I would like to press amendment 22 to a vote and in the unfortunate event that that vote is not won I would like to press amendment 23 to a vote.

Gordon Banks (Labour, Ochil and South Perthshire)

I beg to move amendment 31, in clause 3, page 2, line 32, leave out ‘or include’.

I shall not detain the Committee too long, because the Minister will be anxious to make progress. I hope that he and the Government recognise that the early part of the Bill contains a lot of important matters that require our attention. That is not to say that what comes later is less important, but perhaps it will be less contentious. Who knows?

The amendment is designed to omit the words “or include”. It will take us back to a debate that we have already had. The Bill as currently drafted gives rise to concern that the employee share scheme could hold for someone other than employees. I tried to make that point to the Minister earlier. I understand that it could be appear to be a contradiction in terms, but there is a degree of confusion in the clause as it is written. I see that it may be possible to hold shares for past employees, but that depends on the nature of the scheme. Of course, we still know little about this issue, despite the Minister’s comments on previous amendments.

We have talked about the scheme’s ability to create a mechanism to hold shares in trust for employees, from which they would accrue the benefits but not outright ownership. It is disappointing that the Minister did not see fit to vote with us on that. However, in such a case, are the words “or include” really necessary? Do we take it, from the wording of the Bill, that the Minister does not regard that as the way forward and regards employees as being able to hold individual ownership through their employment and beyond? I am not saying that the system is not workable—in the past I have benefited from such a scheme—but we are guessing what the Minister means by the current wording. As we discussed earlier, there is a real worry that an employee share scheme that is not protected, in the way that such a trust would protect it, could result in the major shareholder becoming the only shareholder in the business. I do not want to make all those points again; I am sure that they are fresh in the minds of Committee members.

Many people have argued for a trust to be established, as I referred to a little earlier, and some of our witnesses have already been quoted. Mr Hooper made similar comments. He said that he thought that

“there is a problem with employees just having shares.”––[Official Report, Postal Services Public Bill Committee, 11 November 2010; c. 116, Q230.]

We heard the reference to BT earlier. In fact, Mr Hooper made reference to the BT privatisation in 1984 and to some of the difficulties that he thought came about from that. I wonder whether the Minister agrees with Mr Hooper about that.

Mr Hooper went on to advise us that a trust would be more engaging, but that that was his personal view. In relation to the amendment, I am confused about what format that would operate under and what added value the words “or include” really offer. Does the Minister share my concern that the scheme must be related to employees and that the clue is in the title—the employee share scheme? What opportunities does the wording, as it currently stands, create for non-employees, and indeed people who have never been employees, to hold shares through the scheme? I genuinely seek his clarification on that point.

The Minister no doubt feels that engaging the work force through an employee share scheme is all that is necessary to get the work force on side. However, the question is how, and with what regulations, will the shares be distributed, and whether the Bill is strengthened by taking out the words “or include”? As I said earlier, an employee share scheme without a trust would give rise to the possibility of shares delivered through this mechanism falling into the hands of other private investors, or indeed investor, who already have the possibility of owning the remaining 90%. The words “or include” do not assist in that matter at all, because they do not protect the employee share scheme.

The employee share scheme may be well-intentioned, but without safeguards we may find that those shares can very easily be purchased from employees. In doing so, the aspiration of the Government could, in fact, result in a scheme that is worthless. By agreeing to the amendment, the Minister could break a bad habit that he has got into—I am trying to coax him out of it; I nearly got him there on the last one, but we are hoping—and at the same time prevent the scheme becoming worthless and, in doing so, protect the objective of this part of the Bill, which is to keep work force engagement. Of course, he could do that through a John Lewis-style trust, as we debated on the previous amendment. There is, however, no such mechanism to make that happen, so we must do all that we can to improve the Bill. Although the Minister’s words are well-intentioned, he might not be the Minister at that point. Someone else might be delivering some of the solutions further down the line. Who knows?

As I said in my first Committee speech and will say again, we really are trying to help the Minister. The removal of the words “or include” strengthens the Bill and strengthens the employee share scheme concept. I do not want to detain the Committee much longer. To conclude, the amendment protects the share scheme to be just that—an employee share scheme. There is a raft of information missing from the Bill, some of which we have discussed in the previous amendment, and the Minister alluded to some assistance in his remarks. If there is going to be an employee share scheme, it must do what it says on the tin. The amendment protects the concept that I think the Minister is trying to promote in the Bill with the employee share scheme.

Nia Griffith (Labour, Llanelli)

I rise very briefly, Mr Hood, to support the comments of my hon. Friend the Member for Ochil and South Perthshire. As it is such a simple little amendment, I will make no further comment.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think that the hon. Member for Ochil and South Perthshire is getting into good habits. Amendment 31 moves away from temptation into the arena of probing amendments, which I welcome. We want the Bill to be properly scrutinised, and we want to be probed so that we can explain the intention behind the different parts of the Bill. I am grateful to him for giving us the opportunity to provide clarity.

Amendment 31 relates to the scope of the employee share scheme. The words “or include” allow the scheme to encompass employees of Royal Mail who work for its subsidiaries, even those subsidiaries that do not fall within the strict definition of a Royal Mail company in clause 2. It is one of our flexibility points, but I hope that the hon. Gentleman will understand that once again we are being flexible in order to ensure the benefits of employees.

As the hon. Gentleman knows, Royal Mail has a number of subsidiaries that do not directly provide the universal service but are nevertheless considered part of the overall company infrastructure. During our debate on subsidiaries last week, a number of them were listed—for example, Royal Mail Estates Ltd. Clause 3 is explicit that all those who work for a Royal Mail company—the company providing the universal service—must be part of the employee share scheme. Without the words “or include” in subsection (4), the Government cannot extend employee shares to employees of companies that do not strictly fall within the definition of a Royal Mail company.

Gordon Banks (Labour, Ochil and South Perthshire)

Does the Minister not agree that the words “or include” could also indicate some other intention? They might allow a decision not to create a trust, so that people other than employees in the business can hold shares. I understand the Minister’s intention, but clause 3 could have been drafted in a more precise and exemplary fashion.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I understand what the hon. Gentleman is saying, but if we went down his route there would be a danger that some staff in Royal Mail Group would be barred by statute from membership of the employee share scheme. They would not, therefore, have the same incentives to engage with the business for which they work and to share in its future success. Let us be absolutely clear that clause 3 ensures that we introduce an employee share scheme for the benefit of Royal Mail employees. It is not the intention to make the shares available to anybody and everybody in the world; it is clearly the intention to make shares available via the scheme to employees and people connected with the Royal Mail family of companies.

I can see that Opposition Members are keen to engage. Perhaps they are worried that we are excluding them because they do not work for a Royal Mail company. We are absolutely clear about the intention, and I hope that they will accept it.

Nia Griffith (Labour, Llanelli)

I really want some further clarification. Will the Minister consider a stronger wording for the clause, which would explain the intention? On this side of the Committee, we think that the words “or include” could result in a small number of participants in the scheme being employees and a large number being all sorts of other people. If the scheme will be available to a specific group that is defined by the Minister, could a definition of that group not be provided? Could the clause not be tightened up—perhaps referenced somewhere else and defined in another clause that links back to this one—so that it is absolutely clear whom we mean? The Minister has clearly defined the intended group of employees for us, and that needs to be somewhere in the Bill.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

This is why I am so grateful to Opposition Members for tabling the probing amendment, because it enables me to put the intention beyond doubt. The Bill is about Royal Mail, and the clauses about employee share schemes contain definitions. It would be difficult to draw the conclusions that Labour Members are trying to draw, but I have made it absolutely clear that the intention is for the shares to be made available via the scheme to those who are connected to the Royal Mail family of companies. I am repeating myself to ensure that the record is clear on that point.

Gordon Banks (Labour, Ochil and South Perthshire)

I hear the Minister’s words. He says that shares will be made available to members of the Royal Mail family, but people will not necessarily always be a member of that family. As the Minister has not accepted the amendment with the trust in it, the two words included here—“or include”—may provide the opportunity for a trust to not be set up and for employees to retain their shares when they move on. It would then no longer be an employee share scheme, but an employee and ex-employee share scheme—something other than what the Minister aspires to create.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

In a way, we are returning to the previous debate. If we chose to go down the trust model route for whole or part of the employee share scheme, the rules of that employee share trust would determine whether someone who has left the trust would be able to take the shares with them. The general assumption—certainly, my assumption—given the policy intention of trying to have longevity in employee-shared ownership, is that they would not be able to take the shares from the trust; the shares would remain in the trust. Again, I hope that the hon. Gentleman understands that if one thinks back to the previous debate and brings those ideas to this one, some of the concerns fall away.

Gordon Banks (Labour, Ochil and South Perthshire)

I hear the Minister’s good intentions, but retaining the words in the legislation would override them and could prevent the formation of a trust. That is why we would like to see the Minister give some ground on those two words.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Those words would absolutely not prevent the formation of a trust—let me be clear about that. The problem is that if we excluded those words, some Royal Mail employees might not be able to participate in the employee share scheme, which I am sure that Labour Members do not want to occur. I therefore urge them to withdraw their amendment. I am grateful that they have probed us on the matter, so that we have had to make it absolutely clear that the words are about making the scheme as inclusive as possible for employees involved in the Royal Mail family. That is the intention, and I invite the hon. Gentleman to withdraw his amendment.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister said throughout his remarks that the amendment was a probing one. I have never used those words, and I want to press the amendment to a vote.

Gordon Banks (Labour, Ochil and South Perthshire)

I beg to move amendment 24, in clause 3, page 2, line 33, at end add—

The amendment, in my name and that of my hon. Friend the Member for Llanelli, takes us back to the debate on amendment 16, and I do not want to repeat myself. The Minister did not see fit to accept our proposal to include a representative of the work force on the board of the newly privatised company. Amendment 24 takes that philosophy forward to the employee share scheme, and it would entitle the share scheme to have at least one representative on the board of the newly privatised Royal Mail. The objective is to ensure that the scheme is at the heart of each, every, and any decision that the company may make that might impact on the existence of the scheme. The opportunities to impact on such matters would be many and varied, but I want to take a minute to run through one or two possibilities.

For instance, if the worst fears of my hon. Friends and I were realised, the lack of a trust designed to protect a particular shareholding on behalf of employees—if the Government failed to establish it—might result in the erosion and elimination of such an employee share scheme. We do not want that, and we think that it is something that a representative on the board would be able to try and preserve. Perhaps the employee share scheme would become something else, as I have alluded to in other contributions this morning. An employee or past employee share scheme in which shares could be sold to the main shareholder would allow the scheme to be eroded, and with it a key point of the legislation and something that the Minister is very keen on.

The purpose of a scheme representative on the board would be to argue that every decision taken by the new business should not impact negatively on the very employee share scheme that the representative is there to protect. With that in mind, there would always be an argument being made at board level on the impact of decisions on the scheme. As the Government do not yet accept the need for a trust to be established through the content of the Bill, it is not impossible that decisions on the longevity of the employee share scheme could be taken by the board of the operating company to which the scheme has relevance. I am quite sure that no one would like to see an erosion of the Minister’s intentions, which he has set out today.

The amendment provides some comfort to employees in the scheme, as there would be someone fighting their corner at the highest level of the company. Perhaps it would also be possible for the structure of share distribution, such as quantity or parity with other shareholders, to be less than equal, which is something that we touched on this morning. None of us in the Committee has a burning desire to see that, but it is something that the legislation, in the way it is presented, allows for as an outcome. The amendment would ensure that someone arguing for the benefit, strength and longevity of the employee share scheme would be able to fight their corner at the highest level of the company. Shareholders are less than equal, in many ways, with any such changes that may be proposed by the new company, and therefore a strong voice from the scheme on the company board is the least that should be expected, and it is the least that employees should expect of us. We have the employees’ interests and the employee share scheme’s interests at heart and, because of that, we have the Minister’s best interests at heart. If the employee share scheme is such a strong part of the Bill, I cannot see a reason for the Minister to refuse the amendment—after all, we only wish to protect the scheme, as I have said. The scheme is built into the legislation, and it is a creation of it.

We heard a lot during our evidence sessions about employee-owned companies, and reference has been made this morning to the contributions of Carol Leslie, the policy director of the Employee Ownership Association, and Alexy Armitage, the head of employee share ownership at ifs ProShare. We must recognise, however, that a privately owned Royal Mail will not be an employee-owned company. It will perhaps be owned by an overseas-based global company in which employees have ownership of possibly as little as 10% of the share capital, because the Minister did not embrace our earlier amendments. We are still not clear whether that holding will reach 10% only when the Crown has reduced its own holding to zero, and we are still not clear what form that staging will take. I accept that the Minister is well-intentioned, but he has not taken up my challenge to do something about that on Report. In such a situation, there must be a representative on the board with the sole interest of the scheme at heart, and the amendment would do just that.

It was also evident that, although it was asked to give evidence to the Committee, and there has been reference to its evidence not only in my contribution but in the contributions of others, ifs ProShare has not been involved with any of the Government’s discussions of the scheme. The Minister mentioned an intention to engage with ifs ProShare in the future, so I hope that he will take up the kind offer that was made to him during the evidence session to do just that.

There is no mention in the Bill of how the ESS will work—the idea has been touched on, and even the Minister raised this in one of his contributions. Would every employee receive a one-off comparable amount on their first day or after 12 months’ service? We do not know whether long service would be rewarded with a share allocation. The details are extremely sketchy, so we are being asked to put our faith in something that does not contain a lot of detail.

I propose that we put our faith in somebody on the board, that we put our faith in somebody who has the best of intentions for the employee share scheme and that we put faith in that person’s ability to stand up for the share scheme in every decision that is taken within the new company. We understand that every decision that is taken within the company might affect the employee share scheme, and having someone on the board arguing the case for the scheme and for the employees would be a significant step forward. That is the least that we can accept. The presence on the board of a representative from the scheme would ensure that any changes to the scheme would always have a voice of the scheme’s members at the decision-making heart. Although the Minister presents the scheme as it appears in the Bill, there is no guarantee that the Minister’s concept of the scheme today will be the same as the scheme that is in operation in, say, five months’ time, five years’ time or 10 years’ time.

Karl Turner (Labour, Kingston upon Hull East)

Does my hon. Friend agree that the amendment would enshrine in the Bill an opportunity for employees to have their voice heard? Does he agree that it would be illogical, and it would rather contradict their mantra that we are all in it together, if the Government were to say no to the amendment?

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful to my hon. Friend for his intervention. During the Committee’s deliberations we have moved a number of amendments that would have strengthened the representation of the employees throughout the new company should the Bill receive Royal Assent and should the business be sold off, but the Government have seen fit not the embrace those amendments. So here we go again trying to do it at another level. My hon. Friend’s point is important, because it empowers employees. Sadly, we were unable to secure representation at a high level during earlier stages of Committee debate.

Representation would ensure that the validity of decisions could be evaluated. If advice and opinions were ignored by the rest of the board, a record of decision making could be kept so the impacts of decisions could be assessed. That is an important point to make. We have had a number of votes in the Committee and seen how people can be outvoted. It is unlikely that one representative on the board would be able to outvote the rest of the board, but we would be able to see, and the representative could ensure, that they stood up for the benefit of the employee share scheme and the employees in it when any decision was debated and voted on in the new company.

Such transparency and accountability should not be the worry of the employee share scheme representative; it should be the concern of other members of the newly created board. We would not want them to make decisions detrimental to the employee share scheme without some as yet unknown reason that would make that tolerable; I cannot see it myself. The employee share scheme representative would be there to evaluate and determine whether the decision-making process and any decisions that came from it were in the best interests of the scheme.

As I have mentioned, I am disappointed that the Minister has not seen fit to accept our offer of representatives from the workplace. We are still waiting to hear whether he will allow a customer representative on the board.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

In your dreams.

Gordon Banks (Labour, Ochil and South Perthshire)

I think “in your dreams” probably means no. However, if the Minister could embrace such representation for employees, customers and the share scheme, there would be a strong voice concerned with work practices, the customer experience and the longevity and fairness of the employee share scheme. That could be useful in preventing the scheme’s assets from falling into the hands of big business, as was discussed earlier. If a trust does not exist, there is a fear that the shares might find their way on to the open market and be gobbled up by the major shareholder.

I accept fully that there are no guarantees in life, and that such representation would not be a panacea for all ills, as I have said, but it would allow remaining board members to be briefed on the impact of every decision that they make in relation to the employee share scheme and to have regular information that would empower better and more informed decisions. I have been a company director for many years. It is important when running a company to run it for the company’s benefit. We are arguing that the company’s benefit is also the benefit of the employee share scheme. Directors can lose sight of what is for the overall benefit of the company, its employees, its customers and the people engaged in it. The amendment would ensure that the business’s directors did not lose sight of what is beneficial to the employee share scheme.

Not much more needs to be said about the amendment. It is straightforward. Previous contributions discussed some of the arguments, and as far as we can see, they stand the test, whether they are arguments for amendment 16, amendment 22 or other amendments. My hon. Friends and I support the amendment—and its ambitions; they, too, are important. I understand that the Minister does not like the drafting of the amendment, but if he comes back with something that represents the same sentiment, we would be happy to support it.

I trust that the Minister will be supportive—although I doubt it—because refusing such an engagement would challenge his commitment to the longevity of the employee share scheme. He has not agreed to embrace the creation of a trust by including it in the Bill. If he does not embrace those at the heart of this new business, arguing for longevity in the best interests of the employee share scheme, people will draw their own conclusions on what he really means by such a scheme. It is important to preserve the share scheme on behalf of the employees in it. I would be interested to hear the Minister’s response.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

As the hon. Gentleman said, we have already discussed the principles underlying the notion of employee representatives on the board. Like him, I do not wish to detain the Committee by repeating or rehearsing those arguments. As I said during that debate, however, such ideas have some merit.

I have never been opposed to the idea of employee representatives being on boards, or on board committees. However, it is for the company—in this case, Royal Mail and its shareholders—to decide how to structure its board. The point is—we had the same discussion last time around—that however much the Committee or the Government think it a good idea to engage with employees, with share options and shares, and even employee participation schemes, the notion that we hard-wire into the legislation a particular board structure seems wrong. It is not appropriate to impose it through legislation, and I am not aware of a precedent for such an imposition being made by statute.

Gordon Banks (Labour, Ochil and South Perthshire)

I hear what the Minister says about the hard-wiring analogy on the make-up of the board. We do not wish to prescribe its make-up. The amendment merely asks that at least one person should be designated as a personal representative of the employee share scheme. The Minister did not see fit to embrace our earlier amendments, so we are talking about only one board member. That is hardly prescriptive as to the board’s constitution.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I understand what the hon. Gentleman says, and I have made our position clear. Assuming that an employee share trust is set up, it is highly likely—indeed, desirable, given its importance—that the employees’ voice should be properly heard and represented. However, the hon. Gentleman must answer this point.

If the amendment were passed, and if the legislation were uniquely to prescribe the structure of the board, a fully independent Royal Mail with no Government shareholding that wanted to change the structure of its board would have to come back to the House and request legislation. That would be an onerous regulation to impose on a private company. It could cause the company problems that it might be difficult to envisage.

Gordon Banks (Labour, Ochil and South Perthshire)

I hear what the Minister is saying, but he said a few moments ago that the employee share scheme should have its voice heard at the highest level. How does he propose that its voice should be heard, if not at board level? Can he tell the Committee how he will ensure that it is heard if he does not embrace the amendment?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman will be aware that there are many examples of ways in which different companies ensure that the voice of their employees is heard, in particular in the employee share ownership sector. There are many ways in which those kinds of companies ensure that the voice of their employees is heard, and that they increase employee participation. I have made it clear to this Committee that I am extremely keen on that.

The previous Government could have done a great deal more on that—in fact, they did almost nothing. We want to start with this Bill and other things that we are doing to put that right. I make it clear that this is not about whether the principle of representation on the board is worth while—I think we can agree on that. The question is whether we should bind the company for ever in respect of the structure of its board.

Graeme Morrice (Labour, Livingston)

If we are all in favour of an employee share scheme, the logical conclusion would be to have a member of it on the board. I note what the Minister said, but I do not agree with him.

Some time ago, if my recollection is correct, the Minister spoke about the Bullock report of 1978, which dealt with industrial democracy and employee representation on boards. He was critical that the then Labour Government did not enshrine it in legislation, which would have hard-wired in companies those things that he now seems to oppose. There seems to be a lack of consistency.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is right, in that I did refer to the Bullock commission, but he is absolutely wrong to suggest that I thought that the Labour Government who set it up should have accepted all its recommendations in full and hard-wired them in legislation. I certainly never said that, and I am not saying it now.

The point I was seeking to make was that this debate had occurred in the past but had disappeared from general debate in the politics of this country. Aspects of the Bullock report are not places where I would like to go: nevertheless, some of the concepts and the philosophy behind it are things that should be encouraged in the workplace of a modern company in the 21st century. Engagement between employers and employees is a good thing, and I have paid tribute in the past to a Secretary of State in the previous Government, the right hon. Patricia Hewitt, then MP for Leicester, West, for introducing the right to request flexible working. Why am I bringing that into the debate? It is because that progress in employee rights helped to trigger conversations between employees and employers that previously were not taking place, for whatever reason.

One of the objectives of Government policy needs to be to break down the barriers that prevent those reasonable conversations from taking place, so that employees and employers can come together. By and large, their interests are actually much more closely aligned than is often thought. If the hon. Gentleman is pointing to the fact that I referred earlier in our debates to the philosophy behind the Bullock commission, he is right. We do need greater engagement, and I think that the proposals will result in that, but the amendment goes too far because it is trying to put into statute something that should not be there.

Gordon Banks (Labour, Ochil and South Perthshire)

I thank the Minister for what he has just said, but he seems to think that an amendment that prescribes one representative on the board of a company which might have 10, 20, 12 or six—who knows how many?—members of its board is a particularly onerous thing for a private business to cope with. I come from private business, and I put it to him that it is not. It is something that the owners of the new Royal Mail could and should easily embrace, and therefore the Minister should not worry about the impact on the private company or even whether there would be a possibility of them selling off the business.

Jimmy Hood (Labour, Lanark and Hamilton East)

Order. Interventions should be a bit shorter than that.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am always pleased to hear the dulcet tones of the hon. Gentleman, who always tries to be helpful, even if he sometimes does not succeed. I understand what he is saying, but there is a reason why I am not aware of any precedent for such a proposal in British company law, which is that it is too restrictive. It might even work against the interests of employees, and I am sure that he would not want that.

I am also sure that he would not want to set in stone a law that would lead to a private company banging on the doors of a future Government to demand new legislation, because what was passed in 2010 was far too restrictive and inflexible. That does not make for good law, and that is why we are resisting it, while making it clear that we are keen to have employees’ voices heard not only in law, but more generally. That makes for good workplaces and, more importantly for Britain plc, improves productivity. There is strong evidence, which I mentioned earlier and could go on at length about, for the need to improve productivity and how greater employee-employer engagement can be part of that process.

I hope that the hon. Gentleman will withdraw the amendment. It is important that we ensure that the Bill is not changed in the way that he has proposed, and I look forward to voting on that.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister read my mind. He has not changed my opinion. We should support the amendment, and I would like the Committee to vote on it.

Clause 4

Nia Griffith (Labour, Llanelli)

I beg to move amendment 34, in clause 4, page 3, leave out line 7 and insert—

Jimmy Hood (Labour, Lanark and Hamilton East)

With this it will be convenient to discuss the following: amendment 25, in clause 4, page 3, line 25, at end add—

Amendment 26, in clause 5, page 3, line 33, leave out ‘report’ and insert ‘Bill’.

Amendment 29, in clause 5, page 3, line 33, leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the super-affirmative procedure under section 18 of the Legislative and Regulatory Reform Act 2006.’.

Amendment 30, in clause 5, page 3, line 33, leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the affirmative resolution procedure.’.

Amendment 27, in clause 5, page 3, line 34, at end insert ‘which confers on the Secretary of State the powers to make the disposal.’.

Amendment 28, in clause 5, page 3, line 35, leave out ‘the report must’ and insert ‘when laying the Bill the Secretary of State must report to Parliament and’.

Amendment 35, in clause 5, page 3, line 40, at end add ‘and

Clause stand part.

New clause 3—Guarantee of inter-business agreement—

New clause 4—Guarantee of inter-business agreement (No 2)—

New clause 8—Report on the future viability of the Post Office network—

New clause 9—Annual report on Post Office network to devolved government bodies—

Nia Griffith (Labour, Llanelli)

We now come to an extremely important clause dealing with post offices, and many people will be concerned about what the Bill has in store for their post offices. There are many elements to this debate, so I will focus on some and my hon. Friend the Member for Ochil and South Perthshire will focus on others.

Language is power. People can deceive, hoodwink, bamboozle and confuse if they use the appropriate language. Some politicians in the recent past have been accused of spinning. However, none have been quite as breathtakingly shameless as those who portray the Bill as friendly to postmasters, postmistresses and customers. Let us consider the hijacking of language. “Mutual”, like “communities,” has a comforting, warming-of-the-heart feeling about it. When the press try to explain “mutual,” in most cases there is a reference to John Lewis. That characteristically Welsh surname naturally inspires confidence, conjuring images of Welsh cakes by the hearth. Nothing could be further from reality.

Peter Holbrook, chief executive of the Social Enterprise Coalition, said in Thursday’s lead story in The Guardian:

“Without the necessary safeguards there is a danger that the mutuals could be demutualised and sold off to the private sector, reminiscent of what happened to British building societies in the 1980s. It would be criminal to see that happen to our public services. All mutuals need to be asset-locked to ensure that they operate for the benefit of the public, forever.”

Nothing ambiguous there: he says, “forever”. That is clear. It is the language of the Lord’s prayer. Nothing could be further from the language of the promoters of the Bill.

To focus a little bit more on specifics, the Government’s proposals on mutualisation are vague. They do not give us a clear idea of exactly what form the mutualisation will take, although we are aware that there have been considerable discussions on this issue with sub-postmasters; they do not guarantee direct employee involvement; and they leave rather a loose definition that could allow many different interpretations of “mutual”.

Amendment 25—particularly paragraph (g)—deals with a number of issues that we would like to explore in detail. Some of the points that we make in paragraphs (a) to (f) will be familiar to Committee members from previous discussions. Paragraph (a) deals with worker representation. Many of the arguments that my hon. Friend the Member for Ochil and South Perthshire has advanced relating to the employee share scheme are equally appropriate in respect of the future of the post office network. Those who are involved most closely need to be best represented. We would like there to be a great deal more clarity about how that representation will take place and who will have a voice, because this is a major new step forward and a terrific adventure that is exciting in many ways. None the less, it will bring with it fears and concerns about what the future holds for the post office network. The maximum amount of involvement is critical, which is why we want to amend the Bill to that effect so that there is proper worker representation.

Let me move on to discuss the UK headquarters. The Post Office may be in a different situation to the Royal Mail. Nevertheless, people feel strongly that whatever happens to the Post Office in future—it may metamorphose in different ways—we want some safeguards on the headquarters remaining in the UK. I will not repeat my previous comments about the way that the sub-postmasters gather information from local communities. Quite clearly, they are very concerned about keeping the headquarters in the UK. Proposed new paragraph (c) of amendment 25 is pertinent here because we do not quite know what is going to happen to the body once it has been floated off. Therefore it is important that the headquarters remain in the UK. That is intricately linked with the idea of proper representation so that there can be proper decision-making procedures.

It is possible through consultation to tease out exactly what people want. The clause does not give us a very clear idea of exactly what is envisaged. We know that we are talking about an organisation that is not uniform. When starting a mutual from scratch with a blank piece of paper, everyone can pile in using exactly the same format. But the Post Office has a very different structure. We have all sorts of people who have put different amounts of money in. There are people with different types of post offices, some of which are viable, some of which are not. So we have a whole range of different scenarios for those people. Some people may be setting out in their careers. Some may be looking to retire very shortly. Clearly there are going to be different views. Indeed, we heard as much on Second Reading.

Consultation is critical before we set out on any structure at all and if this is going to be a viable and successful organisation, we want that consultation to be meaningful and we want it to have a proper response from the Secretary of State. In other words, we want it to be listened to. So that is the purpose of paragraph (e). We want to ensure that the Secretary of State takes on board what is said in that consultation.

Paragraph (f) is critical. If the proposal is for a mutualisation, no mutual could expect to succeed unless it had the full support of its members. That is the very essence of a mutual. There has to be some form of vote or democratic process in which those who are going to be directly affected and involved show that they want to see the post office network become a mutual and be separated off from the state. Clearly the democratic process needs to take place and we need to have some proper evidence that at least 51% of those who will be directly affected wish to see the transfer into a mutual take place.

I should like to focus my comments on paragraph (g) because it is critical to the proposal. Whereas everybody would rush to be part of a money-making enterprise that was clearly going to do well, our post office network faces a difficult scenario with the declining mail volumes, the decline in Government business and the declining footfall in many post offices because so many people do things online. Some post offices manage to combine other types of activity and are symbiotic with village shops or garages. Everybody who might participate will want to know how viable the post office network will be if it is made into a mutual, because they will be making their whole livelihood part of the new organisation.

Recently, we had a very glossy document and an interesting announcement on the funding for the post office network and the £1.34 billion investment. For all those who are involved in the post office network, the question will be how the £1.34 billion will be used.

Michael Weir (Scottish National Party, Angus)

Does the hon. Lady agree that one problem with the mutual solution is that a mutual would become viable only if the network was profitable and viable, as was clear from the evidence that we received? The network is a long way from that. Does she see any indication in the Bill of a time scale for getting it to that stage?

Nia Griffith (Labour, Llanelli)

That is one of the big questions: what is the time scale for getting things in place? A sum of money has been floated for investment and we understand that that is for 2012 onwards. Funding of £150 million was pledged for this year by the Labour Government and there is £180 million for the year up to April 2012. The sum of money is for beyond that time, but a proportion of it will be needed for direct subsidy, just like the current £150 million and £180 million. If costs rise, that may be more than £180 million. If post offices close, it could be less than that. We do not know at the moment exactly how much will be needed for a running-cost subsidy.

Furthermore, we need to know what will be done with the remainder of the money. Different things might be done. There could be modernisation that makes post offices into very attractive places. That may be a good use of money, but it might not create additional income streams. There could be investment in equipment or the computer system. That may be beneficial for people who use the post office and for the people who serve them, but it might not create additional business.

We want a report on the use of the £1.34 billion so that we know what is done with it to make post offices more viable. If a number of post office branches are not profitable or viable without considerable cross-subsidy, which involves a considerable amount of Government money, the question will be what has been done with that £1.34 billion to create new forms of custom. If something has been done, there should be an evaluation of whether those new forms of custom have materialised.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Lady will have read our policy statement, “Securing the Post Office Network in the Digital Age”. Chart 4 on page 19 sets out how the funding will be used.

Sir David Amess (Conservative, Southend West)

I remind the Committee that with this we are discussing the following: Amendment 25, in clause 4, page 3, line 25, at end add—

Amendment 26, in clause 5, page 3, line 33, leave out ‘report’ and insert ‘Bill’.

Amendment 29, in clause 5, page 3, line 33, leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the super-affirmative procedure under section 18 of the Legislative and Regulatory Reform Act 2006.’.

Amendment 30, in clause 5, page 3, line 33, leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the affirmative resolution procedure.’.

Amendment 27, in clause 5, page 3, line 34, at end insert ‘which confers on the Secretary of State the powers to make the disposal.’.

Amendment 28, in clause 5, page 3, line 35, leave out ‘the report must’ and insert ‘when laying the Bill the Secretary of State must report to Parliament and’.

Amendment 35, in clause 5, page 3, line 40, at end add ‘and

Clause stand part.

New clause 3—Guarantee of inter-business agreement—

New clause 4—Guarantee of inter-business agreement (No. 2)—

New clause 8—Report on the future viability of the Post Office network—

New clause 9—Annual report on Post Office network to devolved government bodies—

Nia Griffith (Labour, Llanelli)

I shall return to the discussion that we were having before lunch. We were considering paragraph (g) of amendment 25 and the reasons why we want a full understanding, before the mutualisation of the post offices, of exactly how the £1.34 billion investment will have been used to stimulate viability.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Just before we broke up, I pointed the hon. Lady to page 19 of the policy statement, where that is detailed.

Nia Griffith (Labour, Llanelli)

Indeed, I have in front of me the page to which the Minister refers, but the question in my mind concerns post offices’ viability. We are asking in paragraph (g) for a report on how the investment will have been spent, the value of any unspent budget and, most importantly, the progress toward the expected goals.

Our difficulty, as we explained, is that part of the money—indeed, it looks to be a rather large part, 48%—will inevitably be the three years’ continuation of the subsidy put in by the last Labour Government, £150 million or £180 million to 2012. The difficulty is how, with that amount, to make post offices viable to carry on after the mutualisation. That subsidy is part of their income and it helps them, but it does not change the problem that we all know we face, which is how to make the businesses more viable.

This morning, we touched briefly on the technology being put in and the network modernisation that will bring things up to date and make them more pleasant for customers and the people behind the counter, but that will still not create the business. Maybe one or two people will pop their noses in because they think that it would be nice to see what the spruced-up post office looks like, but it will not provide additional footfall, beyond the curiosity factor for a week or two.

The key question is where the business will come from. I note that the project costs are 5%; what that might mean, I am not sure. Perhaps the Minister can answer that. Our question is whether any of this money will be spent to make the network viable. Otherwise, people will be put into mutualised post offices whose profitability is questionable, and that is not something that anybody can countenance. The National Federation of SubPostmasters wants the Post Office to be a going concern, not the basket case to which Mr George Thomson referred in his evidence to us a fortnight ago.

Clearly, we need to ensure that post offices’ viability is good. We need not just a subsidy but a proper move forward to make them a going concern. That is why we want some information to indicate that: information about the programme’s anticipated goals and how it will work out in practice. That is what the people want who will be looking after post offices after mutualisation. The last thing they want is to find that they have been hived off or cut adrift without access to any Government subsidy, and that lo and behold, they face a closure programme on an unprecedented scale.

Damian Collins (Conservative, Folkestone and Hythe)

Does the hon. Lady agree, based on what George Thomson told the Committee in an earlier sitting, that the network’s viability is not exclusively a matter for the Bill? There are many things that rural and urban post offices can do to improve their business, whether through merging with other local shops and businesses or developing out of franchises in the post office local network.

Nia Griffith (Labour, Llanelli)

Absolutely. There are some very enterprising post offices. In Llangennech in my constituency there was a local supermarket just down the road from the post office and so the option to become a corner shop was very limited. Instead it became a gift shop with some very nice ladies’ jewellery. Yes, there are opportunities for post offices and that is certainly something that we want to look forward to.

Michael Weir (Scottish National Party, Angus)

Does the hon. Lady agree that in areas like mine, that process has already happened? There are few stand-alone post offices. Indeed, under the last closure programme, the Post Office seemed to deliberately encourage stand-alone post offices to move into other local businesses. So there is a limited scope for that continuing.

Nia Griffith (Labour, Llanelli)

Absolutely. The diversification programme has been very important and I will come back to that when I talk about devolved issues. Quite clearly it has had to happen already in our constituencies because otherwise the income coming in would not have been sufficient to have kept the place open. So, yes, a lot of diversification has taken place and certainly we have seen a lot of amalgamation or putting two businesses together. Another example in my constituency is Tycroes where there used to be a post office and a little supermarket owned by the same family. Obviously they have put the two together so that they can make economies of scale and interchange staff between the post office and the shop. We are all familiar with that type of picture.

Yes, of course there is a lot that post offices can do but the key issue is how we can get them to do that. There is a role there for the Government to spur them on and to demonstrate ways forward, such as some of the pilot projects that have been mentioned. To make sure that the Post Office is in a fit state for mutualisation, we want to have this report and to know about the progress that has been made, whether by local individual enterprise or a Government initiative, taking on board the diverse nature of the different types of post offices that we have.

I will not discuss all the amendments in the group because my hon. Friend the Member for Ochil and South Perthshire will do so. I should therefore like to move on to one of the new clauses which is directly linked to what I have been saying. New clause 8 requires the Secretary of State to report on the future viability of the post office network before the first relevant disposal is made in relation to Royal Mail. The report must include details of the inter-business agreement and plans for any new forms of business for the post office network. Clearly this is the real worry for post offices. Not only will they be mutualised, which they may welcome, but they will need to be viable. They are looking at three distinct streams of business and they are worrying about each one of them. Not one of them is secure.

We have talked about the enterprise. We have talked about the possible opportunities for post offices to develop as places of great enterprise. We are aware that the sub-postmasters are trying to get more business from the Department for Work and Pensions and we are also aware that there is no guarantee that they will retain their existing contracts on what are called the green giros. They have put forward some possibilities but we do not know whether the DWP will want to pay the post offices a viable price for some of the transfers that they are offering to carry out when the DWP itself has been closing front-line offices. There is the idea of the post office as a front room, a window on to Government, the place where people can access all sorts of different services: we would like to have more detail about that if it is really going to happen.

People are very worried. In fact, there is talk in the document about the local post office. That is an interesting concept, but it is frustrating if a person turns up at one of them and is glossily told that it provides 85% of the services, but of course the person wants one of the services in the 15% that is not available. They want to apply for something for which there is not a form. We had that kind of situation with things such as driving licences, where people had to go to certain post offices and not to others, and so on.

There is concern that the Government’s idea of the shop front will not necessarily come to fruition because of uncertainty about giros, the fact that we have not yet heard that sub-postmasters have had any commitment from the DWP for further services, and the fact that it can be frustrating if services are not available at every post office. That can sometimes detract from the availability of the service. People decide that they will not bother going there, they will go online—they do not know whether their post office down the road will have a service.

That is the issue with the Government part, but all of that makes it even more important that the IBA is in place. That is why the new clause asks for details of it. We have already mentioned the IBA, which is the vital link that guarantees the post office network one third of its business. Most people cannot conceive of a post office that does not have a letters and parcels service. The idea of a post office without postal services is bizarre, but a few years ago many would not have believed that rivals in the field would snap away from the Post Office the green giros or the TV licence contract which, of course, were lost.

Those are the issues that the Post Office faces. The Royal Mail provides income from not only the counter service but the many other parts of the IBA which involve things such as sorting office links. Many post offices, particularly those in the more far-flung rural areas, are dependent on that for a large proportion of the income that they receive.

All in all, we are asking for the report to make it absolutely clear to everyone exactly what will be in mutualised post offices. Most people who buy something want to know exactly what it can do, what its future prospects are and so on. That is really what we are trying to say. In order for the mutualisation to be successful, people will want to know that they have something that will potentially be a success story, not an unmitigated disaster with a huge amount of blame falling on it for having to close post offices, and with people possibly feeling that it is a financial liability.

I would like to say a little about new clause 9. The essence of the new clause is that the Secretary of State should report to devolved bodies in the same way that he would report in new clause 8, to which I have just spoken. What is the involvement of our devolved bodies? It is considerable. Many of us will know that post offices in Scotland and Wales have been able to benefit from funds that were allocated by the Welsh Assembly and the Scottish Executive. It is clear, if we are talking about mutualisation, that there is another stakeholder: the investment in the post office network that has been made by the devolved institutions.

In Wales we have had two programmes. First, the post office development fund provided £4.1 million in capital grants to 99 sub-post offices in the most deprived and isolated areas of Wales between 2002 and 2004.

Secondly, the post office diversification fund, which opened in December 2008, has also been open to post offices from the whole of Wales. Sub-postmasters and sub-postmistresses have been able to apply for capital grants of perhaps £5,000 or so for small projects, or £20,000 for some of the larger projects.

The first two rounds of the post office diversification fund attracted 214 applications for grants, and 140 applications totalling £2.7 million were supported. It is clear that a significant investment has been made by the Assembly Government in the post office network. I can give you an example from my constituency, where New Dock Road post office received £50,000 for refurbishment. It is a well used post office, which is at the heart of the community. People can be seen queuing outside at about 8 o’clock on pension morning, and the queue stretches right down the road. Residents enjoy the post office as a social outing, and both the current postmaster and the one who was there at the time of the redevelopment have a reputation for caring well for their community and looking after their customers well.

Clearly, the Assembly Government have given a large amount of money. It seems reasonable that they should receive a report of what is happening to the post offices in the mutualisation process, and that they should have some idea of the returns that the post offices can make. When the Post Office is required to report on how it is getting on and what is happening, the Assembly Government should have the opportunity to have that report laid before them. We have mentioned the other bodies that are involved, such as the London assembly.

We think that the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly and the Greater London authority should have the opportunity to see exactly what has been going on. They should be able to see exactly what the plans are, and how the investment that they have made meshes with the investment that the Government have made and the plans that the Government have for the future viability. It is important that such a year-on-year report should be established, detailing exactly how matters have worked out and how the network is progressing. For that reason, we propose these two new clauses in addition to the amendments to which I have just spoken.

Michael Weir (Scottish National Party, Angus)

It may be appropriate that the Minister is wearing a red tie today for his clause IV moment. Clearly, this is one of the major issues in the Bill. The general public have serious concerns about splitting the Royal Mail delivery system from Post Office Ltd. Indeed, what future awaits our post offices in the brave new world of privatisation?

Having spent many of the past 10 years opposing the sweeping post office closure programmes of the previous Labour Government, it is somewhat strange to be on this side of the Committee perhaps joining them in opposing the present Government’s plans.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I confirm that the Government have no plans for a closure programme such as the previous one.

Michael Weir (Scottish National Party, Angus)

The Minister is getting ultra-sensitive; I did not suggest that he had such plans. I was about to explain my concerns about the current plan. I note the promises that have been made on the record that no more post office closures will occur, and given the evidence that we have heard I am fascinated to see how that will be carried through. I wish the Minister luck in that; I hope that he is correct. I continue to oppose post office closures in my constituency and I successfully opposed some proposed closures under the last Government. If the Minister tries to close any, I shall certainly lead the opposition again—I hope successfully.

I have some other concerns. At the outset, I have to say that it would be fine if Post Office Ltd stayed in Government ownership provided that there were no closures. If the Government proceeded with a mutual, many of us would support it provided we were assured that it would be established on a proper footing. However, I am not clear from the clause about various factors, and I would like to explore them in more detail.

Throughout our debates, we have been assured by the Minister that there will be greater delivery of Government and local government services through the Post Office, which will help it to diversify. That was touched upon in evidence by Paula Vennells, managing director of Post Office Ltd, who said:

“In terms of what is in the Bill, what is important for Post Office is that we maintain our strong relationship with the Royal Mail Group. Royal Mail Group is over a third of our revenues but the rest of our revenues come from Government and we will be looking to Government to grow the revenues in terms of front-of-office services through Government and also through financial services. Some 80% of customers now can access other bank accounts through the Post Office, so there are tremendous opportunities”.—[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]

That is fine as far as it goes, but it raises a couple of questions.

I would like to press the Minister slightly on how much Government and local government business may be possible. I do not distrust the Government’s commitment, and I know that he said at a previous sitting that he is in discussion with various Whitehall Departments and agencies, to see exactly what business can be put through the Post Office. However, I foresee some purely practical problems.

In my area of Angus, most burghs have established local access offices offering a front-office service for all local authority services. In Abroath, Brechin, Kirriemuir, Forfar and Montrose they are situated at most 100 yards or so from a post office—and in Kirriemuir, Forfar and Montrose, those are the only post offices in those large burghs. It is difficult to see how there is likely to be greater ability to deliver those local authority services through the post offices in those burgh areas, given the investment that has already been made to set up the access offices. It seems that the Government and the Scottish Parliament would be the only ones to provide services that required such delivery, but I am not clear how much of a service could be provided by the post offices. It would be useful if the Minister were to give an indication of his thinking on the subject.

I welcome the possibility of such services being delivered in smaller village areas, but, frankly, in many areas the post offices have already gone. I wonder whether, under the Post Office local model, it would be possible for staff who run the shop, pub or whatever along with the post office to deliver more detailed services.

On local post office services, the hon. Member for Llanelli touched on the question of mutuality. In Scotland, a great deal of help has already been given to local post offices, through a diversification programme. That has helped post offices with their diversified businesses. Indeed, I previously cited a post office set up in a fish and chip shop. That programme has helped post offices to get greater business, as the hon. Member for Folkestone and Hythe said. The problem that I mentioned in an intervention was that the process was well advanced in many rural areas in Scotland, the area that I know best, and it is difficult to see how much more can be done.

As we heard, the Scottish Government have introduced a business bonus scheme as well as a diversification programme. It helps all small businesses, but particularly post offices; depending on the rateable value, they pay less rates or no rates. I refer to what George Thomson of the National Federation of SubPostmasters said in evidence:

“When it comes to the devolved assemblies in Scotland, Wales and Northern Ireland, in many cases they have been given 100% rates relief to help them stay in that community. I know that in Scotland, for example, some people are saving £4,000 or £5,000 a year, which is a massive help—saving £100 a week—to keep their business on the local high street.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 33, Q76.]

That is a considerable investment in post offices, as the hon. Member for Llanelli mentioned. On that basis I support new clause 9. The Scottish Parliament and devolved Assemblies have considerable input into trying to deal with that problem and to ensure that local post offices continue.

The hon. Member for Llanelli touched on mutuality. Again, as I mentioned earlier, there is a great deal of support for that concept, but we are unclear about what the reality is. In our evidence session, it was clear from witnesses that that there is no way that the Post Office Ltd could ever be a mutual organisation, prior to being put on a sound financial footing. The underlying theme of the evidence was that it was a long way from that point now and that the pathway taking it from where it is now to where it could become a mutual was not at all clear. If the Government are to persuade hon. Members and the general public who use and value post offices, as well as the people who run them, that a mutual is the way forward, they have an awful lot of explaining to do and a lot of detail to go into.

We have talked about the relationship between the Royal Mail and Post Office Ltd. There was a great deal of support for that from the witnesses from whom we heard. However, the relationship between, say, two companies in the same group having an agreement to run together and the realities of a privatised Post Office are different, because the Government are determined to push down the costs to the taxpayer of continuing to support Post Office Ltd.

As has been mentioned, at present Post Office Ltd gets fully one third of its business through the inter-business agreement. We have heard a great deal about that and about the length of the agreement that could be entered into between Royal Mail and Post Office Ltd. I accept, to an extent, and I am sure that the Minister will say, that it is impossible to write a long-term agreement into a Bill. There may be legal problems with doing that. The Minister will no doubt mention that Moya Greene spoke about that during the evidence session, saying:

“For me it is unthinkable that we would not have a very long-term relationship with the Post Office. Here is a group of people—the best and strongest network in the country, by any yardstick, with 11,900 outlets—who are committed to and want to sell our products…To me it is unthinkable that we would ever have anything but the very strong relationship that we have now with the Post Office. I admire our other partners like WH Smith; of course I do. But that is not the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

Leaving aside the fact that in many places WH Smith is the post office now, because of what happened under the previous programmes—many post offices were moved to become effectively subsidiaries of other businesses and are not stand-alone businesses—I am slightly concerned by that remark. However, my real concern about what Ms Greene said was that a relationship between a fully privatised Royal Mail and a Government-owned and mutual Post Office Ltd would be different from a relationship between two companies that are both members of the same group.

Ms Greene may have a considerable attachment to Post Office Ltd, but would a new owner of the business necessarily feel the same way? What happens when the commercial profit motive really kicks in? How much will sentimentality govern the actions of Royal Mail in such circumstances?

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

I am listening closely to hon. Gentleman, who makes a strong case. Will he comment on the asymmetry of power that will exist following the privatisation of Royal Mail relative to Post Office Ltd?

Michael Weir (Scottish National Party, Angus)

I will leave it to the hon. Gentleman to talk about asymmetric power, because it is not in my notes. I understand what he means, which is basically the point that I was already making about a large, privatised and profit-driven Royal Mail. I do not agree with the privatisation, but the rationale behind it is to make the new company look for efficiency savings and to cut costs. Is it conceivable that the new company will not look at how it can do that in its relationship with Post Office Ltd? I think that was the hon. Gentleman’s point. Any newly privatised company will look at all its relationships and contracts to see where costs can be cut. I am sure that we will discuss the universal service and its problems later.

Paula Vennells caused me some concern during her evidence when she said:

“I do not see other retailers as a particularly serious threat, because Post Office has an enormous amount of expertise in this area”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17, Q42.]

As I have said, she mentioned WH Smith, but the business document’s proposal in relation to the Post Office local model is not dissimilar to what is happening in many areas. It is part of the evolving Post Office, and the idea of a stand-alone post office service has already gone.

On Second Reading, I asked the Minister whether there was any precedent elsewhere in the world for splitting the delivery service from the post office network, but I did not receive an answer. I have done some research and have been unable to find an example, but I have discovered an interesting situation in New Zealand. During the 1980s and ’90s, New Zealand changed the structure of its postal service. Prior to that, its system seems to have been much like the old Post Office Corporation. It had three roles: postal services, telecommunications and banking. The New Zealand service, as I understand it, was split into its three constituent parts. Interestingly, however, it was not privatised and, as far as I can ascertain, it remains in public ownership and returns a fairly healthy profit. In parallel to the splitting up of the business, a full liberalisation of the New Zealand postal services was carried out, which led to the entry of a large number of new entrants into the market. At first, the entrants were relatively local, but eventually larger businesses entered the market, one of which was Fastway Post. This example is integral to our discussion not because it was a mail delivery company, but because of what happened next.

We have heard much about the need for the IBA. The Minister and the chief executive of Royal Mail have said that it would be inconceivable that anything but Post Office Ltd would be used by Royal Mail. Indeed, if I remember correctly, the Minister was somewhat dismissive of the idea that an operator might want to use a major supermarket for the delivery of postal services. However, that is what has begun to happen in New Zealand. Fastway Post, which appeared initially to be a business post provider, has moved into the wider market. It is now involved in what is effectively a franchise operation in which shops can provide the services of post offices. It is not unlike the current system of Post Office Ltd and its small business providers. Fastway Post’s website states that it has outlets throughout New Zealand and it issues an invitation to retailers:

“Interested in reselling Fastway Post products and services? Establish a postal service from your store. Fastway Post provides retailers with a range of products and services that are in turn sold to businesses and domestic customers throughout New Zealand.”

The website also gives details of how to become a Fastway Post outlet and, under “Retailer Support”, states:

“Fastway Post is not merely a distributor of product, we help you sell, promote and merchandise our products and we provide ongoing support via our helpdesk, staff training and support materials”.

It goes on to list various matters in which it helps its franchisees, including mail deposit and clearance:

“The Fastway Post mail box is a great added value service for your customers. It clearly identifies the retail outlet as a provider of postal services. Cleared Monday to Friday by Fastway Couriers.”

There is a photograph of one of its post boxes on the website and it is very similar to a Royal Mail post box.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to the hon. Gentleman for informing me of this experiment, not least because it had not occurred when I made my two trips to Wellington and met Elmar Toime, the chief executive of New Zealand Post at the time. It strikes me that what the hon. Gentleman is describing can happen, and already does happen, in the UK. We have retail outlets such as Mail Boxes Etc. that perform services of the sort that he describes as being provided in New Zealand. It does not seem to me that the Bill will change anything in relation to what he describes.

Michael Weir (Scottish National Party, Angus)

I profoundly disagree with the Minister.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Why?

Michael Weir (Scottish National Party, Angus)

If the Minister waits a minute, I will explain—he is really impatient. He has pooh-poohed the idea that somebody could set up an alternative route for delivering services, rather than through Post Office Ltd. Fastway Post demonstrates that that can be done. It happens to have been a competitor of New Zealand Post that did it, but there is nothing to stop Deutsche Post or TNT taking over Royal Mail and deciding that to cut costs it will look at alternatives for delivering services. It might decide to franchise out. The document from the Department for Business, Innovation and Skills describes post office local and says that it provides

“access to post office services in an open plan arrangement alongside the retail till for all the hours the shop is open.”

That basically describes a franchise operation within existing shops.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I stand by the point that I made in the previous debate about the notion that a private competitor might set up a network of 11,500 post office outlets to compete with the post office network. Is the hon. Gentleman seriously suggesting that that has happened in New Zealand or that it might happen here?

Michael Weir (Scottish National Party, Angus)

I am merely pointing out that the Minister is wrong to state that nobody would think of doing that.

Mr Davey rose—

Michael Weir (Scottish National Party, Angus)

The Minister is getting over-excited. The Committee has heard ample evidence that only 4,000 post offices are profitable and that only 7,000 are needed to meet the universal service obligation. The Minister may laugh, but it is quite conceivable that a privatised Royal Mail, or somebody who takes over that service, might decide that that is all it needs to run a universal service and that it will utilise a supermarket chain, or similar, to deliver the services. That would make inroads into the viability of Post Office Ltd as a stand-alone business.

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

The hon. Gentleman is painting a plausible picture. Does he agree that it would be better if the 11,500 post offices were retained in statute by access criteria, rather than at the whim of the Government?

Michael Weir (Scottish National Party, Angus)

My overall point is that we cannot leave the future of Post Office Ltd hanging on the fact that the current management of Royal Mail have a sentimental attachment to it. That is what the Bill asks us to do. Nothing in the Bill writes into statute that there will be a continuing business or that existing post offices will continue. The Minister must consider this matter because he has given an assurance that there will be no more closures and that we will continue with 12,000 post offices, yet he is pressing through a Bill that may lead to the undermining of that post office service. We do not know what is a few years down the line.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The dispute between the two of us may be a philosophical one, because I do not believe that Governments can write into legislation that a business will exist in perpetuity because Parliament has decreed it. That is not how businesses work. Businesses do not work through sentimentality, because this place has all the legal power to decree to businesses; they work because they are commercially viable, with services going through. One does not put that in the Bill, but in a Post Office policy statement, which we have done.

Michael Weir (Scottish National Party, Angus)

The Minister seems to be throwing Post Office Ltd to the wolves, to survive or otherwise in the commercial environment in which a fully privatised Post Office would be found. I do not know if someone will come along with an alternative to Post Office Ltd, but it has happened elsewhere—no postal market is exactly the same as the UK’s and other things might happen, but that is a possibility. Nothing in the Bill guarantees the future of the post offices, which is what we have been arguing about for all these years, through the closure programmes—fighting them. We have been arguing for the future of our own post offices, in our own communities. The Minister is saying that the previous Government were awful in closing all those post offices—they were, and I do not deny that—but he is also saying that the Post Office will, effectively, be left to the market. That is what will happen.

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

Does the hon. Gentleman agree that the Dutch and Germans do not find it philosophically impossible to write into statute provision for access points? Germany is a Christian Democrat country, yet why are the Liberal Democrats talking about what I described the other day as a Thatcherite overreaction?

Michael Weir (Scottish National Party, Angus)

If access criteria are written in for the post offices in Germany and the Netherlands, I do not see why that cannot be done in this country. We must seriously consider, as the Bill goes through Parliament, exactly how we ensure the future of our post offices. I become very worried indeed when I look at what has happened elsewhere and at the potential future of our post offices under the Bill.

Going back to what Paula Vennells said in her evidence, I remind the Minister that she talked about financial services. The Government have rejected the idea of a post bank as one of the ways forward, but interestingly, one of the things that helped the New Zealand postal service get back on its feet and turn itself around was Kiwibank. Guess what Kiwibank is—basically, it is a post bank, but the New Zealand model.

We could do lots of things to help the Post Office, but my problem is that they do not seem to be in the Bill. If new clauses 3, 4 and 9 were pressed to a vote, I would support them, because they are important in putting things into the Bill. If the Minister is to convince us not to, he has to come up with a lot more than the sentimentality of Royal Mail towards Post Office Ltd. In my experience, there is little sentiment in big business when the chips are down. Once Royal Mail is privatised and sold on to Deutsche Post, TNT or whoever, the present chief executive or the present Minister, neither of whom will be around for ever—no offence to the Minister—are not sufficient grounds on which to base the future of our post office network, which so many of our constituents rely on.

Gordon Banks (Labour, Ochil and South Perthshire)

I support all the amendments in the group, surprisingly enough. I want to talk briefly about amendments 34 and 25, which my hon. Friend talked about, but I wish to make some additional points, before moving on to amendments 26, 29, 30, 27, 28 and 35, and new clauses 3 and 4.

Amendment 25 has similar objectives to those of amendment 16, but relates to the Post Office instead of Royal Mail. I will not go through from proposed new paragraph (a) to whatever, but a couple of points are important to pick out.

Proposed new paragraph (a) would secure the placing of at least one representative of those directly employed by the mutualised Post Office or its successors on the board of the new company. That is important, because the Minister seemed to say just now that the business would be mutualised without any real level of information being passed to us, so we think that is some kind of insurance policy and a safeguard. Amendment 25 would deliver a natural avenue for developing relationships between management and the work force in a way that would strengthen the company moving forward. From the employer’s side, that would be a sign of faith in the work force as one of the biggest assets that any company can have, and that would be carried through by amendment 25. As in amendment 16, amendment 25 does not restrict such representation to only one, but rather at least one, directly employed representative, which we think is very important.

Proposed new paragraph (b) mentions the headquarters of the business. One could argue about whether it is more important for Royal Mail or the Post Office to have headquarters in the UK. Sadly, we can all see the possibility of Royal Mail not having its HQ in the UK, which fills us with some dread, but the possibility of the Post Office not having its HQ in the UK would fill us with even more trepidation.

Damian Collins (Conservative, Folkestone and Hythe)

As has been discussed, WH Smith operates many post offices as a franchisee, including the main post office in Folkestone in my constituency. If WH Smith were bought by a foreign company with its headquarters overseas, should it be made to give up those franchises?

Gordon Banks (Labour, Ochil and South Perthshire)

No—that is not the essence of amendment 25; the essence is the headquarters, not the operation. It is important that the Post Office HQ is retained within the UK, and I will develop a couple of points, similar to those that we developed on amendment 16, as to why it is important and why we hope that the Minister will take our arguments on board this time.

Having the headquarters in the UK protects the integrity of a brand that is typically British, typically representative of the United Kingdom and typically representative of our high streets. Amendment 25 would bind any successful mutual to recognise the importance of the HQ location as an integral part of the way forward. It is also important to recognise the earlier point made by the hon. Member for Angus in relation to Royal Mail, because the same argument works here. We need to keep not only the HQ jobs, but the management jobs of the Post Office within the UK. We need to do that not only so that the work force can relate to the management, but so that people can work their way up through the company in a way that would become more difficult if the HQ were overseas.

My hon. Friend the Member for Llanelli has made some good points on proposed new paragraph (d), which I will not reiterate, but I will say that the Committee members need to read her representations.

The resulting ballot that would result from amendment 25 is important—it is as important here as it was in other amendments—but so too would the Bill that would result from amendment 25. I would like to say a few words on that. We will be talking about bills, bills, bills and bills in this part of the debate and I am sure the Minister will follow.

We have seen from the evidence, as the Bill stands, that there is no need for the Secretary of State to report to Parliament at all. He can fulfil his obligations by simply approving the issue or transfer. That is not onerous. He just has to approve it. He does not have to report to anyone.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am trying to follow the hon. Gentleman, but I thought that clause 5 introduced a clear statutory reporting requirement to ensure that Parliament is informed of any move to mutual ownership. Is he trying to make some other point? Clause 5 is clear on the reporting requirement.

Gordon Banks (Labour, Ochil and South Perthshire)

What we are saying is that our amendment relates to clause 4, which says that the Secretary of State can fulfil his obligations once he

“has approved the issue or transfer.”

If there is some misunderstanding between the Government and ourselves on how this would work, we would argue that acceptance of amendment 25 would nullify that misunderstanding.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am just re-reading clause 5. I cannot see that it can be much of a misunderstanding. It is entitled, “Report on transfer of interest in a Post Office company to a relevant mutual”. Subsection (2) is absolutely clear:

“As soon as reasonably practicable after making the direction or granting the approval, the Secretary of State must lay before Parliament a report on the issue or transfer in question.”

I may be missing something. If I am misunderstanding what the hon. Gentleman says, I hope that he will be clearer.

Gordon Banks (Labour, Ochil and South Perthshire)

What I am trying to say to the Minister is that I think the amendment makes that clearer, and that is our argument. It gives some added strength to the Bill.

The Committee will remember the history lessons that we heard during the debate on amendment 16. I will not repeat those here and now, but they are relevant to this amendment as they are relevant to Royal Mail. Paragraph (g)(ii) would require the Secretary of State to outline how he proposes to utilise the £1.34 billion that he has committed to the Post Office from 2012. My hon. Friend the Member for Llanelli touched on that, but there comes a point in time when we need to know what that money will be used for. My hon. Friend asked that question today. We have not had the answer. What level of new product development would that £1.34 billion be responsible for? That is my concern.

We find that the Government want to engage more with the Post Office for the delivery of Government services. We have heard that that is an ambition. Could we find some of that £1.34 billion being used to develop those new products in a way that actually uses that £1.34 billion instead of another departmental budget? Might we find that the Post Office pays for some of the development work for any potential movement that might relate to additional services from, say, the Department for Work and Pensions? We would like to see a commitment that the £1.34 billion is not used in that way and that, if the DWP delivers services through the Post Office, the DWP budget is responsible for the development of those services, and the £1.34 billion for the Post Office is kept for other development work, so that we are not talking about using the £1.34 billion—the Minister is looking confused, I will try and make it simple for him—that is committed to, as a route for subsidising DWP budgets.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I can assure the hon. Gentleman that BIS has no intention of subsidising DWP and I am sure DWP has no intention of subsidising BIS. I would simply say that if new services are put forward by any Government Department, unless there are issues that prevent a competitive procurement, those Whitehall Departments have to go through a proper procurement process and Post Office Ltd would have to compete with them in the way that happened under the previous Government, because those are European procurement rules.

Gordon Banks (Labour, Ochil and South Perthshire)

I do not doubt that, but my concern is to ensure that if Post Office Ltd were successful in attaining some of these potential new services—we really do not know what they are; we hear whispers and gossip as to what they might be—the Post Office Ltd budget would not be responsible for developing them. If they come from the DWP, the DWP budget should be responsible for developing them for delivery through the Post Office, because there will obviously be some cost-benefit advantage to DWP for moving them from wherever they may be at present and placing them with the Post Office. I want to get that point clearly on the record.

Amendment 25 is quite large, but it is important because it delivers a level of security checks and balances and transparency that we think the Bill does not have. If the Minister feels that amendment 25 is too onerous, we will give him as an alternative amendment 34. It has a requirement for the Secretary of State to simply approve the issue of transfer of ownership, after which it receives the support of both Houses of Parliament by way of simple approval. That is a very simple mechanism, which should not worry the Minister too much.

Amendment 26 calls for the Bill to be amended to leave out the word “report” and insert the word “Bill”. This is familiar ground; there are similarities to earlier amendments tabled to this clause and amendments tabled to other clauses. None the less, the amendment is just as important and is just another alternative for the Minister to consider.

Amendment 26 would ensure that the Secretary of State had to produce a Bill on the disposal, presumably via mutualisation, of the Post Office. At present, the Secretary of State gets his power to dispose of the Post Office in this way from this Bill, provided that he lays a report before Parliament. My hon. Friends and I do not consider that that is appropriate and we feel very much that, just as amendment 16 would require in the case of Royal Mail, a Bill with the relevant details of the mutualisation programme should come before Parliament and receive Parliament’s consent.

Members of the Committee may ask why we are going to such lengths again, but I would respond by saying that we have yet to see any real evidence of what the mutualisation programme would look like and there is not much information for the Committee on its structure. We do not know what is being mutualised. Is it the conceptual business, is it the bricks and mortar, or is it both elements? How will that mutualisation work when the Post Office is in the premises of a chain, such as WH Smith, as has been mentioned by the hon. Member for Folkestone and Hythe? Again, we do not know. We would argue that a Bill with those complexities explained, including how the mutualisation will work alongside a private sector business such as WH Smith, is necessary. Furthermore, we do not know how the Post Office is to be mutualised, or indeed when.

Although I am not against mutualisation, I want to say at this point that mutuals can fail too, and we will discuss that when we consider later amendments. However, for this new mutual to have the best chance of survival, we must ensure that Parliament has the ability to scrutinise the position reached by the Secretary of State.

Amendment 29 is less onerous for the Minister. By the end of this clause, I am sure that he will recognise that my generosity knows no bounds, because we are giving him so many options that he really should be spoilt for choice. Christmas is coming early to the Minister.

However, amendment 29 would place a duty on the Secretary of State to deliver an oral statement to Parliament, on which he could then be questioned. Thereafter, the Secretary of State must lay an order on the proposed disposal, subject to super-affirmative procedures under section 18 of the Legislative and Regulatory Reform Act 2006. The Committee will recall the use of this level of scrutiny being included in the content of amendment 17, which we discussed earlier. It is just as important now as it was then, and it is also important to remind Members of the level of scrutiny that the amendment would impose on the Secretary of State’s proposals.

In essence, the procedure demands that there is a 60-day period following the laying of the order by the Minister, during which the relevant parliamentary committees may report on a draft order, or either House may make a resolution with regard to the draft order. The Minister must have regard to such reports and resolutions, and to any other representations made about the draft order. Once that 60-day period has expired, if the Minister wishes to make an order, with no changes, he must lay a statement and he may then make an order in the terms of the draft, if it is approved by a resolution of each House of Parliament.

Amendment 30 is less onerous than amendment 29, but it would still require the Secretary of State to make an order in terms of the draft, only if after 40 days of the order being laid before Parliament the draft order has been approved by a resolution of each House of Parliament. So again there will be scrutiny, but it will be less demanding.

Finally in this little group of what, seeing as the Minister is keen on giving amendments a name, I will call “the accountability amendments”—amendment 27 would simply clarify that, by making the report that is already contained in the Bill, the Secretary of State indeed has the power to make the disposal, so that in essence it is that report that confers the power on the Secretary of State and not the Bill that we are discussing today.

Again, although we would be less happy with that proposal, it acknowledges that the Secretary of State must return to Parliament and produce a report on the disposal in relation to the agreements reached during the negotiation process before he receives the power to dispose.

Then there are amendments 28 and 35. The primary aim of amendment 28 is to ensure consistency throughout the Bill. Members of the Committee will note that the concepts in amendment 28 closely mirror those in amendment 26, so I will not bore the Committee too much by repeating what has already been said.

However, briefly, the clause as it stands means that the only duty on the Secretary of State when transferring a Post Office company to a relevant mutual is that he must lay a report. The vagaries and arguments against that approach are well rehearsed on this side of the Committee and we believe it is more appropriate for the Secretary of State to lay a Bill in the first instance, as we have already argued.

Amendment 35 sets out an additional duty on the Secretary of State when reporting to Parliament that the report must be subject to the approval of both Houses on the basis of a motion in the name of the Secretary of State. Again, that would allow for parliamentary scrutiny and transparency in the process—something that we have been trying to deliver through many, if not all, of our amendments to date. It is my firm belief that both Houses deserve a debate and a vote on the proposals before the Secretary of State has the power to mutualise any Post Office company, and we have provided many options for the Minister to deliver such an accomplishment.

New clauses 3 and 4, which have been touched on briefly, are hugely important. Again, new clauses 3 and 4 are quite similar to each other. They focus on the IBA between Royal Mail and Post Office Ltd. Labour Members would be happy to see an indefinite IBA between the two organisations. However, recognising from the Minister’s earlier comments that he would be most unlikely to agree to that, we again, in the spirit of flexibility and mutuality, have provided him with two options to try to rectify what we consider to be a problem. I believe that the current IBA has about three and a half years left to run, and in light of the total sell-off of Royal Mail the situation needs some attention very quickly, hence the tabling of these two new clauses.

Witness after witness has recognised the importance of the IBA, from Moya Greene who—as referred to in this section of the debate—said that it was unthinkable that the link would be broken, to George Thomson and even the Minister. Separating the Post Office from Royal Mail is an unprecedented step and is something that Mr Thomson said the Government must get right. We would support that position; the Government must get it right if they are going to do it. We do not think that the Bill gets it right because it makes no commitment to any long-term IBA. The National Federation of SubPostmasters expressed its satisfaction with the last five-year deal because the business was still going to be under public control. However, that will not be the case now. So we certainly do not want a five-year deal; we want something much longer than that. We have no idea what thoughts are going through the Minister’s head in relation to what he considers to be tolerable.

There needs to be a level of security for sub-postmasters that is not contained in the Bill. Many sub-postmasters are running businesses and they need to see something beyond three and a half years. That period is now doubtful because, at the end of it, the organisation may no longer be in public ownership. Therefore, for that individual investment—both human and financial—to carry on, there needs to be something in place on a longer-term basis to enable post offices to survive.

The federation is pushing hard for a 10-year deal, and I urge it not to settle for anything less. Ten years is the lesser period mentioned in the two new clauses we are talking about. However, arguably, if that is added to the three and a half years that are already left to run, it provides a considerable level of commitment to post offices across the country. As I have mentioned, we suggest that there should be an indefinite IBA or a 15-year period, which is referred to in the other new clause that we are discussing. A 15-year period is much better and would allow a real opportunity for the newly mutualised organisation to look ahead with some degree of surety to the future.

We have heard throughout the Committee, in witness contributions and line-by-line scrutiny, that a third of the footfall and revenue that comes to post offices is through this agreement. It is because of the IBA with Royal Mail, and we want to keep that as a basis for building the work up in the future. I do not want to see a privatised Royal Mail changing its high street outlets to, for example, a deal involving all our high street banks, or to the banks in conjunction with supermarkets. The hon. Member for Angus has commented on the fact that although we may not see it as a likelihood now, that does not mean that it will not occur. We would like to see some security for an extended period of time—the 15-year period—to ensure that, during that time, post offices retain the identity of Royal Mail’s high street outlets.

We all want to see the longevity of post offices in our community. One of the best ways to ensure that that happens is to make sure that the IBA is delivered for an extended and extensive period of time, and we can do that by accepting new clause 3 or new clause 4. Without that, we are again putting our faith in the management of Royal Mail, who tell us that they see it as inconceivable that there would not be a link between Royal Mail and the Post Office. The Minister has alluded to something similar. However, the current management of Royal Mail and the Minister may not always be there, so we need something in the Bill that creates security for businesses. Remember that that is what these operations are; they are businesses and they need to look forward. We need to use the IBA, which provides a third of the footfall and revenue into post offices, as the basis to move forward over the 10 or 15 years.

I hope that the Minister sees the importance of securing that extended period as a fundamental building block for the future. Anything else that the Government want to do in relation to developing new products through the Post Office will be playing catch-up, and in some ways, it will all be put at risk—if that core third of the business, a third of the footfall, or a third of the revenue were not there, because of the long-term relationship with Royal Mail. It would be detrimental to the development of new products, whether they come from the Government or within Post Office Ltd, if that long-term arrangement did not exist. I hope that the Minister will take the strength of the argument and feeling from Opposition Members on board, as well as the strength of the representations that I am sure he has had from the federation on the importance of a long-term agreement. I am interested to hear what he will say, particularly on that point.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

This has been an interesting debate, centred on the relationship between post offices and Royal Mail after their ownership has been separated by the Bill.

Clause 4 ensures that two extremely important elements of the Government’s policy are in place. First, it introduces new ownership restrictions to allow for the introduction of new capital to Royal Mail while ensuring that the Post Office is not for sale through a separation of ownership. Secondly, the clause also opens up the possibility of a move in due course to mutual ownership of the Post Office.

The amendments fall roughly into three broad categories. The first group seeks to add preconditions that must be met before ownership of the Post Office and Royal Mail can be separated. The second group seeks to add further preconditions for the transfer of the ownership of Post Office Ltd to a mutual, and the third group seeks to increase the scope of the Post Office’s annual reporting requirements. I want to address the three types of amendment, but before I do so it has become my custom to name each group of amendments. This is a long group, so it has been particularly difficult to assess, and the tone of the debate has been particularly interesting. In a previous sitting, the hon. Member for Ochil and South Perthshire accused me of talking down Royal Mail.

Gordon Banks (Labour, Ochil and South Perthshire)

I did not.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I have the record here, if there is any doubt. It has seemed at times that Labour Members have tried to talk down the Post Office, and that is why the group should be known as the Sergeant Frazer amendments. It is as if we were all “doomed”, and the post office network were doomed also—[ Interruption. ] I am going to be told that it is not Sergeant Frazer; I am happy to be corrected.

Damian Collins (Conservative, Folkestone and Hythe)

I believe that the Minister is absolutely right; it is Sergeant Frazer from “Dad’s Army”. Does he agree though that Labour Members seem to oscillate between two views? One is that the Post Office is so fundamentally flawed that without enormous support it would totally collapse, and the other is that it is so lucrative and attractive that any number of private providers will want to come in at any time to open their own post offices.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

My hon. Friend makes an astute point. I am told from a Member in a sedentary position that it is Private Frazer; people reading the record will obviously want to know that.

Michael Weir (Scottish National Party, Angus)

It seems to me that the Minister’s response was blindly optimistic; it has no basis in fact whatsoever.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman typifies my point about the Private Frazer notion behind the amendments. Let me help him, Mr Amess, by dealing with many of his points, and hopefully cheering up Labour Members.

Looking first at the concerns about the separation of the Post Office and Royal Mail, new clauses 3, 4 and 8 suggest that taking Post Office Ltd out of the Royal Mail Group of companies will put the relationship between Post Office Ltd and Royal Mail, and therefore the post office network, at risk. That is the main charge that we face. I have stated throughout the debate that I believe that that is absolutely not the case, and I am not alone. I take hon. Members back to the witnesses that we heard just two weeks ago. The evidence from Richard Hooper, Consumer Focus and Postcomm shows that they all strongly support the separation of ownership of the two businesses. We had the independent expert—first employed by the previous Government—the leading consumer representative body and the regulator all telling us that they thought that the separation of the two businesses was a good idea, and I was heartened by that.

Gordon Banks (Labour, Ochil and South Perthshire)

Does the Minister not also agree that Mr Thomson, in his submission, suggested that the measure was not without its dangers, and that everyone had to make sure that the Government got it right? In discussing the group of amendments and new clauses, we have been trying to say that it is important that the Government get this right, because it is not without risk.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think that I can agree with “it is important that the Government get this right”, and I can also agree that George Thomson and the National Federation of SubPostmasters more generally have engaged with the Government as we have developed the policy and the Bill. I do not suggest for a minute that they do not have concerns about individual details, but I am heartened by their overall approach, by how well they have engaged, and by how they have welcomed the £1.34 billion of investment, the model of mutualisation—which they were helpful in developing—and some of the proposed new services. I am glad that the hon. Gentleman has brought Mr Thomson into the debate, and I am sure that we will hear more of Mr Thomson’s contributions, and those of his colleagues, in future Committee sittings.

Why are these different, independent people so convinced that a separation is a good idea? It is because they look at the facts and at what happens operationally. These two businesses are reliant on one another. That is not because they are in the same corporate structure; they work well together. Post offices carried over 3 billion transactions from Royal Mail last year, and a long-term contract will continue because of the overwhelming commercial imperative for the two businesses to continue to work together, as they do now.

Why would Royal Mail wish to withdraw its business from the Post Office? When giving evidence to the Committee, Royal Mail’s chief executive, Moya Greene, called the network

“the best and strongest network in the country, by any yardstick”—[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

She is absolutely right. The Post Office offers unparalleled coverage across the length and breadth of the country. It offers a broad range of services—postal, Government, telephony, financial and others—and it is unsurpassed by any global comparator. As a result of the wide social and economic role that it plays in the hub of so many of our communities, the Post Office is unique in this country. I have looked across the world to find a parallel, and I do not believe that any post office network in any other country plays the combination of roles that the Post Office plays in this country.

Gordon Banks (Labour, Ochil and South Perthshire)

Again, we are hearing the well-intentioned words of the Minister. He quotes Moya Greene, the chief executive, and says that there will be a long-term agreement. If such an agreement is to exist, put it in the Bill. That will undo any doubt that there may be for a prospective bidder, and any doubt that we may have about the Government’s intentions or the likelihood of the IBA lasting the length of time that the Minister suggests it will.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Labour Members do not seem to grasp the fact that Government ownership, regulation and legal fiat did not stop 7,000 post offices from closing under the last Government, even though their 1999 White Paper promised that the then 19,000 post offices would play a crucial role. They took away Government services.

Nia Griffith (Labour, Llanelli)

Will the Minister give way?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I will, but I want to make a point and I hope that the hon. Lady will respond. The last Government undermined the post office network. Sorting out the future of the post office network is not a question of Government ownership, regulation and those sorts of things; it is about making it more viable, and ensuring that it is in a strong place, so that it can be a strong partner with Royal Mail, the Government and other operators.

Nia Griffith (Labour, Llanelli)

Will the Minister explain why we have a figure of 4,000 post offices and a figure of 7,000 post offices? Do any of the figures that are suggested as being what is required for a network have any value? Will the Minister expand on that and explain how he would make 11,900 post offices viable? That figure does not appear at all.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think I understand what the hon. Lady is saying. The figure of 4,000 has been quoted by a number of hon. Members as a suggestion of the current number of commercially viable post offices. She is right—that is the position that we have inherited. We inherited a post office network that not only saw 7,000 post offices closed, but has only 4,000 post offices that remain commercially viable. Working with Post Office Ltd, sub-postmasters, and all those who care about the post office network, we intend to turn the situation round. The idea that it can be turned round by passing a regulation or a law, quite frankly, does not come from the real world.

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

Will the Minister give way?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I will, but I first want to give way to the hon. Member for Angus, who has been trying to intervene. I do not think that people are living in the real world if they think that one can turn the Post Office round simply by legislation.

Michael Weir (Scottish National Party, Angus)

The Minister is very good at just dismissing concerns. Surely he must understand that the concern here is that much of what is needed to make Post Office Ltd viable has to do with Government putting more business its way and having other businesses involved in the Post Office. Let us look at the matter from the other side: if there were a privatised Royal Mail provider whose sole business was mail provision, what would it want from the Post Office? It would want something that provided the mail services that it needed—something like Fastway in New Zealand or, in many ways, something not unlike post office local.

The figure of 4,000 refers to main post offices, as I understand it, where all services are provided. However, there is a real danger of them being chipped away at the side, with a private provider looking only at services that it really needs, which could be provided by someone else.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

One of the reasons why I am confident that our approach will mean that we do not need to have the closure programmes that we saw under the last Government is that we are taking a realistic and commercial approach to the matter, albeit within a public sector or mutualised model. The post office local model that the hon. Gentleman talked about in his speech, and which he referred to just now, is a key part of that, as we said in our post office policy statement. When someone looks at that statement and the results coming from that experiment, they will begin to see why we think it is such a good model.

One of the clear findings coming from more than 50 pilots out there—in urban, suburban and rural areas and in different parts of the country—is that the average opening hours have increased by six hours a day. If someone is operating a retail network and trying to provide services and win contract bids from Government, Royal Mail or someone else, and if they are able to provide the network and on average are open for an extra six hours a day, they are operating more commercially. They are enabling customers to have greater access.

The people whom we are talking about—the hon. Gentleman’s constituents—will, under our proposals, have greater access to the post office network, yet I have heard no welcome of that. All I have heard is the Private Frazer approach. I have heard no welcome of the fact that the Government, working with POL, are not only putting in £1.34 billion—a major investment—but getting to grips with our appalling inheritance from the Opposition. Making sure that post offices are open longer reduces queues and increases access, so when the post office network tenders for contracts with a Department, Royal Mail or whoever, it will be in a strong place to win those contracts, not just because it can compete on price, but because it can compete on service.

I do not know what world the hon. Member for Angus has been living in, but the world of service at some—not all—post offices is not as good as it should be. That is why the sentimentality we sometimes hear is so misplaced. I hear from my constituents that they have to queue for too long, and that the post office is not open when they are away from work. I hear from them that they have to go to the post office in the lunch hour because it is open neither before work nor after it, and they have to queue for very long in that hour. It is not surprising that people are not going to post offices. We have inherited a disastrous model that is not providing the sort of service that people have come to expect. I am confident that we will turn around the business and ensure that it provides services that people want, with a level of customer service that people are used to in the 21st century. That is why it will be a financial success, and will transform the problems that we have inherited from the Labour Government.

Michael Weir (Scottish National Party, Angus)

I do not know where the Minister lives, but I live in a rural area. I live in the real world, and I have seen what has happened to post offices over the past few years. I can also see what might happen under the Bill, though he seems determined to ignore it. He talks about longer hours; many Tescos are open for 24 hours. How will that help? Again, he is blindly optimistic that everything will be okay on the day. I cannot speak for the Labour party, but I am looking for some realisation that we must ensure that our post offices remain open, and I am not getting it from the Minister.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think that the hon. Gentleman did get it from the Minister, but just does not like it. We are piloting the post office local model. We want to put money behind it, and it is part of the post office policy statement. I will tell him what the market research tells us. The hon. Member for Ochil and South Perthshire, or perhaps it was the hon. Member for Llanelli, complained that post office local does not have all the services that they want and has only 86% of the full suite of post office services, forgetting that many post offices do not have the complete suite now. The market research shows that 94% of customers are satisfied with the overall experience of going to a post office local, and 82% are satisfied with the range of services. I refer the hon. Member for Angus to pages 12 and 13 of the post office policy statement, which gives more details of the market research. I am happy to read it out to the Committee, but it has been published and is there for people to see.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Can I take it from the Minister’s comments that he is confident that 11,500 post offices will remain open?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

What I do know is that the business agreement reached with Post Office Ltd for the £1.34 billion—the contract made with Government—requires Post Office Ltd to keep a post office network of 11,500 post offices. That is a big commitment by this Government in tough financial times, and I think that it speaks volumes for our commitment.

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

That is a welcome assurance, but I am sure that the Committee will know that it is a time-bound commitment. If the Minister was so confident about the future of those post offices, I suspect that he would have no problem writing it into statute, as they do in Germany and Holland, which have the most successful mail services in the world.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am glad that the hon. Gentleman mentioned Germany, because we have had some discussion about Deutsche Post, as hon. Members will remember. Until that intervention, he had desisted: I thought that he had seen the light about the reality of Deutsche Post. He seems to think, as he told a Scottish newspaper, that our model is very different from the Deutsche Post model because in Germany, 30% is still held via a state-owned bank. For the record, so that he is absolutely clear, what he fails to appreciate is that the German legislation for Deutsche Post contains no legislative restriction requiring the German Government, either by bank or by direct shareholding, to keep any shares. In other words, Germany uses exactly the model that we are proposing. The Deutsche Post model, which he is trying to use against us, is exactly the model in the Bill. I am sure that he will write to The Scotsman to correct the record. Will he?

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

That is an interesting question. I did not tell The Scotsman anything. I think that the Minister will find that that comes from the proceedings of this Committee. I will read closely his point about Deutsche Post, but as things stand, the state has a share of 30.5% in Deutsche Post. That model is very different from the one that he proposes. However, I will go away and read his additional remarks with interest.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I hope so. I want to return to that point, because the hon. Gentleman and other Labour Members seem to think that businesses are rescued by legislation. I point again to what Moya Greene said and why she said it, because their fears and concerns—their Private Frazer moments—seem to be based on the idea that Royal Mail would not use the country’s largest network, which has now been modernised, transformed and invested in, and which will be open for longer hours. They think that Royal Mail will say, “Do you know what? We’re not going to use it. We’ll let our competitors in. Wouldn’t that be a good idea?” That is effectively their concern.

I do not believe that Moya Greene’s successor and Royal Mail will be that stupid. I doubt that they will be stupid enough to rebrand Royal Mail Consignia, for example, which happened under the previous regime.

I have a lot of confidence in the people in Royal Mail and in the board of Post Office Ltd, and I believe that when they are separated they will continue to work together because they know that it is in their commercial interest to do so, not because something is written into the law. Moya Greene said that

“it is unthinkable that we would ever have anything but the very strong relationship that we have now with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]

She is absolutely right. It is worth noting that the chairman, Donald Brydon, told the Committee in evidence that before any privatisation of Royal Mail, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is “legally permissible”. That is a very strong pledge. He said that not for sentimental reasons, but because he is a business man and knows that it makes commercial sense.

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

Am I right in saying that the Minister will have no idea what is in the contract?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is certainly right to say that my predecessors in the previous Government will not have seen the inter-business agreement currently in force between Post Office Ltd and Royal Mail, and he is absolutely right that neither I, nor my Department, will be party to any agreement negotiated between Post Office Ltd and Royal Mail.

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

I thank the Minister for that answer. Does it follow that there could be stipulations or clauses in the inter-business agreement that would work to the disadvantage of Post Office Ltd of which the Government would know nothing? For the Government to talk in such optimistic terms about the IBA when they do not know what will be in it is quite a leap.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is in danger of making a circular argument, but not for the first time. All I say to him, in strong terms, is that Post Office Ltd is hardly going to negotiate terms of a contract that are against its interests.

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

But the point is that Post Office Ltd will be in a weaker position, relative to Royal Mail Group; it will be a much smaller organisation and will be less powerful than a privatised Royal Mail. That was the point about the asymmetry of power that was referred to earlier. It is stretching credulity to believe that Post Office Ltd will be able to negotiate a contract on a level playing field with a privatised Royal Mail.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman might find it stretching, but I do not, for the reasons we have been talking about in Committee. It has, as Moya Greene said,

“the best and strongest network in the country, by any yardstick”.—[Official Report, Postal Services Public Bill Committee, 9 November; c. 18, Q42.]

It is simply not the case that that somehow makes it a minnow. If the hon. Gentleman is trying to put himself into the mind of a future chief executive of Royal Mail—not Moya Greene, as she has pledged on the record her support for the proposal—does he really think that Royal Mail would leave a vacuum for competitors to enter? I just do not see that happening in the real world.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister is painting a picture that indicates that we on this side of the Committee are scaremongering, but I want to take him back to what George Thomson told the Committee in evidence:

“On separating Post Office Ltd from Royal Mail, it is unprecedented and we have to get it right… We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI to build a school or hospital, you would get a 21-year contract. I am not asking for a 21-year contract, but, by God, I am asking for a 10-year IBA contract.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 39, Q80.]

That is from someone who sees the value of the inter-business agreement from both sides, and that gentleman appears to have some concerns, so it is not just scaremongering from this side.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman will know that as the Minister I have talked an awful lot to George Thomson and his colleagues in the National Federation of SubPostmasters. I am aware of his concerns about the IBA and it is his job to voice those to Ministers in his role heading that organisation. However, as I have said, the regulator, Consumer Focus, and Richard Hooper, who are not all on the same side and do not have a vested interest, agree with the Government that separation is sensible. That flies in the face of the hon. Gentleman’s point.

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

I am trying to remember Consumer Focus’s evidence. Am I right that it favours statutory provision for access points in the context of a separate Post Office Ltd?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I do not remember, but no doubt the hon. Gentleman will find the evidence for us. I remember clearly that Consumer Focus supported separation.

Having shown that I cannot see a commercial reason for Royal Mail and Post Office not continuing, let us examine what has been proposed. Let us assume that Royal Mail might be desperate to get out of using the post office network and that we will have to find a way to bind it in—even though Donald Brydon has said that it intends to have the longest contract that is “legally permissible”.

The new clauses seek to put the contract or inter-business agreement on a statutory basis, requiring a minimum duration of 10 or 15 years. I am unaware of any statutory precedent for requiring particular commercial terms between two independent businesses. I would be interested if Opposition Members could find such a precedent. It would be odd for a Government to dictate detailed contractual terms to two independent businesses. That is why we are not attracted to the new clauses.

The Opposition proposals only serve to reiterate why the Government should not impose on commercial negotiations. Contracts of the duration that Opposition Members are seeking would not necessarily bolster the commercial partnership between the two businesses, as they argue, but could harm it. A 15-year contract that charged Royal Mail extortionate prices while offering Post Office Ltd no indication of the volume of business it could expect would be no use to either business. A 10-year contract that was economical for Royal Mail would satisfy new clause 3, but could mean that each transaction lost loads of money for Post Office Ltd. Any proposal that might jeopardise Post Office Ltd’s commercial interests cannot be accepted. I hope that the Committee will reject the proposals.

Gordon Banks (Labour, Ochil and South Perthshire)

To take the Minister’s words at face value, he seems to be arguing against a 10-year IBA. Is he saying that irrespective of whether it is in the Bill or something to be agreed with the national federation, he is against a 10-year IBA?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

There is no difference between us on whether Post Office Ltd and Royal Mail should be able to negotiate a 10-year IBA if that is what they want. The difference is about whether the Government should impose such a deal on Post Office Ltd and Royal Mail in the Bill. As I have said, there is no statutory precedent for that. I have also made it clear that neither the previous Government nor this one have become involved in the negotiations between two commercial companies. Let us take a flight of fancy and imagine that the Committee could create the commercial contract, including all its details. It would be utter nonsense to say that we could get it right.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister seems to be suggesting that a 10-year deal can be done, provided that it is not required in the Bill. We are not saying anything about the content of the agreement other than the number of years it should last. If a 10-year deal will be viable when privately negotiated by Post Office Ltd and Royal Mail, that is no different from our proposal. We are not saying what the agreement should be, but that it should last at least 10 or 15 years.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The point that I am making is that stipulating the duration in the Bill misses the point. One negotiates the details, not the duration, of a contract. In many ways, the duration may be a small matter for the two parties. I echo the very important words of Donald Brydon, who told the Committee that, before any privatisation of Royal Mail, a continued, long-term, commercial contract will be in place between the two businesses for the longest duration that is “legally permissible”. That is an extremely strong pledge by the chairman of Royal Mail and I do not see why the Opposition are not reassured by it. Perhaps it has something to do with “Dad’s Army”.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Surely, as a Liberal Democrat, the Minister will recognise the asymmetry of certain recent negotiations, especially in the formation of the coalition Government. He must have also witnessed, or been privy to, commercial negotiations in a previous life. Considering the size of a privatised Royal Mail in negotiations with a mutualised Post Office Ltd, any longevity in the IBA between the two will come at the cost of access points.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

First, I believe that the Post Office will be a big player as an individual company, because it has the largest network. I do not therefore accept the Labour party’s efforts to talk down Post Office Ltd. The hon. Gentleman invites me to reflect on the negotiations that formed the coalition and whether they involved asymmetry. However, tempting as it is to comment on that point, I think it would lead me into difficult waters and that you would rule me out of order, Mr Amess.

Negotiations for an inter-business agreement are best left to the businesses, which know far more than we do. They know their customers, markets, services, products and past historical relationships. The best contract for both businesses is likely to come from their work together as they understand and negotiate the complex interaction between the pricing, the volume of the business, the duration and many other factors. The idea that we should put that into law, given the lack of any precedent and the danger of challenge in relation to anti-competitive practice and so on, is absurd.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister has not grasped the fact that the issue is not the difficulty of Post Office Ltd and Royal Mail in their present formats negotiating an IBA. The issue is that the present IBA will end after Royal Mail has become a fully privately owned company that may well have a different set of criteria from the present Royal Mail. By asking for 10 or 15 years, my hon. Friends and I are arguing in favour of preserving the business as it enters privatisation, not as its empire currently stands.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The chairman, Donald Brydon, said that there would be a new or refreshed IBA before privatisation and separation, and that it would last

“as long as is legally possible.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 19, Q49.]

That is the third time that I have made that point, because I think it is a very important part of this debate. Legislation is not the appropriate place for commercially sensitive terms to be debated. The terms of such a contract will be commercially sensitive, and I would have thought that the idea that we put them on the face of the Bill, discuss them and give succour to the competitors of the post office network is the exact opposite of what the Opposition are trying to achieve. I do not accept that point at all.

I have been really impressed when I have met sub-postmasters throughout the country and by how the NFSP has engaged with the issue. I know they have concerns about this but I think they also see the amount of money that the Government are investing, the support for mutualisation and the proposals in the policy statement on new services, and they have taken succour from that and from what Donald Brydon told the Committee.

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

Will the Minister give way?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I will just finish a few more points and then I am happy to take some more interventions. What some people fail to understand is that the Government are not party to the current arrangements and will not be party to them in future. We are not changing anything. This is what happens now. While I have not seen the existing contractual arrangements, for the reasons I have given, I am aware that they stretch to more than 100 pages of highly specific, commercially sensitive material. I think it is right that the experts, the businesses and their advisers, negotiate on those and agree the commercial relationship between them for the long term, rather than us trying to do that in a parliamentary Committee.

Gordon Banks (Labour, Ochil and South Perthshire)

I want to tease something out. Can the Minister take his last statement a little bit further? Will he tell the Committee that he has no involvement with, no interaction in and no say on the length of time that any IBA will be drawn up for and therefore will not be involved in any negotiations with anyone on the subject outside the Committee?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Yes. The Government’s job is to create the conditions in which the businesses can flourish. That is what we are hoping to do through the Bill. It is what we are hoping to do by getting private capital into Royal Mail. It is what we are hoping to do through the major investment that we are making in Post Office Ltd. Post Office Ltd is modernising its branches and will have the money to do so. As we heard from Paula Vennells, the Post Office managing director, it is developing the post office local model, a model where branches offer customers much longer opening hours. It is therefore putting itself in a very attractive place to be a very strong partner to Royal Mail and, indeed, to Government Departments.

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

The Minister has mentioned a partnership. With regard to the relationship between Royal Mail and Post Office Ltd and the asymmetry of power, I found out recently that the Post Office Ltd board has six people on it, four of whom are from Royal Mail. The notion that these two organisations are relatively balanced in their respective reach, strength and power is pushing it a bit. Can he confirm that that is the make-up of the board?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

What I can confirm is that the hon. Gentleman has just made the argument for separation. The problem for Post Office Ltd and thus for the post office network is that it has never been the first consideration of the board of the Royal Mail Group. It has always played second fiddle. Those who are running the Royal Mail Group are worried about the letters business, because it is the biggest part of the business. They are worried about the parcels business and so on. They are worried about how the regulator affects that by its decisions. Their focus and management attention is on that. Inevitably, the post office network comes next or even later. Having a separate company where the board is solely for Post Office Ltd and is focused on the strategic needs of the business will make a really big contribution to the successful future of the post office network. That is why I believe the regulator, Consumer Focus and Richard Hooper backed the proposal for separation.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister seems to have said that the management of Royal Mail Holdings have not done their job correctly, because they have taken their eye off the Post Office. He surely cannot mean that.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I did not say that. I said that while Post Office Ltd is within the Royal Mail Group, the management of the Royal Mail Group have many other things to consider. Because these are very different businesses, there is a danger—this may well have happened in the past—that Post Office Ltd has not had the full attention and focus that it requires. I believe that separating out will avert that danger.

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

I note that the Minister did not disagree with me about the Post Office Ltd board make-up. He may well have a point; I can see why in the past the two groups’ being in the same organisation could have created issues with Post Office Ltd’s performance. Putting them into contractual negotiation where Royal Mail is so much more powerful—even if the Minister’s plans for Post Office Ltd’s growth come off—makes it difficult for Post Office Ltd. We on this side of the Committee would be much more comfortable with what he has said about spinning Post Office Ltd out from Royal Mail if he put statutory provision for post offices in the Bill. Then some protection for Post Office Ltd would exist in that relationship, and we could have the advantages of the separation to which he has referred.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is whistling one of his favourite tunes, and I am sure we will discuss that issue when we reach the relevant clause. I am looking forward to that debate, and it is something that he and his colleagues quizzed me on when I gave evidence to the Committee. I am keen to move on to the other amendments, because time is pressing. Does the hon. Member for Angus want to add something?

Michael Weir (Scottish National Party, Angus)

The Minister is making the case that Royal Mail and Post Office Ltd are part of the same board and that insufficient thought has been given to Post Office Ltd. Why can he not accept that if they are split and a privatised Royal Mail focuses exclusively on its letters business, as he has discussed, there is a real danger that it will consider alternatives to Post Office Ltd?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Throughout the debate, I have quoted the chief executive and the chairman of Royal Mail, and I strongly believe that Royal Mail would be taking leave of its commercial senses to vacate the network of 11,500 post offices and allow its competitors to come in there. That is exactly what its competitors want it to do, and that is exactly why it will not do so.

I now turn to the second category of amendment, particularly amendment 34, amendments 25 to 30 and amendment 35. They seek to put further preconditions on any move to mutual ownership of the Post Office. Chief among the preconditions are those of amendment 34, proposed new subsection (8)(g) of clause 4 in amendment 25, amendments 26 to 30 and amendment 35. Those provisions seek to require the passage of a further Act of Parliament, a further order subject to either the affirmative or super-affirmative procedure, or the approval of both Houses of Parliament of a report on the transfer before any transfer to mutual ownership can be made.

I do not believe that those requirements are necessary, because we are now scrutinising a Bill that contains the necessary provisions. Clause 7 lays down clear parameters for any transfer to mutual ownership, and it will ensure that the mutual operates within those parameters in the longer term. Those parameters recognise the Post Office’s unique social role. They will ensure that the Post Office continues to serve the public benefit, irrespective of whether it is owned by the Government or by a mutual.

There seems to be some misunderstanding about these provisions. The hon. Member for Llanelli is worried about the lack of an asset lock. She quoted Peter Holbrook, the chief executive of the Social Enterprise Coalition, who has suggested that it is necessary to ensure that mutuals cannot be demutualised and the assets appropriated by private owners. Clause 7(4) requires the Secretary of State to be satisfied that a mutual Post Office Ltd cannot dispose of property or rights, if it is inconsistent with its purpose of acting for the public benefit by promoting the use of post office services. That is an asset lock of exactly the sort that Peter Holbrook wanted and, alongside the ownership restrictions in clause 4, it ensures that further legislation would be needed before any demutualisation could take place. I want to make it absolutely clear that the post office network could not be sold off privately. A mutual post office network could not be demutualised without another piece of legislation. That is what I call a lock, and I would have thought that Opposition Members would appreciate that it is a lock. That is why I do not think that their desire for some more preconditions before a transfer to mutual ownership is necessary. We have the policy before us, we have the framework for either a 100% Crown-owned Post Office network or a relevant mutual and that is what we should be debating rather than further barriers and further preconditions.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I thank the Minister for giving way and agree with him that we should be debating what type of mutual is being proposed; in the Bill, there is not any sort of proposal about any variables or options for the mutualism. Would there be front-door mutualism, in that there would be buying-out of independent post office holders? Would there be back-door mutualism, where there would be a redistribution of profits from independent post offices to pay for currently unviable post offices? Would the mutual itself be able to sell off assets—in other words, 7,000 other post offices—to pay for the existing network?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think that I answered that question just a second ago, or at least the last part of that question. However, let me make clear what is in the Bill. I am keen that hon. Members look at what is in the Bill, because that is what we are here for. The Bill sets out a very clear legislative framework for future mutual ownership, which seems to me to be the right approach.

We are building on that approach by the way in which we are engaging with the mutual sector to get its ideas about the best specific model for Post Office Ltd. We have asked Co-operatives UK to explore how a mutualised structure could work best in the post office sector. Once it has reported, which we expect to be by April 2011 although it may be a bit later, we are committed to a full public consultation before a decision is made to move to a mutual structure.

So, first, we will have a consultation led by the mutual sector itself and not by Government, so that the sector can consider all the different options, whether it is a John Lewis-type model, a more co-operative society-type model or some other model. The sector will come up with options, having discussed those options with all the key stakeholders, particularly the National Federation of SubPostmasters but other key stakeholders too. Then the mutual sector will come back to Government and, assuming that we get Royal Assent for this Bill, we are making an absolute commitment that we will consult on our proposals for taking forward a mutual structure.

Nia Griffith (Labour, Llanelli)

Perhaps the Minister will explain the relationship between “viability” and “mutualisation”. In other words, we can talk and consult about wonderful schemes, but the question in everybody’s mind will be, “Is it going to be viable?” Will the Minister explain what criteria he will have for that viability before the mutualisation process can take place? Also, will he say what sorts of guarantees he will be looking for?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am very happy to do so. The hon. Lady is absolutely right, to the extent that there cannot be an unviable mutual. The thing about a mutual is that people volunteer to be part of it; we cannot force them to be part of it. Therefore, it grows organically.

People will not sign up—be they sub-postmasters, or community mutuals that exist at the moment—to be part of the national mutual, which is proposed in these clauses, if that national mutual is a loss-making organisation, and we would not expect them to do so. That is why I have not suggested at any stage that mutualisation is the process by which we will make the post office network more viable. I believe, as I have said at length during our exchanges today, that the way to do that is by getting more Government services through the network and by ensuring that the Government are putting in serious investment to modernise the network.

Through that process and through ideas such as post office local, we will get the post office network—this incredibly valuable social and economic institution—to be viable and put it in a situation where it could be mutualised. We will not mutualise it by imposing a model, because the nature of mutualism is not about the top-down imposition of models in a Bill or by Government fiat. We have to take people with us, which is why we have set out the consultation process. The process is the first not to be led by the Government, and it involves the Government responding to the mutual sector’s ideas.

Nia Griffith (Labour, Llanelli)

I am glad to hear the Minister accepting our arguments about the need for viability, which is what a great deal of what I have said this afternoon has been about. Can he give us any idea of the time scale in which he hopes that the Post Office might achieve viability?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

We gave an indication of the time scale in the Post Office policy statement. We say at the end of paragraph 63:

“We believe that the Post Office could be a mutual by the end of this Parliament.”

I believe that the process of improving viability, as I described, would enable mutualisation by that time.

I am glad that the hon. Lady sought that clarification, because I do not want people to get the impression that we can move to a mutual structure very rapidly. An awful lot of work has to be done before that would be possible. However, it is a realisable, achievable goal, to which we are very committed and which we want to see happen, ideally, within the lifetime of this Parliament.

Nia Griffith (Labour, Llanelli)

As we discussed earlier, the three-year funding programme, which will presumably be in place from 2012 to 2015, concentrates largely—nearly half of it—on the running subsidy, while other amounts are for modernisation and the introduction of technology. However, the question remains, what is the actual investment in things that will make most post offices more viable? What plans are in place so that, by 2015, there will be a realistic prospect that the post office network will be viable and therefore in a state to mutualise?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

We hope that investment in the 4,000 main post offices, which we talked about in the policy statement, will enable them to generate more revenue than they can at the moment. The reforms of the post office local model will assist as well—we talk about taking 2,000 post offices along that route in this time period.

I do not know if what lies behind the hon. Lady’s question is whether we will have transformed the whole network during that time scale, but we probably will not have. It takes quite some time to transform everything—the issues are really quite big—but we are moving at speed despite that challenge. Transforming a network that has been shrinking year after year—so much in the past 13 years, leaving just 4,000 financially viable post offices, according to different experts—cannot be done overnight. It is a long job, which will require a shoulder to the wheel and all the tools in the box. The prospect of mutualisation might galvanise people’s attention and enthusiasm—as might the investment, post office local, the involvement of local authorities as we described in the Post Office statement or the new services—but transformation will require a whole-Government approach. That is one of the reasons why I am spending so much time talking to Ministers in other Departments, focusing on how we can bring life to the front office for government model, which we talk about in the policy statement.

Gordon Banks (Labour, Ochil and South Perthshire)

To go back to a point I made earlier, is it correct that Post Office Ltd and others will have to compete for those services?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I think that I answered that earlier, in response to the hon. Gentleman. He is absolutely right that we must have a normal procurement approach, unless there are certain security considerations, which is one of the reasons why we need to invest in the post office network, so that it can be a good competitor for the contracts. We are confident about what we are doing, whether on a processing role for the Post Office, identity verification or the pay-out technology now being implemented. Those generic roles will be attractive and will put the Post Office in the lead in such competitions.

Before moving on, I wish to clarify a point that, when I listen to debates, it seems is not clear in some people’s minds. When we talk about mutualising the post office, we mean mutualising Post Office Ltd. That is the overall national body that operates the franchises, holds the intellectual property, manages the contracts with Royal Mail and Government Departments and holds the discipline codes and so on. We are not saying to private individuals who have invested their capital in their businesses that we will suddenly take those businesses away and put them in a mutual. The proposed model is a national mutual model that will have beneath it at the local level many private businesses, as it does now. At present, 97% of post offices are run by private individuals or groups, and that will continue. They will have the option to become part of the national mutual of Post Office Ltd. I hope that I have made that clear, and that my explanation will have been of assistance to those that had not quite grasped the point.

Before turning to the other aspects of amendment 25, I wish to make a general point about the amendment’s use of the word “purchaser”. I do not know whether it was the hon. Member for Llanelli or the hon. Member for Ochil and South Perthshire who wrote the amendment, but I make it clear that the Post Office is not for sale. There will not be a purchaser of the Post Office. Clause 4 explicitly states that the only owners of the Post Office can be the Crown or a relevant mutual within the parameters of clause 7, to whom ownership of Post Office Ltd will be transferred by the Crown.

I turn to the other preconditions to a transfer sought under amendment 25. Proposed subsection (8)(a) seeks a written commitment that an employee representative should be on the board of the mutual; and proposed subsection (8)(f) seeks a majority vote by staff and stakeholders in favour of a transfer. The amendment rightly places importance on the engagement of the work force and stakeholders in the operation of the Post Office, and I commend it. Any move to mutual ownership must put the views of employees, sub-postmasters, business partners, communities and customers first. However, I reiterate what I said in previous debates, that we should be careful about being prescriptive in legislation on the governance structure of the mutual.

As we heard in evidence, we should not impose a rigid mutual structure on the Post Office from the top down, which is what the amendment would do. That is why we have asked Co-operatives UK, the national trade body for co-operatives, to consider the proposal in detail and to consult sub-postmasters, particularly the National Federation of SubPostmasters, staff and so on. There are a number of questions that we want answered. For instance, we want to know precisely who would be the members of a mutual, and how the governance of a mutual should work. After Co-operatives UK has sought the views of staff, stakeholders and experts and reported back to the Secretary of State, we will then have the public consultation to which we are fully committed.

I assure the Committee that there will be nothing mandatory about mutual ownership. For example, if a member of staff does not want to engage in the operation of the business, nothing will oblige that staff member to join committees or to vote on resolutions. It would be a shame if they did not become involved, but it is not mandatory.

Gordon Banks (Labour, Ochil and South Perthshire)

I wish to be clear about a mutualised Post Office Ltd in which some outlets buy into the mutualisation and some do not. Will there be any impact on the ability of those that do not buy into mutualisation to deliver services?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It would be quite wrong if a sub-postmaster employee were to be penalised for not being involved, but I would have thought that there would be incentives to become involved. The hon. Gentleman is trying to tempt me to prejudge what Co-operatives UK decides and what will be said in the public consultation. Experts on mutualisation say that we have to engage first with those who are going to be part of it, and not impose it top down. I will not stand here and give a set of rules. That would be inappropriate. I believe that we have a framework that safeguards the public benefit, as well as the assets through the asset lock. We have the framework required for a mutual structure; now we want to engage all the key stakeholders and the public.

Proposed new paragraphs (d) and (e) of clause 4(8) seek to make a public consultation an explicit requirement. I can only repeat that we are committed to a consultation. Proposed new paragraphs (b) and (c) seek to ensure that the headquarters of the mutual Post Office will be located in the UK. I do not think that the provisions are necessary, as it is highly unrealistic to think that a mutual Post Office would be headquartered anywhere else. After all, it will be a mutual to promote the UK public’s use of UK post offices. The point of mutual ownership is that the key stakeholders—staff, sub-postmasters, customers and business partners—are more engaged in the running of the business. All those groups will be UK-based and have a vested interest in the headquarters being in the UK. It is a flight of fancy to think that a mutualised post office network would want to be headquartered outside the UK. I hope that hon. Members will withdraw the amendments.

Finally, new clause 9 seeks to add further annual reporting requirements on the Post Office to cover Northern Ireland, Scotland, Wales and greater London. People throughout the UK, whether they are in Eastbourne or Enniskillen, Aberdeen or Abergavenny, value the role of their local post office. I remind the Committee of our proposed requirements for the annual report on the post office network, which go further than existing statutory duties. Clause 11(2) will require the report to give details of the number and location of the company’s post offices or the network of post offices, whether or not they are owned and operated by the company.

The current annual Postcomm report provides the number of post offices in each region, including the nations—Scotland, Wales and Northern Ireland—and the English regions including London. The Postcomm report also covers what proportion of those post offices are in rural, urban and urban deprived areas. That is exactly the sort of information that we envisage the Post Office will provide when it produces its own report on the post office network. It includes the number and location of post offices and their accessibility, and that is what people want to know about.

Although clause 11 requires the annual report to be laid only before Parliament, it will be a public document, and I have no doubt that it will be sent to the appropriate people in the other Assemblies, authorities and Parliaments across the UK. I hope that hon. Members will agree that our proposed annual report on the post office network not only goes further than the existing statutory duty, but will continue to provide details of the geographic spread of the national network of post offices, broken down as appropriate. It is unnecessary for separate, duplicative reports to be produced for the Government bodies proposed in the amendment. I therefore suggest that hon. Members withdraw new clause 9 and agree that clause 4 should stand part of the Bill.

Nia Griffith (Labour, Llanelli)

I will sum up briefly, because I do not want to repeat the points that we have discussed. Amendments 26, 29, 30, 27, 28 and 35 all deliver possible means of further scrutiny of the legislation, because we are concerned that the detail about mutualisation is not as good as we would like. We have also brought viability to the Committee’s attention and discussed it at length. We have discussed trying to get more Government business without seeing any sign of it and the worry that commercial business is not taking off. We are disappointed that no post bank was proposed in the latest announcements, and we are, of course, worried that the IBA will not be given a proper 10 or 15-year opportunity.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am disappointed that the hon. Lady has responded in that way, because I know that she has with her a copy of our policy statement, which details a lot of the Government services that we propose and the pilots for them. For example, page 23 discusses the potential for the Post Office to become an umbrella organisation to provide an end to the electronic Criminal Records Bureau application service. There are other examples in relation to Jobcentre Plus and national insurance number applications, the provision of an identity verification and registration service that would enable public sector employees to access multiple Government services and so on. I assure the hon. Lady that we intend to put a huge amount of effort into ensuring that Government services and pilots to explore those ideas are taken forward.

Nia Griffith (Labour, Llanelli)

Well, indeed, but anybody who is running a post office will want to know where the bankable contracts are. They want to see contracts stating exactly how much they are going to get for each type of transaction, because they have to take into consideration the time that those transactions take. They have to run their businesses, so they need proper business contracts. There is a lot of talk and suggestion, but, at the moment, none of that can be taken home by the post office network and banked.

The same is true of local authorities. Many local authorities wax lyrical about their local post offices, but, at the same time, they do not let people pay council tax through them. I had to have a fight to get my council to drop plans to stop people paying their council tax that way. Although there is a lot written in the announcements, the actual problem is the bankable contracts, which people will want to see.

It would be interesting at this point if we turn to what Hooper said:

“Given the social obligations of the Post Office, there is little prospect that the network will be sustained on a fully commercial basis.”

He points out that there are difficulties of viability, and he went on to say:

“We recommend, therefore, that it should remain wholly within public ownership. To ensure that post offices continue to provide a point of access to the universal service, we recommend that there should be a long-term agreement between Royal Mail and Post Office Ltd. We also believe that the post office could enhance the service available to recipients by providing a collection point for parcels and packages.”

He quite clearly had in mind not only the difficulties of making the post office network viable, but the absolutely fundamental nature of the IBA to the post office network.

The other stream that we have looked at is what new business there might be. Although we have some interesting diversification projects on an individual basis, the progress being made towards more commercial-style business is still slow. We have nothing new.

Gordon Banks (Labour, Ochil and South Perthshire)

Just to reiterate what the Minister has said, Post Office Ltd will have to tender and win any new business that comes via the Government.

Nia Griffith (Labour, Llanelli)

Indeed. As I have said, we have those fine words and the issues about the pilots, but there is clearly already a problem in that the giro contract may not be given to the Post Office. There are proper tendering processes to go through, which will make it even more challenging for the Post Office.

Clearly, the post office network has to be viable before anybody would want to buy into it as a mutual. That is absolutely essential. We cannot possible think of anybody wanting to get involved in a loss-making organisation. They would want to see something proper on offer.

It was that great American film producer, Sam Goldwyn, who said that an oral agreement is not worth the paper that it is written on. The remnants of a three-year agreement from the Government is like Faustus being tempted by Mephistopheles. In the process of creeping privatisation, three years is as nothing. I say three years because that might be the remnants of an existing IBA—just long enough to tempt in the short term.

In almost every business and profession, there are certain phrases, senses, words and initials the mere mention of which will cause everyone to nod sagely. Outside that business or profession, these words, so sacrosanct to the insider, will have absolutely no resonance. For example, there is the IBA, which is the internal business agreement by which Royal Mail is required to take all its post office counter services from Post Office Ltd. The harsh fact is that, once the current internal business agreement ceases to apply, Royal Mail will be free to use any partner to supply post offices.

One third of Post Office Ltd’s revenue comes from Royal Mail. Without that revenue, Post Office Ltd would be unable to keep many post offices open. That is why the new clauses that we have tabled—new clause 4, which suggests 15 years, and new clause 3, which suggests 10 years—are absolutely critical to the survival of the post office network. With the very greatest of respect to Moya Greene, it is no good simply having fine words. Those fine words need to translate into a proper bankable contract—a proper agreement. Other countries manage to get round these things and put agreements into their legislation, but the real difficulty here is an intense obstinacy not to enshrine in legislation protection for the post office network, which is clearly what many hon. Members want. I suspect that many Members on both sides of the House want the post office network to be made as financially viable and secure as it possibly can be, and without the guarantee of a Royal Mail contract, there is, frankly, nothing to tempt anybody to be involved in a mutual post office network.

It is important that we get these things right and get some indication from the Minister—more than fine words about possible future Government business and possibly developing this pilot project or that project—about a proper IBA guarantee that the post office network will get the business. On that note, I will wind up my comments on this large group of amendments and will take guidance from you, Mr Amess, on how we proceed with each amendment separately in deciding whether to vote.

Sir David Amess (Conservative, Southend West)

Well, the hon. Lady needs to advise me exactly which amendments she wishes to move. It goes without saying that we will deal with the new clauses much later in our deliberations on the Bill. If she indicates what she would like to vote on, I can give guidance, because some amendments are consequential.

Nia Griffith (Labour, Llanelli)

The strongest amendment in the group—29, 26 and 30—is clearly 26, so we would like to press that to a vote, and, consequential to that are amendments 27 and 28.

Sir David Amess (Conservative, Southend West)

I am very happy for the hon. Lady to move amendment 26, but I advise her that if she is unsuccessful, she cannot move amendment 27 or 28. Is she withdrawing amendment 34?

Nia Griffith (Labour, Llanelli)

I beg to ask leave to withdraw the amendment.

Clause 5

Clause 8

Gordon Banks (Labour, Ochil and South Perthshire)

I beg to move amendment 32, in clause 8, page 5, line 14, leave out ‘reasonably’.

I promise not to keep the Committee long with an inquiry into a single word, as that is something we have already done. We are asking the Minister for clarification on the word “reasonably” as it appears in the Bill, and we have some honest and straightforward questions about the way the Bill is drafted.

What is reasonable, and who will decide that? I understand that the provision relates to subsection (3) where a company is

“the original holding company or a subsidiary of that company,”

and

“it is wholly owned by the Crown.”

Therefore, I cannot see why the Secretary of State would act unreasonably with such operations. That takes us back to this morning’s debate on amendment 31, and I genuinely seek the Minister’s guidance about what the word “reasonably” adds to the Bill. Will he give us an example of what information he thinks would be reasonable and what he would consider unreasonable? Will he tell us what other assistance the Secretary of State may seek that would be reasonable, and to the same extent, what would be unreasonable? Is that word in the Bill because he envisages the current, or future, Secretary of State acting unreasonably? Will the Minister say what added value there is to the Bill with the inclusion of “reasonably” in its current location?

The rest of the debate is in Hansard.