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Royal Mail debate

11th February 2009

Jonathan Djanogly welcomes proposals for partial privatisation providing that a suitable partner can bring much needed commercial confidence and investment to modernise Royal Mail. He also raises concerns about Royal Mail's pensions deficit.

Mr. Jonathan Djanogly (Huntingdon) (Con): Let me repeat the shadow Secretary of State's earlier remark that we welcome Richard Hooper's review of the UK postal services sector. Published on 16 December, with the title "Modernise or decline", it provides a worrying statement about the desperate condition of the Royal Mail today. Simply, it states that the status quo is untenable. Sadly, that conclusion comes as no surprise to the Conservative party. As my hon. Friends the Members for Wealden (Charles Hendry) and for Reading, East (Mr. Wilson) noted, it confirms what we have feared for a decade: the Labour Government's negligence in failing to address the vital issues that face the Royal Mail has allowed it to slip down the premier league of European postal service providers.We are faced with a stark choice: the Royal Mail must modernise or decline. Mr. Hooper's review has at last forced the Government to accept the need for reform-at least that is what we thought from Lord Mandelson's response to it, and I think that the Minister, after some interrogation, ended up taking the same view in a roundabout manner. I still do not know where the Liberal Democrats stand; I think that they sort of support the report but do not like third-party voting-or something.However, survival alone is not what Conservative Members hope to achieve. We share Hooper's belief in having a positive future for the Royal Mail if the right 11 Feb 2009 : Column 1474actions are taken. Given the urgency, why have not the Government seen fit to publish proper details of their plans? Before encouraging prompt action, we must see clear and acceptable proposals. All we currently have is a set of hollow statements by Lord Mandelson in the other place, and a promise that he would provide a full statement early this year.I remind hon. Members, especially the hon. Member for Stoke-on-Trent, North (Joan Walley), who strangely accused us of dithering, that we are already well into February, and yet no comprehensive details of Government policy have been released. We do not know whether Ministers fear the dissent of their own party, or whether the Government have been unwilling or unable to formulate a policy. Either way, that is indicative of a Government in disarray and lacking in direction or leadership.Perhaps we need to look at Labour's manifesto, in which the party commits to a publicly owned Royal Mail, or the Warwick II deal, as mentioned by the hon. Members for Morecambe and Lunesdale (Geraldine Smith), for Ynys Môn (Albert Owen) and for Stoke-on-Trent, North, to ascertain why Ministers minimise the public air time they give their part-privatisation proposals. We note the 131 Members of Parliament who signed the anti-privatisation early-day motion. However, the issue is ultimately for Labour, not us. What we are interested in is saving the Royal Mail and checking that the Government have the policy, the resolve and the leadership to deliver on that. At the moment, we have no such confidence. Are they, as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said, buckling at the knees?We on the Conservative Benches understand Mr. Hooper's concern that there should be a sale of a stake to a strategic partner, so we welcome Lord Mandelson's endorsement of partial privatisation. If we are to reverse the downward-spiralling fortunes of the Royal Mail, strategic outside input is, we agree, essential. However, as the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) and my hon. Friend the Member for Mid-Worcestershire (Peter Luff) said, important questions remain unanswered in relation to Lord Mandelson's vague proposals.What form will a partial privatisation take? How much of the Royal Mail do the Government intend to privatise? What price, if any, will they charge for such a stake? Who will keep the sale proceeds-the Royal Mail or the Treasury? What type of partner do the Government want for Royal Mail and will any partner be obliged to invest in the company? As my hon. Friend the Member for Wealden said, will the Government also promise that the sale process will not break down into the kind of farce that they delivered in the tender process for the Post Office card account?Although we support the concept of some form of outside ownership, our support for the Government's partial privatisation proposals is not unconditional. The proposals must not be just a convenient way to flog assets to prop up a Government on their last legs and desperate to reduce their debt pile at any cost. We agree with Hooper and Lord Mandelson that, in finding a solution, three interdependent aspects must be carefully considered.First, any new partner to the Royal Mail must introduce some much-needed commercial confidence. As admitted by the Minister, at present, bureaucracy and internal 11 Feb 2009 : Column 1475conflict, which includes a long history of-let us face it-terrible industrial relations, frequently paralyse the Royal Mail when it comes to making decisions and bringing about change. That is particularly the case with modernisation. As the right hon. Member for Leicester, West (Ms Hewitt) pointed out, new sorting machinery is on the way, and the Royal Mail network will be subject to a review as a result. However, few at present consider that the Royal Mail is equipped to bring forward such vital changes. We were pleased that the Minister accepted that outside experience will be invaluable in moving the Royal Mail ahead, although we consider that a careful review of the qualifications of any third party as a strategic partner will be essential.Secondly, the Hooper review maintains that private investment will be required to modernise the Royal Mail fully. We do not know how much that will be and we are unable to verify any figures, because the Government have refused to provide any such details. Can the Minister replying to this debate confirm that when he comes forward with privatisation proposals, he will provide details of the likely capital requirement, so that the House can properly assess those proposals?Thirdly, and perhaps most problematic of all, as pointed out by my right hon. and learned Friend the Member for Rushcliffe, the right hon. Member for Leicester, West and the Chairman of the Business and Enterprise Committee, my hon. Friend the Member for Mid-Worcestershire, current estimates of the pension deficit vary widely, but we all know that it is the largest problem that the Royal Mail faces. Worse still, the deficit is growing, in what is a turbulent economy.We have voiced serious concerns about the Government's intentions in that regard. By taking over the entire responsibility for the pension scheme on an unfunded basis, the Government could quite easily raid the fund's £22 billion of assets, thereby bolstering the nation's balance sheet, which has been saddled with mind-boggling levels of debt, in the short term and piling on unknown billions of liabilities for future generations. Absolutely nothing that the Government have said today gives us any confidence about what their direction will be in that regard. I join the right hon. Member for Neath (Mr. Hain) in calling for the Government to provide their proposals, and the sooner the better.The Minister now needs to reassure the hundreds of thousands of postal workers who are members of the scheme that a future Government will not have the ability to strip them of their benefits. One thing is for sure: with a revaluation of the pension fund due in the near future-I think in the next month or two-the Government cannot put off dealing with the issue any longer. The consequences for working members of the scheme could otherwise be very bleak, and they would certainly not thank the Government for their continued inaction.So a variety of issues need to be looked at together. Mr. Hooper noted that a strategic partnership with a third party, effective regulation and the need to deal with the pensions deficit were all connected, and all necessary. We agree with his view that we cannot pick and mix between these issues, and that they need to be dealt with at the same time, although that was clearly not the view of the hon. Member for Nottingham, East (Mr. Heppell).11 Feb 2009 : Column 1476My right hon. and learned Friend the Member for Rushcliffe, my hon. Friends the Members for Cotswold (Mr. Clifton-Brown) and for Wealden, and the hon. Members for Blaenau Gwent (Mr. Davies) and for Ynys Môn all pointed out that the importance of maintaining the post office network and retaining the universal service obligation was assumed in all of this. Combined, they are an essential element of our society, providing a lifeline to communities up and down the country. As Hooper's review said, they are part of our economic and social glue, but their future is inextricably linked with Royal Mail.Let us also keep in mind that the price control regulations are due to be revisited in 2010, which could seriously impact on the process of part-privatisation and modernisation. Royal Mail's dominance of the market ensures the need for strong regulation. The Hooper proposals for a merger of Postcomm and Ofcom are generally welcomed, although as my hon. Friend the Member for Mid-Worcestershire said, we will need to be satisfied that emphasis in the merged entity will be placed on the development of specific postal industry expertise.Rumours abound that legislation to enable privatisation is imminent. Will the Minister now confirm when this is going to happen? We strongly urge the Government to initiate the Bill here in this elected Chamber, and not in the other place. We believe that this elected House is best qualified to deal with matters of such importance, even if most of the Department's unaccountable Ministers sit in the other place. I am sure that that sentiment is shared by many hon. Members here.The Royal Mail, like the Labour Government, stands on the brink. The difference, though, is clear. While redemption is beyond this Government, the Royal Mail can yet recover and prosper. There is a final opportunity for the Government to revive the Royal Mail instead of continuing to drag it down. We urge them to release and rapidly implement appropriate proposals, and to set the Royal Mail on the course to recovery set out so comprehensively in the Hooper review.

6.47 pm



Mr. Jonathan Djanogly (Huntingdon) (Con): Does the hon. Gentleman agree with the Minister's point that, by having an outside third-party investor, the trade unions will, in effect, be better behaved than they have been in the past?

John Thurso: That is precisely the point I am coming on to. I wonder whether the hon. Gentleman will allow me to develop it in my own words and intervene again later if he wants to.

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