HC Deb 12 May 1989 vol 152 cc1175-82

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sackville]

2.35 pm
Mr. John Bowis (Battersea)

I am grateful to my hon. Friend the Minister for responding to this debate. Our two earlier debates were answered by two Ministers with the same name: at least this one provides some variety from the plethora of Pattens.

I am not sure how much experience my hon. Friend has of his post going astray, but he lives, I believe, in one of the longest-inhabited castles in the land, so perhaps the Post Office has had time to get it right in his case. Sadly, that is not most people's experience. I believe that Woodrow Wilson once said that people would endure their tyrants for years but would tear their deliverers to pieces. I do not know whether he had postal deliveries in mind, but I know that some of my constituents have.

The Post Office is a topical subject this week. All sorts of things have been delivered that should not have been, with the Leader of the Opposition—if he is to be believed—receiving mail that the Post Office denies having delivered at all. Too often, however, the postal service can only be described as hopeless, and typical of a service that has no competition.

Competition is not, I suggest, a political panacea, but it has a good track record in achieving higher quality at lower cost. Let me quote from that gospel that I am sure my hon. Friend takes nightly to bed with him, the Conservative manifesto: The Conservative Government has created a framework in which once again enterprise can flourish—by cutting red tape, by denationalising state-owned companies, by removing unnecessary restrictions … by keeping down prices through extending competition, and by ensuring access to open trade". I can almost hear my hon. Friend singing that refrain into his shaving mirror every day. The manifesto goes on: Competition forces the economy to respond to the needs of the consumer. It promotes efficiency, holds down costs, drives companies to innovate and ensures that customers get the best possible value for money. All that is true, unless we are talking about the postal service.

The manifesto also says: We have fostered a new spirit of enterprise"— except, as it should have confessed, in the Post Office. It says: The British instinct is for choice and independence"— unless, apparently, we want to post a letter.

Why, I ask my hon. Friend, have we been so timid about bringing the consumer the benefits of competition in the postal service? Who is frightened of competition? Surely it is not my hon. Friend, and surely it is not the Government. Can it really be the chairman and board of the Post Office? Only a few years ago I remember talking to senior Post Office executives who were excited at the prospect of privatisation and gearing up to win in a competitive world. I wonder what has happened to those people. Are they now terrified by the idea of giving the British public a bit of choice? Have the men of enterprise become the mice of protectionism—or, as my hon. Friend might say, have the lions become donkeys? I fear that they have. My constituents think that they have, and they do not like it.

I have already raised the non-deliveries over Christmas, the anti-consumer decision to close sub-post offices because bureaucratic tidiness is valued more highly than customer satisfaction, and the cost to business of lost letters. One mail order firm tells me that it loses £1.2 million worth of packages every year, and the Periodical Publishers Association, which spends £90 million a year on post, says that less than 50 per cent. of items posted first-class arrive the next day. I refer my hon. Friend to the response given last November in the House by my hon. Friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs who, when asked about disruptive postal services in London, confirmed that: during the period November 1987 to October 1988, there have been a total of 55 industrial disputes within the letters business, four within the parcels business and eight within the counters business which affected postal services in the numbered London postal districts".—[Official Report, 8 November 1988, Vol. 140, c. 139.] I am tired of raising the issue of lost letters, late deliveries and diminishing service to the public. Surely, it does not have to be that way. Surely, there must be a better way. If the Post Office does not believe me, it should ask the Post Office. It is that very same Post Office which today resists public choice that, in 1981, faced up to the newly competitive world of express mail and produced a winner in Datapost. As a result, we have choice of courier, reliability of service and reasonable cost. Jobs have been created in the private sector and, by and large, consumers are satisfied. That should have been no great surprise, because parcels have always benefited from competition. The Post Office has never had a parcels monopoly. As a result, it has had to provide a service that competes in cost and quality with the best of the private sector alternatives.

Will my hon. Friend announce today the timetable for launching the parcels service into the private sector? I presume that the appointment as its managing director of the former managing director of DHL, Mr. Nelson, was made with this in mind, but the timetable has been a long time coming. Likewise, the counter services should also be on their way to the private sector. We await the date for their lift off into free enterprise.

I should have thought that the success of the Government's 1981 policy on express mail and the lessons of competition in parcels, would be part of the catechism for DTI Ministers and officials. I am sorry to say that I am not sure that that is the case. The latest DTI report, produced by the wonderfully entitled Institute of Logistics and Distribution Management, does not seem to be aware of the success that has been achieved in this area. For example, it calls for the creation of a working party to monitor the industry and identify its needs when such a working party not only exists, but is chaired by the DTI. It proposes taxpayers' support for research initiatives, when the industry is quite happy to continue to finance its many research projects out of its own money.

My task today is to tempt my hon. Friend down the path of competitive righteousness and away from protectionist leftishness. As he knows, in 1981 the postal monopoly was suspended for letters and packages for which there was a charge of £1 or more. That is clearly too expensive to attract customers, and so it is uneconomic for firms to set up to provide an alternative service. That £1 requirement could be abolished without any threat to the Post Office. A 5p levy could be charged, as suggested in the report of the London School of Economics, so that the Post Office was compensated for its rural and so-called uneconomic services, and a viable choice would emerge for the public in many parts of the country.

Mrs. Teresa Gorman (Billericay)

I am glad that my hon. Friend raised the spectre of uneconomic rural areas. Is he aware that research shows that it is cheaper to deliver mail in rural areas because there more labour is available and there is no problem of Postman Pat's van travelling through crowded streets. Therefore, that is a complete non-argument.

Mr Bowis

I am grateful to my hon. Friend for that valid point. At the moment, I am merely seeking to bend over backwards to show that there is no threat implied to the Post Office in terms of the cost to it of continuing these services. I hope that my hon. Friend's point will be logged at Post Office headquarters and the DTI.

I hope that the Minister will soon respond to the LSE report. For now, I shall put aside the more comprehensive proposal and ask for at least a step in the right direction. Let me ask for half a loaf now, and let us settle for a 50p requirement.

As I understand it—my hon. Friend the Minister may be able to confirm this—that has been agreed in principle. Therefore, what are we waiting for? Not even the chairman of the Post Office could conceivably object to that modest step towards customer satisfaction. It will hardly threaten the mighty Post Office. After all, good as it is, the private sector handles just 25 million items a year, while the Post Office handles 50 million a day. Projections are for mail to increase from 1.8 billion items a year to 2.5 billion, so there is plenty of scope for everyone.

If we move towards a world of postal alternatives we begin to free the public from being held to ransom by industrial disputes. In theory, the Secretary of State now has the power to lift the partial monopoly in the event of a postal strike, but he has not chosen to do so on any occasion to date—and what if he did? Who would come galloping to the rescue with an alternative service? I suspect that nothing would happen and that there would be a deafening silence, because no one has been allowed to set up even an embryonic competitive business. If we had a limited choice there would be some point in lifting the monopoly completely in the event of a strike; and perhaps it would make a strike less likely in the first place.

Internationally, we do not suffer from the same sort of monopoly as we do domestically, but threats are being realised and opportunities to liberalise the international post missed. We have two more years of the presidency of the Euro Centre for Post and Telecoms—the CEPT—and I hope that we will use them to promote a new liberal framework. I understand that there will be an opportunity to do that this autumn at the Universal Postal Union congress.

For example, the situation surrounding Remail needs clarifying. Remail seeks the best mix of post and courier services, here and abroad, for the consumer, and the simplest way to achieve that would be to remove article 23 of the UPU convention, which is a bar to Remail and must surely be contrary to the treaty of Rome, at least in spirit and possibly in law.

Substantial business is at risk. I know of one firm which earns £150 million a year from this service. While we are at it, perhaps we can give the private sector parity of treatment with the Post Office at airports and customs. Why do we require courier parcels to have triplicate forms travelling separately from the parcel, while Post Office parcels get by with a single sticker? And why is trans-shipment not possible for the private sector without having to go through Customs twice?

Overall, there is a danger of the DTI protecting the Post Office from the Department's own competition policy. Not content with smothering competition at home, it seems that the Post Office is setting out to stitch up the European market with its counterparts in other EC countries. Its purpose is to keep out unwanted competition from the private sector. Our couriers have lodged a formal complaint with the Commission, and it seems likely that the Post Office will be singled out as the leader of an anti-competitive ring. I am sure that my hon. Friend the Minister will not defend that, and I trust that his Department has submitted evidence in support of the couriers' case.

We also await, I believe, a European green paper on postal services. Its purpose is to consider whether a postal monopoly should be permitted. Again, I hope that the Government are resisting this idea with their customary vigour. We should instead be putting forward a regime of developing competition, based on 1981 steps that were found so successful, and the steps that I hope my hon. Friend will be able to announce for the British market.

With 1992 on the way, the Post Office and its British competitors ought to be competing for business throughout Europe. I am sure that private sector firms would be eager to do so, but, sad to say, the Post Office seems to want to stay at home and put up the shutters.

Britain can be proud of its postal achievements in the past and it can be proud of the success of the express service industry, public and private, that has resulted from the Government's deregulation in 1981. We need the same success for the post. Perhaps the Monopolies and Mergers Commission should have a look at the postal monopoly—it seems to be looking at everything else—but, meanwhile, I ask my hon. Friend to make market sense of the exemption level and reduce it to 50p.

Finally, as a postcript, will my hon. Friend explain why we perpetuate a unique restrictive practice within our own Palace of Westminster? If a courier delivers here, every envelope must have a stamp in addition to the cost of the hand delivery. That is one Post Office monopoly at which even the Post Office must blush with embarassment. I suggest that we consign it to the history books.

2.48 pm
The Minister for Trade (Mr. Alan Clark)

I am glad to have this opportunity of standing in for my hon. Friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs to reply to the cogent and effective speech made by my hon. Friend the Member for Battersea (Mr. Bowis). The House well knows that he has a long record of attention to the failings of the Post Office and of vigorous action on behalf of his constituents and other consumers to try to correct them. As recently as February of this year he set out his views in a speech introducing a ten-minute Bill. No person could honestly deny sharing many of the feelings that he has articulated, either in principle or from personal experience.

Equally, we must recognise that the Post Office is more than just another nationalised industry. The length of time for which it has been in existence, its pioneering role in world postal services and its historical links with the Crown make it a national institution. Its services are available to all members of the population and all have an interest in securing its efficient and effective operation. We often take for granted aspects of it which are far from the norm in other countries. We have the privilege of letters and parcels being delivered to our doors, wherever in the United Kingdom we live. That involves calling on more than 23 million private and business addresses.

Moreover, since Rowland Hill established the penny post in 1840, we have had a universal tariff so that it costs no more to send a letter from Lands End to John O'Groats than it does to send one from my hon. Friend at Westminster to his constituency in Battersea. However, my hon. Friend raised an interesting point about the cost of rural deliveries, which I had not heard, but we shall certainly take it into account. It defies ready acceptance that it should cost less to send a letter from London to Caithness than from London to Battesea, but I should certainly welcome further information on that.

It is not widely realised that there is no statutory obligation on the Post Office to charge a single tariff for all letters of the same class and weight, irrespective of the distance carried; but it has always done so as a matter of custom and practice for the past 150 years, although it is argued that such equality of treatment is uneconomic.

Mr. Bowis

I wonder whether the same principle is applied to the parcels service where there is competition and therefore a better public service.

Mr. Clark

Parcels are delivered all over the United Kingdom at the same cost. The price varies only in relation to their weight and in some cases to their size, but the tariff is universal whatever the distance.

Since it ceased to be a Government Department and became a public corporation some 20 years ago, the Post Office has transformed itself into a profitable organisation, run on commercial lines. It has had a sustained run of profitability for at least 10 years. In each of the last two financial years it made profits of well over £100 million. It has managed to sustain that high level of performance while maintaining letter tariffs which compare very favourably with those of other European countries, some of which do not even aim to provide such a high basic level of service. That improved performance, and the economic recovery of recent years have combined to create a rapid increase in demand for postal services during the past 10 years.

Mrs. Gorman

My hon. Friend has just put forward an argument for the retention of any monopoly. Any monopoly can produce what it calls a competitive price, but how do we know whether that price is competitive when there is no competition?

Mr. Clark

I do not know whether I mentioned a competitive price. However, it is perfectly true that it should not be hard for monopolies to produce profits. At present, the Post Office handles some 46 million individually addressed letters every day. In the course of 1987–88 it handled 40 per cent. more letters than it had done a decade ago, and 25 per cent. more parcels, with growth—particularly in letter services—expected to continue. That growth has undoubtedly presented a challenge to Post Office management and employees in terms of meeting the need simultaneously to maintain and improve quality of service and targets.

Against that background, there has been an unfortunate rise in the level of disruption by the work force. There has been a high level of localised disruption, often an unofficial response to changes in working practices. In the financial year 1988–89 there were 278 disputes in Royal Mail Letters, resulting in the loss of more than 1 million working days. Industrial action on that scale has had an impact on the Post Office's financial position, the volume of business it handles and the quality of service to the consumer. The strike had an effect on letter delivery performance that far outweighed the duration of the strike—or at any rate it uses that as an excuse. In the previous financial year, 1987–88, letter delivery performance improved to its highest ever level—an average of 88.7 per cent. of first-class letters met the Post Office's target of being ready for delivery by day B, the day after date-stamping, with approximately 95 per cent. of second-class letters ready for delivery by day D, the third day after date-stamping.

Those figures fell short of the Post Office's letter performance targets of 90 per cent. ready for delivery by day B for first-class letters and 96 per cent. ready by day D for second-class letters. The strike affected first-class letter performance in particular for some months. This year's performance has sunk below the level that I mentioned earlier.

Perhaps more important, the small print of those criteria refers to "ready for delivery", which is not the same as "delivered". It is a let-out for the Post Office, which possibly explains the fact that it manages to discharge its functions up to the target that it has given itself of up to 90 per cent. It may explain why, in our experience, first-class letters are unreliable almost to the point that one can no longer use them for any serious transaction and assume that one's correspondent will receive the news or document within 24 hours.

The undertaking that second-class letters will be ready for delivery by day D is a pretty feeble target. Irritatingly, it is widely rumoured that second-class post is often not delivered, even when it is ready to be delivered and no first-class post is standing in front of it, simply because, I am searching for a euphemism but am forced to fall back on the adjective "bureaucracy", says that it is within the target that they should be delivered on day D and therefore they must wait until day D.

The letters business employs 160,000 staff. The Post Office has been experiencing difficulties over the past 18 months recruiting and retaining staff in areas in which demand for labour is high, which has had an effect on the efficiency of its service.

Mr. Bowis

My hon. Friend has listed the Post Office's delivery problems. Some hon. Members have been raising such problems for years. I refer my hon. Friend to when the matter was raised with my right hon. Friend the Prime Minister, who said: The Post Office has a monopoly and if this kind of thing continues we shall have to consider … reducing the monopoly threshold from the present level of £1."—[Official Report, 1 December 1988; Vol. 142, c. 871.] That was December and we are now in May. Is it not time to act?

Mr. Clark

The speed with which my right hon. Friend the Prime Minister moves is sometimes subject to criticism. If my hon. Friend wishes to press her to act more speedily, I suggest that he takes advantage of the bi-weekly occasions when she answers questions.

My hon. Friend's most recent intervention illustrates the fact that there are those who argue that the only way in which the Post Office can be efficient and genuinely responsive to consumers' needs is to subject it to a greater degree of competition by abolishing its statutory monopoly over the conveyance of letters and/or subjecting it to market disciplines through privatisation.

Some increase in competition could be achieved by reducing the current £1 monopoly threshold. Plainly, to take it as far as the standard minimum tariff or below would effectively eliminate the monopoly. But we do keep under consideration the topic of a further reduction in the threshold and, were specific proposals to be made, this is a subject on which we should be obliged to consult the Post Office—that is to say, the board and the chairman. We have also reaffirmed on several occasions our readiness to suspend the monopoly in the event of industrial disruption which resulted in a serious decline in the quality of the letter service.

My hon. Friend has referred on previous occasions to the privatisation of the Post Office. My right hon. Friend the Prime Minister said during the last general election campaign that privatisation of the Royal Mail was not contemplated because of its special character. What I have said about the role of the letter service in the community bears that out, I hope. However, there are other aspects and functions of the Post Office that are generally understood to be outwith the definition of the Royal Mail.

I hope that my hon. Friends will be able to draw some encouragement from what I have said. I leave it to them to interpret it, using their own decoding devices. The Post Office's performance and the measures that it is taking to improve its quality of service are being watched closely and will be valuable as testimony in helping us to decide what further developments are in the best interests of the community and the consumer. I reassure the House that we are constantly considering practical ways in which to encourage the Post Office to become even more efficient and to provide an even more effective service.

Question put and agreed to.

Adjourned accordingly at two minutes past Three o'clock.