HC Deb 01 April 1993 vol 222 cc653-68 2.30 am
Mr. John Marshall (Hendon, South)

I ask the leave of the House to speak for a second time this evening, as indeed have two Opposition Members. I hope that the House will be as kind to me as we were to the hon. Members for Hampstead and Highgate (Ms Jackson) and for Newham, North-West (Mr. Banks).

First, I pay tribute to all those who work for the Post Office. One of the highlights of my annual political year is going every Christmas to see those who work at the Golders Green sorting office. They are among the most friendly and hardworking of people. They have to work the most anti-social hours, but they are for ever cheerful. They are well regarded by those to whom they deliver letters. They also seem to have a good political bias, because most of them tell me that they vote for me.

Dr. Norman A. Godman (Greenock and Port Glasgow)

They would, wouldn't they?

Mr. Marshall

Constituents do not always say that when one talks to them. I am sure that, even in Greenock and Port Glasgow, they do not always tell the Member of Parliament that they vote for him.

The Government have already privatised part of the Post Office which they inherited in 1979. I want to talk about Post Office Counters Ltd and the Royal Mail. The Government have already developed some franchised offices of Post Office Counters, instead of Crown offices. In my observation, that has frequently led to several advantages. The first is that the hours of opening of the franchised operations are often longer than those of the Crown offices. I do not think that there is a Crown office in the country which opens after 1 pm on a Saturday. The franchised operations almost all open on Saturday afternoon and later at night than many of the Crown offices. Those longer hours are obviously much more convenient for the customers than the rather restricted hours that Crown offices offer.

The second advantage of franchised operations is that they offer a wide range of goods for the customer. In my constituency there is a franchised operation in Temple Fortune. The lady who runs it, Mrs. Lim, offers a much wider range of goods. She sells cards, stationery and other things which previously would not have been sold when it was a Crown office. She has transformed a neighbourhood post office into much more of a neighbourhood convenience store.

Earlier today—in the parliamentary sense—I entertained some constituents for tea in the Pugin Room. They talked about the former Crown post office in Lyttleton road in my constituency, which has been transformed by being made into a franchised operation slightly further along the road. They said that they now received a friendly service. The person who runs the post office recognises all the customers by name. If they turn up slightly after closing hours, he is still open and will still serve them. They get a much better deal from him than previously from the Crown office. Another post office in my constituency used to have a big mausoleum of an office above it. When it became a franchise operation, the franchisee said that he did not need the office and could let it out to someone else who could use it and provide jobs.

We have found that when offices are franchised there is frequently a hell of a row in advance, because people in Britain do not like change, but once that change has happened they recognise that the new office is giving an even better service than was given before, and it is to the advantage of all those who use that operation. If Post Office Counters were to stay indefinitely in the public sector, it would, I believe, face a gentle decline and find it very much more difficult over the years to continue to offer the sort of service that people expect.

One of the major forms of activity at present is paying out pensions and child benefits to claimants, but I believe that increasingly people will not want to go to the post office and collect the cash; they will want the money paid into their bank accounts. After all, it is only relatively recently that wage earners have received monthly payments into their bank accounts rather than weekly cash payments. If we expect people now to get their wages and salaries paid into their accounts, we should not be surprised if pensioners and mums want their social security benefits paid into their bank accounts rather than having to collect them in cash every week. There is also a perfectly sensible security argument for encouraging that. If a lot of cash is kept in a post office, it is much more likely to be the subject of a raid by robbers than if there is somewhat less cash there.

We have to recognise that the service provided by Post Office Counters to its customers will be very much better if the offices go into the private sector than if they stay in the public sector. If they stay in the public sector, the range of choice that they offer will not be increased, whereas if they go into the private sector they will offer a better choice and longer hours of service to the customer, and eventually they will create many more job opportunities for those who work in them, and offer much more sustainable jobs.

We should also look at some of the Crown offices which occupy wonderful sites in main high roads. Under the present financial arrangements, if the Post Office redevelops those sites, the money flows straight back to the Treasury, so there is no financial incentive for the Post Office as currently constituted to earn the property profits that it might well be able to earn if it were in the private sector. It also sometimes lacks the property expertise. There is an unanswerable case for all the Crown offices to go into the private sector, where they will thrive as small businesses with an entrepreneurial skill and flair that they often lack at the moment.

With regard to the Royal Mail, I listened earlier this week to the "Today" programme, or whatever it is that the BBC churns out at 6.15 in the morning, and the views of the hon. Member for North Cornwall (Mr. Tyler) who, like all Liberals, has missed this Adjournment debate and every Adjournment debate before it—one wonders where they are. Perhaps the rail strike has sent the hon. Gentleman to Cornwall; that will no doubt be the excuse.

Listening to the hon. Member for North Cornwall talking about the potential impact on the quality of service of the possible privatisation of the Royal Mail, one had to sit back—if one can sit back at 6.15 in the morning—and wonder if we had not heard all this before. Was it not the sort of nonsense that we heard when British Telecom was being privatised in the early 1980s? We were told then that the quality of the payphone service would only get worse if it was privatised.

What happened? Payphones did not work very well in 1983, but today there are many more payphones and virtually all of them work. Those who say that if we privatise the Post Office and the Royal Mail the quality of service will decline should consider the example of British Telecom. The fears that were expressed when it was privatised turned out to be groundless. Rural telephone services have thrived, just as rural post offices would thrive under privatisation. The overall quality of service supplied by British Telecom has improved.

Similarly, those who run the Post Office believe that there is a case for increasing the level of investment in it. Mr. Cockburn who runs it would like to increase his investment substantially, but I fear that so long as the Post Office remains in the public sector the level of investment will be artificially held down. Privatised industries can increase their investments as soon as they are released from the financial constraints of the Treasury and are able to raise money on the international capital markets.

I remember listening to debates in 1988–89 about privatisation of the water industry. We were told that the industry needed more investment and therefore should stay in the public sector. One might say that argument did not hold water As soon as the water industry entered the private sector, the level of investment increased, as it did with British Telecom. There has been a 50 per cent. increase in investment in the water industry and a magnificent increase in investment in British Telecom. In Cable and Wireless we have seen investment in a service designed to compete with British Telecom. That would never have happened if both companies had remained in the public sector. The answer to those who say that the Post Office needs an increase in investment to become more competitive and efficient must be to remove the postal services from the state sector and put them into the private sector.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

Does the hon. Member accept that the new chair of the Post Office, Mr. Heron, in his evidence to the Select Committee only a few days ago, drew attention to the need for his investment programmes to be free of the present restrictive controls that the hon. Gentleman is rightly criticising? He also said, however, that formulations other than privatisation could give him freedom of investment and access to the capital markets. The hon. Gentleman may be in favour of privatisation, but does he accept that there are other options which would give the Post Office its freedom of investment?

Mr. Marshall

It is terribly easy for those who run a nationalised industry to say that there are other ways to raise money while remaining in the state sector, but we have to consider the Government's borrowing requirement. If the Government were to let rip with the Post Office and introduce some new, ingenious system of financing which meant that they could give it more money, that would not do very much for international confidence in Britain or for confidence in the City and elsewhere in the Government's financial policies. The only effective way to achieve a substantial increase in investment in the Post Office is to put its services into the private sector.

In a labour-intensive business such as the Post Office, it is important to look at the record of productivity. Productivity growth in industries which have been privatised, such as British Steel, British Telecom and the electricity and gas industries, improved massively once they were in the private sector. If we were to apply a similar test to the Post Office, we would find that productivity would increase substantially. Of course we shall be told by existing management that it cannot be done; that is what they said about British Telelcom and British Steel—but as soon as they got into the private sector it was done.

Mr. Cousins

Does the hon. Gentleman accept that the evidence, which is attested to by accountants and certified in every way possible, proves that in the past five years productivity in the Post Office, under its existing management, has already increased by 30 per cent.?

Mr. Marshall

It is nice of the hon. Gentleman to point out that under the Government productivity in the Post Office has increased significantly. I thank him for doing that. If one looks at other industries which have already been privatised, however, their record of productivity growth has been even more rapid. I cannot believe that there is not significant scope for increasing productivity still further in the Post Office, given that it has been in the state sector for such a long time.

The opponents of privatisation will ask, "What about pricing?" The history of privatisation has shown that the regulators are even more effective than Ministers in controlling prices. The person who controlled Sir Denis Rooke was not a Minister with responsibility for fuel and power, or the Secretary of State for Energy, but Sir James McKinnon of Ofgas. The regulators are much more likely to be successful at screwing down prices than any Minister, even my hon. Friend the Parliament Under-Secretary of State for Technology, who has appeared diligently this evening to answer the debate.

The life blood of economic progress is a free market economy, based on strong competition. The Post Office is particularly fortunate in the sense that it has been almost absolved from competition. My hon. Friend the Minister should consider the competitive barriers erected against those who seek to compete with it. The private couriers who seek to compete with the Post Office for the dispatch of goods overseas find that, unlike the Post Office, they pay value added tax. I am not suggesting that VAT should be imposed on postal services, but the Government should consider such unfair competition and bias in favour of the Post Office.

My hon. Friend should also consider the restrictions on price competition. Potential competitors with the Post Office must charge a minimum price four times greater than the price of a first-class stamp. It should not be too difficult to remove that barrier quickly.

I apologise to my hon. Friend and to the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) for keeping them up, but the issue is an important one. The Post Office serves every household and it would serve people and industry more efficiently if it were in the private sector.

2.47 am
Mr. Jim Cousins (Newcastle upon Tyne, Central)

I congratulate the hon. Member for Hendon, South (Mr. Marshall), not so much on his ill luck in ending up with this time of night for the debate, but on having such a debate. I congratulate him on his excellent judgment in choosing a topic on which debate is long overdue.

The last time that the Minister and I engaged in such a debate was at a similarly unfavourable hour. I then asked him when we might expect the results of the Government's review of the Post Office. He replied—he will put me right if I give a false impression of it—to the effect, "We've had the Post Office for 350 years, so, if we take a lot longer, it won't really matter." At the time, and given my sunny and jovial disposition, I did not contest that proposition. With hindsight, however, I should have done, because the Government have dithered and delayed on that review for far too long.

Hon. Members will recall that, on 15 July 1992, the Government announced to Parliament their intention to privatise Parcelforce. The hon. Member for Hendon, South did not occupy himself with that matter, and I understand that. However, it is an important part of the Post Office's activities. On 9 July 1992, after Parliament had gone into recess, the President of the Board of Trade chose to announce by press release his intention for a wide-ranging review of all the Post Office's activities, including the possibility of privatisation.

When we debate the subject again, the House may want to recall that the Government did not choose to make that announcement to Parliament, but, in a cavalier fashion, chose to make it when Parliament was in recess and to do so in the form of a press release. Over an important issue of this sort—I share the views of the hon. Member for Hendon, South about its importance—it was unfortunate and wrong that the Government should have chosen to make the announcement in that fashion, rather than in the form of a statement to Parliament.

What is still more worrying is the fact that no report has yet been given—from 29 July to the present day—about the course, progress, options or more precise details of the matters that are covered by that wide-ranging review of the Post Office. That shows a great disregard for the significance of the issue and it is a further discourtesy to Parliament. The time is long overdue for the Government to come clean about their views on the matter, and to end the muddle and delay that have set in. In the hearing in front of the Select Committee on Trade and Industry, to which I have already referred, the chair and the chief executive of the Post Office both described the difficulties that that fact was causing in the management of their business.

The Post Office is not a dead, fixed institution. Its activities, and the way that they are organised, are constantly changing and being adapted. There is always the possibility of new services developing. The hon. Member for Hendon, South took the view that the Post Office was not subject to competition, but clearly it is—both to competition at home and, importantly, abroad. At the same time as the Post Office review has been taking place, there has been a discussion within the European Community of the liberalisation of postal services markets throughout Europe. The Government have never reported back to Parliament on the progress of their review of the Post Office in Britain and, as a consequence, they have not reported back to Parliament on the progress—and their own view—of the liberalisation of postal services markets as part of the developing single market of the European Community. Both those matters are the source of great concern.

It was made entirely clear to members of the Select Committee—of all parties—that the delay and uncertainty were causing the Post Office's investment programmes to be thrown into some confusion. It was made clear that the Post Office's posture on the development of new services was being frozen and delayed. It also became obvious that it was being made impossible for it to develop a proper, commercial reaction to competitive pressures—both the existing ones and those that will soon develop when there is a single market for postal services—because of the Government's failure adequately to determine the matter.

The issue does not rest there. The President of the Board of Trade has given some comments—not to Parliament, but to Radio 4. He gave them not at 6.15 am, but at the far more gentlemanly hour of the lunchtime Radio 4 news programme.

I have here a transcript of the remarks made by the President of the Board of Trade on 1 February to the Radio 4 lunchtime programme. He referred to his press release of 29 July, which was just over six months' behind him. Therefore, in those remarks, he is reporting and rehearsing the product of six months—an enormous time in Government terms—of systematic investigation of the Post Office review, and commenting with the benefit of over £500,000 of private professional advice that had been obtained from a variety of sources, including Kleinwort Benson, Price Waterhouse and KPMG Peat Marwick.

Incidentally, in a parliamentary answer to me, the Government made it clear that that advice is not to be shared with Parliament. I hope that the Minister will give us some assurance that when the review is finally concluded, and the Government's preliminary proposals are made known, the House will be able to share in a scrutiny of that advice. That would be part of the trend towards openness in government, which we welcome. The President of the Board of Trade is making known publicly his advice on other matters, and it is important that he should make it known to Parliament on that matter as well.

He said when asked whether he was still consulting The position is precisely that and I have not taken any decision myself as to where we move from there. I haven't got papers actually in front of me that I could put to colleagues. Colleagues have therefore not been consulted or involved in that process and my preoccupation is to make it absolutely clear that whatever we do there will be a nationwide delivery network with delivery to every address and that there will be a uniform and affordable structure of prices with a nationwide network of post offices. That is what I said at the time. We are looking at options and when The Post Office and my officials come to me I will decide what I think should be the next step. After six months, and a comprehensive invitation of views and opinions from a wide variety of sources, after the expenditure of £500,000 of public money on private professional advice, we have the poor President of the Board of Trade patiently waiting for the Post Office and his officials to come to him so that he can decide to make up his mind about the issues involved in a process that he launched. That is not good enough. The time has long since gone when the President of the Board of Trade should have formed some opinion about those matters.

It may be that forming an opinion about those matters is not as simple as or uncomplicated as the President might have supposed when he set out on that review. In that case, he must be in a position to come back to Parliament, and if he cannot determine an exact course of action on those matters, he should at least set out a range of coherent alternatives from which he proposes to choose. Those difficulties, the range of the choices, appeared, perfectly properly, in the speech of the hon. Member for Hendon, South. He said that there was the possibility of franchising some of the activities, most specifically in the context of Post Office Counters Ltd. He spoke of privatising—whatever that may mean—the Post Office. It was not clear whether he meant that it should be privatised as a single entity or separate ones—as counters, parcels and Royal Mail. The franchising process to which the hon. Gentleman drew attention seemed to imply that there would be an entity that would act as the franchiser of the franchised services.

These are all practical matters. All the time, sub-post masters and mistresses, new and old, are investing their money in property and facilities and in buying the right to operate post offices when there is uncertainty about what the Government intend for the organisation of the various services. The uncertainty was not resolved after six months, on 1 February, and now over eight months have passed since the review process was set in hand.

We hear rumours. We are told that the Under-Secretary flits about interested Conservative Members presenting a variety of fantastical, chimerical and labyrinthine possibilities. He goes this way and that. The hon. Gentleman is becoming a member of the no-comingforward group.

The world shares in the fruits of some of the Minister's discussions. Rumours of the Minister's latest idea for the mechanics of the privatisation of the Post Office seep out. Wondering people receive the tiny scraps of information, sometimes with interest and usually with amazement. That is not the way to proceed.

We are talking about more than a state-owned operation. Through Post Office Counters, there is an operation that involves tens of thousands of sub-post masters and mistresses, who are business people and property owners. They have their own small investment programmes. They are not included in the external financing limit, I know. Their programmes are usually with their banks. It is not right, fair or proper that these tens of thousands should still be in a state of uncertainty, awaiting the next insight into what the Government's thinking might be by third, fourth or fifth hand from bits of information that leak out from Government circles.

The time has come for the Minister to declare alt least part of his hand. We are talking about more than the potentially global competitive business that we have in the Post Office. The hon. Member for Hendon, South has thrown doubt on its record of commercial success and productivity, but I hope that he agrees that the Post Office is accepted among the public postal services operators of Europe as being by far the most efficient. It is also by far the most cost effective. It is recognised that it offers the best deals on prices.

There is a huge possible postal market. If the Post Office were free to do so—if it were unshackled from the EFL and knew where it stood within the Government's policies—it could become an extremely important and rapidly growing business. We should be planning its success in the postal markets of Europe, which would lead to success for other British businesses engaged in direct mail and publishing. Such businesses work in parallel with the business of the postal services. As I have said, these are important matters. There cannot be total uncertainty for much longer.

We are talking about a business with an annual turnover of £5 billion. It has net assets of more than £2 billion and it employs 200,000 people. It has operated free of subsidy. We are at the start of the 18th year of subsidy-free operation of the Post Office. Far from the Post Office being a burden on the Government, the Government, in their own expenditure planning, intend to increase the negative EFL by more than 250 per cent. in the next two years so that the Post Office will be expected to make, through the EFL system, a contribution of more than £350 million over the next two years to the Government's own accounts.

The Government have chosen to load at least £200 million of extra negative EFL revenue, and to raise that from the Post Office—when the Government themselves have not come clean on their own proposals for the Post Office and its operations over that period. No commercial operation could possibly succeed in that commercial context. The EFL system is not to be compared with a profit system. The EFL is declared in advance—a target set for the Post Office three years ahead of the turnover and commercial operations under discussion. That is a heavy burden to lay on the Post Office at precisely the same time that an open-ended review that has now lasted for more than eight months is in hand.

No sensible public service or commercial operation could reasonably be expected to perform in that kind of context. Even so, the Post Office is continuing to perform and to deliver what the Government want in terms of a negative EFL.

The new chairman of the Post Office, Mr. Heron, made it crystal clear that he does not consider his remit at all reasonable. He challenged head-on, and rightly, the working of the negative EFL system as it applies to the operations for which he is responsible. The Minister must pay some regard to that. If he cannot say where the Government are going with the Post Office review, at least he should respond to direct criticisms of the negative EFL system made by the Post Office's new chair—who described himself as living in a cash book culture that belongs more to the Victorian age. He made the point that that is not a sensible approach for an organisation that should be seeking to develop its activities, and to respond to possible new markets, competitive pressures and the huge opportunity presented by the single market for postal services with new investment programmes.

Mr. Heron made it clear also that a system that requires those investment programmes to be financed in effect out of revenue, which is the working of the negative EFL system, is simply madness.

The Government's autumn statement made it clear that it would be possible for public organisations to go to the private financial markets to raise their capital in a commercial way—yet the Minister made it clear that that new freedom is not to be extended to the Post Office. In the context of the position clearly adopted towards the negative EFL system by the Post Office's new chair, that aspect is one to which the Minister might well direct his thoughts.

The hon. Member for Hendon, South mentioned the use of the Post Office network, which is larger than the combined network of all the banks and building societies, and has more customers. He said that in future people would opt for the important part of post offices' business—handling the payment of pensions and benefits—to be dealt with by automatic credit transfer into their bank accounts.

Clearly that is a growing trend, which may develop as a result of the availability of choice. It is also clear, however, that the Government may well intend to force the hand of those who are receiving pension or benefit payments for the first time, persuading them to choose cash transfer rather than payment through the Post Office. That would be a betrayal of those who operate the Post Office Counters network, most of whom are private business people rather than trade union employees or any of the other figures that the Government like to set up.

We must know the direction in which the Minister thinks the Government are going. Does he intend, by negotiation with the Department of Social Security, to allow free choice, or does he intend the Department—by means both direct and surreptitious—to structure choice so that business moves away from the Post Office Counters network?

We do not yet have the transcripts, so I cannot quote from them; but, when the Post Office's director of finance spoke to the Select Committee a few days ago, it was clear that his evidence did not make sense unless he was ignorant of any proposed change in the Department of Social Security's policy in regard to benefit payments through the Post Office network. It now seems, however, that all along the Government have had some plan—a cost-saving plan, perhaps, from their point of view—to structure choice in the way that I have described.

It would be interesting to know whether the Minister was party to the intragovernmental negotiations—whether he was aware of the possibility, or whether, like the Post Office's director of finance, he was operating on the basis that matters would continue according to the present trend, and would not be artificially twisted in some new direction.

I hope that the Minister will give us some idea of the Government's stance on a number of matters, some of which are also of concern to the hon. Member for Hendon, South. There is the question of social security payments through the Post Office network, and the negotiations with the Department of Social Security; there is also the question whether the private professional advice sought by the Government in the last financial year, at great expense, will be sought again in the new financial year on which we have just embarked, involving extra expenditure.

The Minister may not be able to tell us what the options are, but at least he may be able to tell us that there are options—that the President of the Board of Trade has emerged from the period of extraordinary passivity during which he has waited patiently to be told what to say by his officials and those of the Post Office. Have we passed that stage? Are there at least options on paper? Are the right hon. Gentleman's Government colleagues being consulted? How near are we to ending the current prolonged delay? It is not right in terms of parliamentary convention; nor is it fair to the business people whose lives are committed to Post Office services, or to the huge potential business in the Post Office.

The Government have already taken eight months over this matter. Therefore, the Minister ought at least to be able to tell us for how long the Government will allow interested parties, the businesses involved and the British people to mull over whatever conclusions the Government reach. The Government have already taken eight months. They may take nine months, or even longer. The period may stretch into the autumn, unless there is to be a press release the day after Parliament rises for the summer recess announcing the conclusions of the review, thus repeating the very unfortunate and wrong procedure under which the review was started. Will the British people be given an equivalent period of time in which to mull over the very complicated issues involved, so that they can form a proper view about whatever options the Government may put forward?

These are serious matters. We are not talking about a failed public enterprise which is dominated by militant unions, which has had no commercial success and no record of productivity. We are talking about a very important business which has a record of productivity and commercial success and whose operations are directly linked to the operations of tens of thousands of small businesses, which are a structural part of that public enterprise. Much hangs on the review. The time is well past, in every sense of the term, for the Minister to tell us about the Government's view on these matters.

3.16 am
The Parliamentary Under-Secretary of State for Technology (Mr. Edward Leigh)

I thank all those hon. Members who have taken part in the debate. I pay tribute to my hon. Friend the Member for Hendon, south (Mr. Marshall) for making this debate possible and I join him in paying tribute to the staff of the Post Office. It is not often, despite the very long hours that we keep in the House, that we beat Post Office staff out of bed, but as we speak, at 3.16 am, the wheels of that mighty organisation are turning so as to ensure that about 60 million letters are delivered, most of them on time. We should be grateful to the 200,000 members of staff of the Post Office for the dedicated work that they do on behalf of us all.

Since no decisions have yet been taken on the future organisation and structure of the Post Office, I shall have to disappoint the hon. Member for Newcastle, Central (Mr. Cousins) and tell him that I am not yet in a position to announce what the future will look like. It is an important policy area and we are considering a number of factors. However, I should like to address the framework within which the Post Office, whatever the outcome of the review, will operate.

Some people argue—I note that this is the opinion of my hon. Friend the Member for Hendon, South—that the Post Office should be changed, denationalised and demonopolised and that postal markets should be set completely free. They argue that this is the only way in which consumers can have real choice. Others are asking, however, why we are reviewing the Post Office at all. There are people who say that the Post Office should be left well alone, including—as one might expect—Opposition Front-Bench Members.

Mr. Cousins

I do not wish to be misunderstoood on this point. I made it crystal clear in my speech that we want the Post Office to be taken out of the constraints of the negative external financing limit system.

Mr. Leigh

I am grateful to the hon. Gentleman for saying that. I am also grateful for the advice that he has given us on the workings of the negative EFL system. I take it, therefore, that he is one of those who accept that it was right of the Government to undertake this review. I shall be delighted to give way if the hon. Gentleman wishes to intervene to say that we were wrong to do so.

Mr. Cousins

I am most grateful to the Minister. A review was certainly necessary in the context of the commercial possibilities of the British Post Office in the European Community, especially in view of the discussion about liberalisation of postal markets throughout the Community, but that need not have taken the eight months that the Government have already spent—and on the basis of what the Minister has said tonight, it seems likely that many more months will be required.

Mr. Leigh

This is a very complex matter. The hon. Gentleman has mentioned the current review. In fact, the Commission is working extremely slowly on this matter, which is highly complex. Its report is still in draft form. Given the complexity of the Post Office, an eight-month review is not over-long. We are listening to a very wide variety of views and are conducting a very thorough and careful study. I am sure that hon. Members recognise that that is the right thing to do.

The Post Office has made great strides in the last few years—certainly since my hon. Friend the Member for Hendon, South last raised the subject, in an Adjournment debate in June 1990. The House will want to pay tribute to my hon. Friend for the very close interest that he has taken in these matters and the great skill and knowledge that he brings to them.

I will reiterate why we are conducting a review of the future organisation and structure of the Post Office. As my right hon. Friend the President of the Board of Trade said on 29 July last year. The Post Office is facing a period of considerable change. Post Office Counters faces growing competition in a number of its markets. Royal Mail no longer has a monopoly over express products and unaddressed mail. Its direct mail services face competition from other forms of advertising, and competition from the telecommunications sector is ever-growing. Indeed, there is a growing interest world wide in the potential advantages of freeing up postal markets.

The hon. Member for Newcastle-upon-Tyne, Central informed the House about these new opportunities. The time has arrived to consider the potential impact of these changes on the Post Office and, in particular, whether its current organisation and structure should remain as they are. We have to pose the question: "Could the consumer and taxpayer get a better deal?" That is the whole purpose of the review. In short, it is not enough simply to rest on our oars. I am sure that, whatever disagreements we may have, we agree about that.

I must stress that, when my right hon. Friend the President of the Board of Trade announced the review, he emphasised that the Government remain committed to a nationwide letter service, with delivery to every address in the United Kingdom, within a uniform and affordable structure of prices, and with a nationwide network of post offices. He said then, and I repeat now, that those commitments are not negotiable and will remain at the heart of public policy towards the Post Office. All the alternative ownership and structural options are being examined with this in the forefront of our minds. Any reform must satisfy those non-negotiable commitments.

With regard to Royal Mail, I should like to dwell in a little more detail on the non-negotiable commitments to which I have already referred: a universal letter service, within a uniform and affordable tariff structure. A universal service commitment clearly means a delivery every working day to every address in the country. Royal Mail will continue to provide this. Indeed, in most areas of the country there are two deliveries a day, so the commitment is currently not only met, but exceeded.

The Government are committed to an affordable uniform tariff structure. But what is a uniform tariff? Self-evidently, a uniform tariff does not mean that every piece of mail will cost eactly the same to send.

Mr. Cousins

Let me recap. We are trying to put straws together to make a house. What the Minister has just said is of some significance. Does he regard a second delivery each day—a unique feature of the British system—not as part of the universal service but as some optional extra that could be negotiated away?

Mr. Leigh

A second delivery is not available to all households in all parts of the country, but I think that the House is well aware what a universal service obligation means. We shall ensure that it is met.

I was dealing with the tariff structure, which is of interest to the House. Charges may vary with weight steps, and there are discounts for pre-sorting. What we mean by a uniform tariff is that we will not allow the Royal Mail to adopt any form of zonal pricing. It will cost no more to send the same article from the Scilly isles to the Shetland islands than it will to send it from Hendon to Golders Green. When considering the future of the Royal Mail, we asked how best we could satisfy the fundamental social concerns over universal service at a uniform tariff and make things better for consumers.

There are essentially three major issues for the future of the Royal Mail the competitive structure, the regulatory environment, and the question of ownership. I shall speak briefly about each, as they have formed the main concerns for the future environment in which the mail services of the Post Office will operate.

We believe that the right competitive environment is essential for improving services to the customer, and we began the review with an examination of whether any market restrictions are necessary to ensure a universal service and a uniform tariff structure.

Some have argued that no restrictions are necessary—my hon. Friend may hold that view—that we should allow free competition to enable the most efficient operator to exploit economies of scale, and that we would still be able to offer a universal service at a uniform and affordable price. Indeed, I hear my hon. Friend make these points about the monopoly and argue that the only way to have a Post Office which is efficient and genuinely responsive to consumers' needs is to subject it to full competition. I am always keen to examine the potential scope for liberalisation, but I have to say that I do not think that full deregulation is appropriate here. Some routes would be inherently unprofitable, and a free market would not provide them at an affordable price.

I represent a rural constituency, and I am sure that the House will recognise that I of all people want to ensure that rural areas are not disadvantaged in the future. The Government believe that the outcome of such a free-for-all, at least for some users—I have in mind especially those living in rural areas—would be higher prices and a poorer quality of service. We therefore reject a free-for-all.

Others have argued that we should permit the entry of more than one firm into the monopoly area, provided that they also have an obligation to deliver mail to every address in the country. The argument here is that the efficiency gains which will emerge as a result of competitive presssure will be beneficial. This is theoretically attractive and is certainly not ruled out, but we need to be careful. There is a possibility that the loss of economies of scale, particularly at the delivery end, would lead only to higher costs. We must therefore consider these matters carefully.

However, I am certain that some increased competition is possible and desirable. The question then is what competition we can introduce while protecting the social commitments. We are already committed, as part of the citizens charter, to reducing the current £1 monopoly to a level nearer the price of a first-class stamp. My hon. Friend made a particular point about that. But what should the monopoly level be? Again, there are a number of views, and I am not in a position to say what we will do.

The second way of introducing competition into postal services is less direct, but may be just as significant in the long run. It is known, in the usual appalling jargon, as "downstream access". In the citizens charter, the Government proposed to extend the current range of discounts for users such as those who pre-sort their mail. Further discounts will be available to those who also trunk their mail to the final delivery office. Discounts might also be extended in the future to third party consolidators.

However, it would again be important to ensure that this did not weaken Royal Mail's ability to deliver the universal service and uniform tariff. I am sure that there are ways of introducing competition while still protecting the universal service and uniform tariff, and that is what we shall attempt to do, because it is only as a result of competition that we shall ensure that we get a better and better service.

To sum up on competition, we shall consider only proposals which do not in any way endanger the social commitments that we have made. We shall proceed on the basis of known effects, step by step. I reassure the House that we shall not introduce change for the sake of change.

Mr. Cousins

Clearly a major retreat is taking place, and it is causing the Minister some embarrassment. None the less, the retreat is in the right direction, so we welcome it. When the review is concluded, and the results are shared with the rest of us, will there still be options to be taken and resolved? Will the Minister have advanced and completed all those step by step stages that he mentioned, or will there be a concluded package? When the review is over, will there still be steps to be taken—backwards, perhaps, in the Minister's opinion—or shall we then have the final package? It is quite important for us to know that.

Mr. Leigh

The hon. Gentleman's arguments are becoming somewhat Byzantine, even for 3.30 in the morning. The review is internal and we are considering all the options. We have long since made it clear—we made it clear in our manifesto—that we intended to introduce more competition into postal services. I make it absolutely clear again that that will happen. We said in the manifesto that we intended to set up an independent regulator to report to the Secretary of State—the President of the Board of Trade—to oversee that competition. There is nothing unusual about that, and I am surprised that the hon. Gentleman does not seem to think that competition in that form would be beneficial.

Let me make it clear that we shall not allow the future provision of the social commitments to be a simple act of faith; nor will we allow necessary restrictions on competition to be an excuse for the abuse of monopoly power. It is vital that we maintain a regulatory framework to ensure that the interests of consumers are protected. The framework in which the Post Office currently operates was structured in 1969. Some of the models that we have developed during the 1980s have shown that there are better regulatory regimes than the traditional nationalised industries model of the 1960s.

Before I go on to speak about the question of future ownership of the Post Office, I wish to talk briefly about Post Office Counters. My hon. Friend the Member for Hendon, South started by talking about that subject, and I know that he feels strongly about it.

In our manifesto, we gave a clear, unfettered commitment to a nationwide network of post offices. What does that mean in practice? It means that we are committed to maintaining a readily accessible network which meets the social industrial and commercial needs of the United Kingdom. Post offices and their customers throughout the country can rest assured that, whatever solution we adopt for the Post Office and its constituent parts, whether in the public or the private sector, that commitment will not be compromised.

Any organisation serving 28 million customers a year through a network of 20,000 offices—about twice the number of all the banks put together—dearly has major strengths in reach. But if it is operating in a series of low-margin businesses, not protected by any statutory monopoly, it must be constantly on its guard to keep its costs down and to respond flexibly as some of its products decline and others increase.

Post Office Counters is responding to the decline in some product sectors, such as national insurance stamps, by developing other business areas, such as stationery retailing, and it hopes to make use of its huge network to play an important part in the selling of national lottery tickets. We have recently given it powers to enable it to diversify into that business, which could fit very well with its core businesses.

I note what my hon. Friend has said about the ownership structure of Post Office Counters, and his view that we should continue the process towards full privatisation, which has been continuing for many years, but we need to consider how best we can equip the Post Office to develop new business in a rapidly changing world. Can that best be done in a public sector environment?

Of course, 19,000 of the 20,000 post offices are already owned and run by private business men, and that proportion will increase as the Crown conversion programme develops. I pay tribute to the 19,000 sub-postmasters and sub-postmistresses whose commitment and hard work make it possible for the Post Office to continue to serve communities throughout the United Kingdom, even in far-flung rural areas where banks, building societies and most other retailers no longer operate. Our review must help us to determine what structure for Post Office Counters will best secure a bright future for those thousands of small businesses and protect the interests of all their customers.

On the question of ownership, we have to consider whether the competition and regulation framework we decide upon is more appropriate to a Post Office in the private or the public sector. It will come as no surprise that, in general terms, the Government believe in the advantages of private sector ownership. Indeed, I believe our experiences over the last 14 years have clearly demonstrated the enormous benefits, both to the consumer and to the taxpayer, of transferring businesses to the wealth-creating private sector. I have noted the remarks of my hon. Friend about the experience of nationalised industries which have been privatised.

For the Post Office, it is important that we get the sequence of decisions right. We must decide upon a competition and regulatory regime and then consider the alternatives for ownership—again always applying the acid test of what is in the best interests of consumers.

The hon. Member for Newcastle upon Tyne, Central mentioned Parcelforce on 15 July last year, as he said, my right hon. Friend the President of the Board of 'Trade announced to the House that it was the Government's intention to sell Parcelforce. Parcelforce operates in a fully competitive parcels market. The majority of its traffic is business traffic. I believe that Parcelforce can flourish in the private sector. It has a distinctive brand image and a large customer base—strengths on which it can build.

We are currently examining the most appropriate method and timing for transferring Parcelforce into the private sector. It faces competition across a range of its activities. The vast majority of its traffic is accounted for by products sent to or from businesses, yet it offers a universal service at a uniform and affordable tariff, which we have pledged ourselves to maintain—another non-negotiable commitment.

We have been considering the future of Parcelforce alongside the future of Royal Mail and Post Office Counters, but our intention to privatise Parcelforce should not necessarily be taken as implying that the rest of the Post Office will be privatised. That will be decided on its own merits. Indeed, when my right hon. Friend announced the review, he made it clear that we would be considering continued public sector options as well as private sector options.

Before concluding, I should like to deal briefly with the views of the Post Office Board. The hon. Member for Newcastle upon Tyne, Central made great play of the views of the chairman of the Post Office. As I understand his remarks in the Select Committee, the Post Office chairman made the point that a decision on the review was desirable by the end of the first half of this year. As the hon. Gentleman made clear, the Post Office Board has made no secret of the fact that it is seeking changes in the current regulatory structure. In particular, I note that the Post Office has said that it wants to be free from Government controls on investment and wants more commercial freedom.

I should make it clear that Post Office capital investment has been running at record levels over the last three years. External financing limits which we set last year were specifically designed to enable those record levels to continue over the next three years—some £900 million in total. That sets in context some of the hon. Gentleman's remarks.

Mr. Cousins

Will the Minister confirm that the Post Office's investment programme, comparing the current year, 1993–94, with the previous year, 1992–93, shows decline both in cash terms and in real terms? In other words, his assurance that the investment programme is being maintained is not borne out.

Mr. Leigh

Obviously there will be variations from time to time in the capital investment of the Post Office. The hon. Gentleman cannot have it both ways. He regaled the House for 25 to 30 minutes with a description of the virtues of the Post Office. He said that it was the best in the world, the most efficient and all the rest of it. Has he forgotten that we have had a Conservative Government for the best part of 14 years? We have invested in the Post Office, we have ensured that it is the best, and we intend to leave it that way. We have undertaken a review to ensure that the Post Office responds to the opportunities, referred to by the hon. Gentleman, which are coming into world global markets.

In conclusion, this has been a valuable debate. I hope that my hon. Friend the Member for Hendon, South is satisfied with the assurances that I have given. The review has confirmed our faith in the Post Office's ability to rank high among Britain's world-class, world-beating organisations. It will continue to thrive, break more of its records for customer service and pass on the benefits of ever greater efficiency to business and individual customers. I am grateful to my hon. Friend for allowing the House to debate this important subject.