Post Office

HC Deb 19 May 1994 vol 243 cc966-81 3.59 pm

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine)

With permission, Madam Speaker, I should like to make a statement on the Post Office.

On 29 July 1992, I announced that the Government would be considering the future structure and organisation of the Post Office. I made it clear then that we would consider a variety of options both in the public and private sectors. In March, the Trade and Industry Committee published a report on the future of the Post Office. We have considered that carefully.

The Government have now decided that they will shortly publish a Green Paper setting out the issues in full and outlining the options for change. In view of the intense speculation of the past two days, however, I thought it important that I should make this early report to the House.

The Post Office is an essential part of our national life. It provides at least one daily delivery of mail throughout the country at a uniform tariff, which is the same regardless of whether one lives in Westminster or the Western Isles. It handles some 60 million items of mail per day. Perhaps most important of all, it maintains a network of some 20,000 post offices which serve their local communities in a way that no other organisation can match.

The Government therefore made their consideration of the future of the Post Office subject to three vital and non-negotiable commitments, all of which we clearly set out in our manifesto. These are, first, the maintenance of a nationwide letter and parcel service with delivery to every address in the United Kingdom; secondly, a uniform and affordable structure of prices; and, thirdly, a nationwide network of post offices. Under no circumstances would we put those commitments at risk.

There are three principal businesses of the Post Office: Post Office Counters, the Royal Mail and Parcelforce. The Green Paper will outline a number of options, but I can announce some firm decisions today.

Let me begin with the Counters business. Every Member of the House is well aware of the vital importance of the network of post offices, particularly in rural areas, but also in our towns and cities. The Government fully recognise the key role that they perform in our communities. That is why the maintenance of a nationwide network is non-negotiable.

The Counters business is essentially a partnership between the public and private sectors. The central core, which negotiates contracts and provides back-up services, is Government owned. But the vast majority of post offices —all but some 800 of the 20,000 outlets—are privately run sub-post offices operating under an agency agreement.

The Government can see no case for changing that structure. It works well. It ensures that the Government retain the necessary control over the maintenance of the nationwide network. It also allows for private sector initiative at local level where the local post office is at the heart of local communities.

During the review, however, the case has been put forcefully, particularly by the National Federation of Sub Postmasters, that the commercial prospects of the post office network need reinforcement. I understand and share that view. Most post offices are small shops, and the Government understand the pressures on such shops as a result of social change. We therefore intend to proceed with two measures specifically designed to improve their position.

First, we will be giving Post Office Counters greater freedom in future to seek new clients from the private sector to supplement their existing client base, which consists largely of public sector bodies. The best way of maintaining the network is to give it freedom to compete for new business on fair terms, and thus increase the spread and scale of its activities. The Green Paper will set out our proposals.

Secondly, we propose to automate many of the clerical procedures that lie behind much of the business of the network. These procedures—particularly those related to the payment of benefits—have been unchanged for decades. Work is thus under way between the Counters business and the Benefits Agency to devise a method of automating the payment of social security benefits. That will provide not only an extremely cost-effective way of paying benefits, but an electronic platform in post offices enabling the business to provide enhanced services for all its clients, new and old.

Work on that project is at an early stage, but we are looking to extend the public/private sector partnership by the involvement of the private sector in the management and funding of the project.

I should like to comment on the relationship between Post Office Counters and the Royal Mail. The Royal Mail does not cross-subsidise post offices. Post Office Counters has been run as an independent business since 1986 and has been profitable throughout that period. Some post offices in rural areas do, of course, make a loss on a strict accounting basis. Post Office Counters has existing powers to support such post offices. Indeed, at the present time, 2,700, of which 1,800 are part time, are already supported by a flat fee, regardless of the business that they undertake.

Post Office Counters and its clients see the nationwide network not as a liability, but as an asset which enables it to provide a unique service to villages and hamlets throughout the land. It enables the Benefits Agency, for example, to provide a service for the millions of people who have no bank accounts and live in remote areas.

The business link with the Royal Mail is also important, although Members may be interested to know that only about 25 per cent. of Post Office Counters' turnover comes from the Royal Mail. In any proposals, however, the Government will require the Royal Mail to continue to use post offices, as they do at present.

I shall now turn to the Royal Mail, which accounts for more than 70 per cent. of Post Office turnover. It is the most efficient postal service in Europe. It is a modern, profitable business and it is looking to expand into what is rapidly becoming a European and even a world market for postal services. That is in itself only a part of a global communications market that is one of the most innovative industrial sectors of all.

The Post Office board wishes the Royal Mail to be free of many of its constraints. Indeed, the board has made it clear that the increasing competition in its marketplace is beginning to pose a real threat to its ability to maintain its current performance. In its recent report, the Select Committee on Trade and Industry accepted that argument. The Government also recognise the case for change.

The Green Paper will set out the options, showing the advantages and disadvantages and, in particular, the case for retaining a substantial minority shareholding in a newly created public company. In addition, preferential share entitlements for the employees of the post office and sub-postmasters would ensure that a significant holding of shares would be in the hands of those people most immediately concerned with the future of the business.

The Green Paper will also set out an option for retaining the business in the public sector, but extending its commercial freedom as far as is consistent with continued public sector status.

Let me emphasise that none of those options would in any way reduce the social obligations placed on the Royal Mail. To ensure this, any legislation would set up a regulatory system to ensure that those obligations were properly defined and policed. The Government's commitments to universal delivery, six days a week to every household, with a uniform and affordable tariff remain non-negotiable and would be written on the face of the legislation.

Tariffs would be controlled through regulation. Experience has shown that social commitments can be delivered through strong regulation; for example, regulation requires BT to provide telephone boxes in rural areas. In the same way, it would be our intention to require the Royal Mail to maintain its letter services in rural areas.

I turn now to Parcelforce. I announced on 15 July 1992 the Government's intention to privatise Parcelforce, which already operates in a fully competitive market. Work has been going on since then on the best method and timing of the sale of Parcelforce. Of necessity, we have done so in the light of the Post Office review. It would be possible to continue with our original plans, but there are important synergies between Parcelforce and the Royal Mail. The Government have decided in include Parcelforce in their new proposals for the Royal Mail. We shall, of course, pay particular attention to the need to avoid any unfair cross-subsidy from the Royal Mail to Parcelforce.

Before concluding, may I reassure the House on three specific points? First, it has been suggested that any change of status would lead to VAT on stamps. That is simply wrong. I can assure the House that, under any proposals that we finally adopt, stamps will continue to be exempt from value added tax.

Secondly, I can assure the House that all existing pension rights will be preserved in any case.

Thirdly, the House will be aware that the Post Office, and in particular the Royal Mail, has long had important connections with the monarch. I am pleased to announce to the House that, after consultation, Her Majesty has agreed that, if a public sale option were to be pursued, Royal Mail would be given permission to use a depiction of Her Majesty's head on postage stamps, to use the royal emblems, the Crown and the Cypher and to be registered as Royal Mail plc at Companies House.

I will soon bring forward a Green Paper setting out the options and the Government's preferred proposals. It will allow an opportunity for a full public debate on this complex area.

We are committed to increasing the opportunities for the Post Office and Post Office network, and to ensure that the national standard of service is maintained. We will wish to ensure in any change that the interests of the consumer continue to be protected by effective regulation.

There is common accord that major change is needed if the Royal Mail is to meet the growing competitive threat that it faces.

The Government believe it important to allow the Royal Mail to build on the excellence of its reputation and to compete both at home and internationally where the quality of its achievements and the reputation it enjoys offer an exciting future. We hope to make rapid progress to enable this major British organisation to achieve its ambitions.

Mr. Robin Cook (Livingston)

The President will acknowledge that he has spent two years and £1 million on consultation over the future of the Post Office. He will also concede that his main announcement this afternoon is that he has reached the conclusion that he requires further consultation on the future of the Post Office.

Has the right hon. Gentleman not heard the chairman of the Post Office say that the delay is a millstone round the Post Office which needs to be removed if it is not to grind to a halt? That chairman and the management of the Post Office were entitled to more decisive action from the President, who purports to lead British industry, than the announcement of a Green Paper.

Just so that the House is clear that the President's heart is in the Green Paper, can he assure the House that he went to the Cabinet this morning to argue for permission to publish a Green Paper that he cannot print today?

I welcome the President's commitment to give commercial freedom within public ownership to Post Office Counters. I particularly welcome it, as it is the option that he told the Select Committee in January was not feasible. Now that he has decided that that option is feasible, why can he not agree to applying the same option to the Royal Mail? Does he not recognise that if he agreed to the same solution for the Royal Mail, he would have unanimous support throughout the House?

Mr. Keith Mans (Wyre)

No, he would not.

Mr. Cook

He would have unanimous support from everybody except those whose votes he will need if he wants to become leader—[Interruption.] I am happy to say that he is welcome to those votes.

If the President wants that solution, he does not need a Green Paper, as we could agree to it this afternoon. His only reason for wishing to present a Green Paper is to keep open the option of privatisation. Is not the real reason why he does not announce his decision today the fact that the Government are terrified of announcing the privatisation of the Post Office while the public still have a chance to vote on it at the forthcoming election?

I warn the President that he will never sell to the public the idea of privatising the Post Office. [Interruption.] I notice that Conservative Members did not try to sell it at the last general election, when they did not breathe a word of it in their manifesto. The President will not sell the idea to the public because the public know that privatisation would end the uniform tariff on postage. [HON. MEMBERS: "No."] Can the President tell us how the assurance that he has given the House today on the uniform tariff for postage differs from the assurance on the uniform tariff on gas when the Government privatised British Gas? Does he not know that, only last week, his Department gave the green light to British Gas to charge more to remote regions? For how many years after privatisation would it remain possible to post a letter at the same price from any part of Britain to any address in Britain?

The President will not succeed in selling privatisation to the public because the public know that privatisation would threaten their local post office branches—[Interruption.] Oh yes, oh yes. Does he really believe that a separate, privatised mail company will continue to collect and deliver mail at a loss from post office branches with a small turnover? If he does, is he prepared to guarantee that each of the 20,000 post offices would be involved in that collection?

The President rightly acknowledged that the Post Office is a public sector success story. It provides the best letter service in Europe at one of the cheapest prices. It does not need a penny subsidy from the Treasury, but for 20 years has subsidised the Treasury with profits. Why cannot the Government accept that the simple logic of that success is that the best place for the Post Office is in the public sector? If they cannot accept that, I warn them that we shall lead the national campaign to demand that the Post Office stays where it belongs—owned by the public, in the public sector and providing a service to the public.

Mr. Heseltine

I came here this afternoon intent on discussing the Post Office and its future. Suddenly, the issue of leadership has been raised. I was waiting for the hon. Member for Livingston (Mr. Cook) to suggest a Green Paper on leadership. I understand the machinations of the political truce, which I thought the hon. Gentleman was only too keen to advocate in the House. The hon. Gentleman wants not a Green Paper but the reddest possible paper that he can lay his hands on. [HON. MEMBERS: "Get on with it."] I came here to get on with it, but the hon. Member for Livingston apparently had his mind on a totally different constituency from the one in which we are interested. Having considered his ambitions and what he had to say, I must say with all my heart—and I speak for all my hon. and right hon. Friends—that I wish him the very best of luck. I would go even further: he may launch a campaign in the country; I shall launch one in the country to help him achieve what he is so obviously trying to achieve.

It is incumbent upon us in the House to take—[Interruption.] I am sorry that there is so much turmoil among Opposition Members. I thought that they were genuinely interested in the success of this great industry. The industry is entitled to the most serious consideration of the House.

May I answer the first question put to me by the hon. Member for Livingston which was relevant to the subject under consideration? Yes, this morning I asked the Cabinet for support for a Green Paper and I am delighted that Cabinet members were prepared to go along with my proposals. It is important that the widest range of issues and opportunities involved be explored and that the public understand what is going on. We must listen to people's ideas and take account of the strengths and disadvantages of those ideas.

I pay tribute to the Select Committee on Trade and Industry, which conducted a most thorough investigation into the matter. The House must realise that there is no option called the status quo. If we try to preserve the status quo, the erosion of the Post Office's market share will be continued by the private sector, which is now providing an increasing number of ever-more sophisticated services. Thus, it is eating into the ability of the Post Office.

One of the options available to us is a move to the private sector, while another apparently gives more discretion within the public sector. But any public sector option would involve the borrowing of money on the back of Treasury guarantees and would, therefore, produce a particular dilemma for all those private sector companies that have to raise money in their own names and compete fairly in the marketplace. One of the most powerful arguments advanced by the management of the Post Office is based on its desire to become a world-class player in a world which will increasingly see a shrinking number of major companies competing.

I should like to mention the matter in respect of which I part company most profoundly with the hon. Gentleman. He points, quite rightly, to the remarkable success achieved by the management of the Post Office within the domestic framework of Britain in providing a service that is much admired. But the management of the Post Office is looking for enhanced freedoms, including the ability to go out into the marketplace and win for Britain. Classically, the Labour party finds every conceivable reason for preventing just that.

Several hon. Members

rose—

Madam Speaker

Order. The initial exchanges have taken more than 20 minutes. I am now looking for brisk questions and very brisk answers.

Sir Cranley Onslow (Woking)

I congratulate my right hon. Friend on dealing so effectively with the leadership nonsense that came from the Opposition.

How long does my right hon. Friend think the consultation process is likely to take, bearing in mind the fact that he, like the Select Committee, evidently recognises the urgency of enabling the Post Office to compete in the world market in which it must operate?

Mr. Heseltine

I am extremely grateful to my right hon. Friend, who, as he played a significant role in the Select Committee's deliberations, is aware of the urgency of this matter. We shall produce the Green Paper as quickly as possible—within not many weeks—and shall urgently reach the conclusions that flow from it. We understand the need to make up our minds.

Mr. Alex Carlile (Montgomery)

With his usual eloquence, the right hon. Gentleman ensured that the first five pages of his statement were a eulogy of the Post Office's services. Before selling the depiction of Her Majesty's head to the highest bidder, will he explain how he proposes to guarantee the integrity of the delivery service in rural areas? Does he propose that there should be a privatised monopoly? Does he propose that there should be a regionalised monopoly? Does he propose that there should be competition within localities? If there is to be competition within localities, how on earth will the regulator be able to ensure a daily delivery by a postman or a postwoman for people living in remote rural areas?

Can the right hon. Gentleman confirm that at present many sub-postmasters and sub-postmistresses work long hours for nothing for Post Office Counters? Will he see that the regulator ensures proper contractual arm's-length negotiation?

Mr. Heseltine

The hon. and learned Gentleman has raised a number of important issues. I assure him that we shall not be prepared to make the changes that we might, after consultation, be prepared to consider unless we are able, by contract and under statute, to ensure the universal delivery of services. There will be a tough regulatory process to ensure that, if the single-company option is adopted, the company will be statutorily charged with responsibility for delivering services.

Mr. Alex Carlile

Monopoly.

Mr. Heseltine

The hon. and learned Member says that that would be a monopoly. I wonder where he has been. The dilemma that we face is that an increasing range of services in every part of the country are competing with the Post Office. We see it every day—different services, international services, overseas companies. It is very important that, whatever we decide to do, the public should be assured, from the very beginning, of the absolute sine qua non: there will be a regular six-day-a-week delivery at a uniform tariff across the country.

Mrs. Ann Winterton (Congleton)

Is my right hon. Friend aware that my constituents will consider his proposals to be rather like the curate's egg—good in parts? They will be much encouraged by the proposals for rural sub-post offices: the extension of their services will enable them to play a greater part in the local community. My constituents will also be encouraged by the fact that postmen and women employed by the Royal Mail will have an opportunity to buy a stake in their own business. They would be even more reassured, however, if the Government said that they would retain their shareholding, to ensure an excellent arrangement between the public and private sectors.

Mr. Heseltine

I am grateful to my hon. Friend for her constructive analysis, with which I agree. The Government have made it clear that one of the options that we shall present involves a very large minority shareholding; furthermore, if we adopted that option, it would also give employees of the business a substantial opportunity to gain a shareholding. The combination of those opportunities would mean that, overall, the interests of those immediately concerned would have an important influence on the future of the organisation.

Mr. Richard Caborn (Sheffield, Central)

I thank the President of the Board of Trade for announcing the Green Paper, for two reasons. First, it will at least move the arguments on, and—we hope—bring about an early decision. Secondly, it suggests that the right hon. Gentleman has experienced a fairly substantial change of mind: when he spoke to the Select Committee, he was clearly in favour of privatisation and had ruled out commercialisation.

May I ask the right hon. Gentleman two questions? First, will he consider keeping the whole of the Post Office together if that option emerges from consultation on the Green Paper? There is a strong industrial logic for keeping the three component parts together. Secondly, in considering commercialisation, will the Government refer to models such as Nuclear Electric, British Nuclear Fuels Limited, the BBC and BP Burmah—models that can work effectively without going into the private sector?

Mr. Heseltine

The hon. Gentleman will recognise that BT, which he mentioned, is now in the private sector and is very successful.

Mr. Caborn

I mentioned BP.

Mr. Heseltine

BP is also in the private sector. BP and BT are both in the private sector, which means that a large number of British citizens own shares in those companies. The hon. Gentleman happened to choose two companies that—in the name of this country—are world class, trading internationally to the immense benefit of the country. Let me add—as the hon. Gentleman raised the matter—that, since its privatisation, BT has provided a range of services at a lower price than people would have believed possible at the time of that privatisation.

Of course, when a Government publish a Green Paper they are inviting consultation; but, in the course of the Green Paper debate, the Government are likely to present their own ideas about what they think the future should be. I understand the hon. Gentleman's view—he has studied the matter carefully—and I shall consider to what extent the Green Paper should reasonably reflect an option that, on the surface, is not immediately attractive.

Mr. Robert Hicks (Cornwall, South-East)

Does my right hon. Friend accept that many people living in peripheral regions of the United Kingdom are becoming increasingly apprehensive about the effects of privatisation —or part-privatisation—following the introduction of regional differential pricing for electricity and gas? Does he accept that relieving the existing Treasury constraints on the Post Office is the most satisfactory way of achieving the objectives that we all seek for the organisation?

Mr. Heseltine

I am most grateful to my hon. Friend; I know that he has taken a particular interest in the matter. I can give him a categorical assurance that there will be no regional differential in the charges relating to the universal delivery on which I have given the House an assurance.

Mr. John McWilliam (Blaydon)

Will the President of the Board of Trade reconsider those last words? His predecessors in other Departments have given precisely the same reassurance, and it has proved unfounded in many instances. Will the right hon. Gentleman also think very carefully about what he is doing in announcing the Green Paper? All that the Post Office really needed was access to a bit more commercial freedom, and access to funds without the external financing limit. A system of bonds that did not give any shareholders' rights—which was proposed before—could have provided that, but it was ruled out in the case of BT simply because the Treasury did not like it, not because it was not efficient.

Mr. Heseltine

I do not think that the hon. Gentleman understands the nature of the implication that flows from borrowing that apparently has the Government's guarantee behind it. I do not believe that there would be an argument for assuming that we can just allow the Post Office to raise bonds, and therefore produce money, in some way that would carry a Government guarantee with which it would then be able to compete with the private sector, which has no such privilege.

Mr. Patrick Cormack (Staffordshire, South)

Is my right hon. Friend aware that many old-fashioned Tories, of whom I am proud to be one, view the prospect of Royal Mail plc about as favourably as they would his old regiment at Buckingham palace being replaced by Group 4?

Mr. Heseltine

For once in his life, my hon. Friend has not understood the immensely close relationship between my old relationship and many of the employees of Group 4 Security.

Mr. Tony Benn (Chesterfield)

Is the Minister aware that, for 334 years since 1660, the Royal Mail has been a public service, not only through the counters until quite recently, but through the people who called at everybody's house every day, and were a form of contact; that there is no justification for privatisation for commercial freedom, because, over the years, as he will know, the Post Office has developed, as with the giro, a completely new bank from within which was so successful that the Government sold it off; that the consequences of privatisation will be higher salaries for the management, which is why they want it, and poorer services and redundancies?

With great respect, after I heard the President give assurances about the pits 18 months ago, nothing that he says is believed, because he did not honour the assurances that he gave in 1992. Many people, and I am one of them, think that the sale of this asset to Tory businesses that funded the Conservatives' campaign will have a sniff of corruption about it from the very outset.

Mr. Heseltine

The great value of a Green Paper debate is that we shall have the opportunity of listening to the views of the right hon. Gentleman, which, in my view, have hardly changed through any of the 300 years to which he drew the House's attention.

Sir Michael Grylls (Surrey, North-West)

Does my right hon. Friend agree that it must be obvious to almost everybody in the country, perhaps with the exception of the socialists opposite, that if the Royal Mail is to remain competitive, and become even more so in the future, it must be given commercial freedom and freedom to invest; that if the Government fail to do that, they will be failing in their duty as the current owner of that business; and that the best way of achieving that is to privatise the Royal Mail and give it that freedom?

May I ask a question on local post offices? Would not it help them in their hour of need—as he has said, they are going through a difficult phase—if they were given priority access to the lottery terminals when the lottery comes into action, as that would help them a lot?

Mr. Heseltine

My hon. Friend realises that the issue of the allocation of the lottery contract has already been determined by the House, although the results have not yet been finalised. My hon. Friend made the point about setting the Post Office into a world in which it can expand and create a more competitive system. That is precisely why we have been conducting the review. I will certainly listen carefully to what he has to say.

Mr. Clifford Forsythe (Antrim, South)

We on this Bench strongly favour the status quo for sub-post offices, and I welcome the assurances given by the President on them. We will study the Green Paper very carefully. When we have done so, we will make our views known. If we require any—may I use the word?—"clarification", perhaps we could seek a meeting with the President.

Mr. Heseltine

The hon. Gentleman is most courteous and of course he can be assured that, although I will not indulge in clarification, any other form of consultation is readily available to him and his hon. Friends.

Sir Giles Shaw (Pudsey)

May I congratulate my right hon. Friend not only on proceeding with this idea but on doing so through a Green Paper, a lesson from which many of his colleagues might learn in the complicated legislation that has recently been passed? Will he give an assurance that Post Office Counters and small sub-post offices will not have to wait for the results of the Green Paper to be reassured about pension transmission and other activities, which they sorely need at the present time?

Mr. Heseltine

My hon. Friend is most kind. We realise that there is considerable pressure on us to move the decision-making process forward and there was, of course, a temptation just to come up with a scheme, as sometimes happens in government, and move on from there. However, after wide consultation, we took the view that some issues were perhaps separate from the strict economic imperatives and called for a rather more timely and cautious way of proceeding.

Ms Kate Hoey (Vauxhall)

Will the Secretary of State assure me that there will be a clear option in the Green Paper, which will satisfy 90 per cent. of the public and everyone—including management—who works for the Post Office, for the Post Office to remain as one integral unit and have more commercial freedom? Will that be a simple option in the Green Paper?

Mr. Heseltine

The Green Paper will try to cover the horizon of options, as the hon. Lady requires. However, it is fair to say that if we were going to consider something along the lines of what she suggests, the opportunities for the Post Office would be so constrained as to make the exercise hardly worth while.

Sir Peter Emery (Honiton)

Does my right hon. Friend accept that his announcement about Counters will be a great relief to every sub-postmaster and sub-postmistress because it will resurrect the possibility of their staying in business, which is essential for country districts?

Will my right hon. Friend make sure that the Green Paper points out the ways in which the interests of the tens of thousands of ordinary postmen who work in country areas will be protected, because they are also a great part of the country's structure and have a considerable role to play beyond that provided by the Post Office, as they deliver milk and do the various other little things that keep country districts operating smoothly?

Mr. Heseltine

I am grateful to my right hon. Friend, especially for his remarks about Counters, which are merited by my statement today. I think that postmen and postwomen will take into account the fact that the service that they are delivering—a universal service at a universal tariff—will be enshrined by statute in the new arrangements. Those men and women will, therefore, be needed to carry out tomorrow the work that they are carrying out today; but we shall put before them another option: instead of doing so just as paid employees of the Post Office, they might do so as paid employees of the Post Office but owning parts of the business for which they work.

Mr. Jeff Rooker (Birmingham, Perry Barr)

Is the President of the Board of Trade aware that most Opposition Members hope that the result of this Green Paper exercise is the same as that of the first that he carried out on the poll tax, which effectively rubbished it completely?

Bearing in mind the right hon. Gentleman's well-deserved reputation for bringing modern management to government in the past decade or more, does he accept that the big defect of his statement is that he has been unable to provide a date for publication of the Green Paper? He said that it could be in a few weeks, but we should like to know whether it will before the House rises for the summer recess. More important, he has been unable ' to establish a reasonable period for the consultation process —five or six weeks would be wholly inadequate. Does he accept that regional meetings will be required so that the general public feel that they have been genuinely consulted?

Mr. Heseltine

I understand that consultation periods are never long enough, but I have been through this process often enough to know that the views that we have heard expressed today will not change whether the consultation process takes a day, a week or a year. It is important to balance the interests of reaching a decision with a reasonable consultation period.

Mr. Rooker

How long?

Mr. Heseltine

To be straight with the hon. Gentleman, in the normal course of events, I should have wished to come to the House with specific answers to the sort of questions that he is putting to me. However, faced with the fact—

Mr. Campbell-Savours

And the whole of the Cabinet.

Mr. Heseltine

No, not the Cabinet at all in that context. The fact is that somebody, in the growing convention of the day, leaked the information to the newspapers. [Interruption.] The hon. Gentleman has few expectations about the system in which he works. I believe that it would be much better to do these things in an orderly way without leaks. Nevertheless, given that there had been a leak, it seemed to me to be courteous to make a statement to the House at the earliest opportunity—if for no other reason than to stop the mischief making of people such the hon. Member for Livingston (Mr. Cook).

Mr. John Butterfill (Bournemouth, West)

I am most grateful to my right hon. Friend for the attention that he has given to the views expressed by the Select Committee. What he has said today is very welcome, in particular his recognition that the world is moving forward very rapidly and that the development of new technology—electronic mail, faxes and everything else—means that the Post Office will have to make considerable capital investments in order to compete in the future.

Does my right hon. Friend agree that that capital can be raised only through the private sector and that it would be quite unreasonable to expect commercial freedom to allow the Post Office to raise that capital through the Treasury? It would be unreasonable for its competitors and a complete fudge. Will he resist the blandishments of the hon. Member for Livingston (Mr. Cook) which amount to nothing less than cooking the books?

Mr. Heseltine

My hon. Friend makes some very important points. Every attempt that the Government have made to enhance the opportunities for British industry by turning nationalised industries into trading companies has been resisted by the Opposition parties. They have been wrong on every single occasion.

The fact is that we have to wrestle with the difficulties and discuss them on a wider basis than the forum today allows. The idea that businesses can simply operate in the public sector pretending that they are private sector businesses is not realistic.

Mr. Peter Hain (Neath)

Surely the President is aware that his favoured privatisation option will have a devastating impact on areas such as Wales because it will encourage the cherry picking of profitable traffic and the social dumping of remote areas.

The separation of the Post Office Counters business as a rump service in the public sector could be very dangerous for remote, rural sub-post offices which have been effectively subsidised by the Post Office and are currently institutionally supported by it. [HON. MEMBERS: "They have not."] Yes, they have from time to time. Will the President of the Board of Trade give a specific guarantee that all existing second deliveries in urban areas will be maintained and that existing collection and delivery arrangements in rural areas will be maintained so that we do not go down the New Zealand route? Is he maintaining the £1 limit on the letter monopoly?

Mr. Heseltine

The hon. Gentleman has asked the sorts of questions which made it so necessary to make a statement to the House today. Although I have made it absolutely clear that his fears are utterly groundless, he still got up and asked his questions as though they involved new points that no one had heard about.

All over Wales today, post offices are subjected to increasing competition, whether in the form of fax machines, bike boys or international companies delivering the more expensive products. The fact is that the Post Office is now subject to that competition. The issue that we face is the extent to which we can free it to enable it to fight back, not only in this country but internationally where many competitors are based.

Sir Anthony Grant (Cambridgeshire, South-West)

Is my right hon. Friend aware that the proposals concerning sub-post offices are particularly welcome in view of the enormously important role that they play in the community? It is absolutely absurd that they should have to haggle with the Treasury for months before they are allowed to sell even a fishing licence.

Is my right hon. Friend further aware that the all-party Select Committee on Trade and Industry—which included a Liberal-Democrat Member—noted, without objection or criticism, that one solution was privatisation and another was part-privatisation? Committee members raised no objection to that suggestion. That statesmanlike and sensible attitude contrasts remarkably with the ideological nonsense that we have heard from both Opposition parties today.

Mr. Heseltine

My hon. Friend, who sat through the hearings of the Select Committee, makes a point that the House should take into account. When, in the Select Committee's long investigation, the arguments were paraded clearly, rationally and calmly, the Committee formed very clear and unanimous views across all parties that progress had to be made.

I very much welcome what my hon. Friend said. However, I make one small qualification. I am delighted that Counters are able to sell fishing licences, but it would be wrong to suggest that it was Counters which had to spend many months haggling with the Treasury.

Mr. Dennis Canavan (Falkirk, West)

Does the President of the Board of Trade agree that the Royal Mail is the oldest and most successful postal service not just in Europe, but throughout the world? Does he agree that the 51 per cent. privatisation proposal will inevitably mean a reduction in service and an increase in unemployment?

With regard to the question about the Queen's head on stamps, if El Presidente is not calling "off with her head" at this stage, will only 49 per cent. of her head be left and will the next stage of his crazy privatisation programme involve selling off 51 per cent. of the Crown jewels?

Mr. Heseltine

What I find absolutely depressing about that sort of remark is that the hon. Gentleman stands up and says what an excellent organisation the Post Office is and then assumes that if it is given the freedom to expand it will get worse. I take exactly the opposite view. I think that if it is given the freedom to expand it will do an even better job than it is doing now.

Mr. Edward Leigh (Gainsborough and Horncastle)

It has been a long, careful road since we embarked on this process nearly two years ago. Will my right hon. Friend assure us that we will have a decision in time for the House to consider privatisation legislation in the next Session of Parliament?

Clearly, the Government have, rightly, made up their minds that the status quo proposal is a non-starter, as is commercial freedom in the public sector, for the reasons given by my right hon. Friend. In short, I congratulate him and his right hon. Friends on having the courage at last to give the Post Office the freedom to invest in the private sector and on having the wisdom to reassure the public that a uniform tariff will be retained.

Mr. Heseltine

I am most grateful to my hon. Friend. I realise, as do all my colleagues, that we must balance proper consultation with the need for a decision. My hon. Friend may take some satisfaction from the fact that the statement has been made this afternoon.

Mr. Alex Salmond (Banff and Buchan)

At a time when the Scottish Office is being forced away from the privatisation of water and steered away from the privatisation of forestry, can the President of the Board of Trade explain why he wanted to swing ahead and sell off bits of the Royal Mail before his proposal was overturned by his Cabinet colleagues?

Is not the real explanation for today's bungled statement that the President wanted to put on a macho display of political virility for the electorate and the Tory Back Benchers? In view of his climb-down, will he in future take the advice of another blond, Zsa Zsa Gabor, who said that, in her extensive experience, "Macho men ain't mucho"?

Mr. Heseltine

That was a rather pathetic intervention when we first heard it from other Opposition Members, and it got no better when repeated by the hon. Gentleman.

Mr. Nicholas Winterton (Macclesfield)

Although I am a Conservative Member who is deeply unhappy about the fragmentation and privatisation of the Post Office—which could be a privatisation too far—I congratulate my right hon. Friend on his statement and the fact that he has decided to publish a Green Paper.

Will my right hon. Friend give me two assurances in that regard? First, will he assure me that he will listen to the comments that are made about the Green Paper and that, if those comments are overwhelmingly opposed to the proposals, he will drop them? Secondly, will he give me a cast-iron assurance this afternoon that the 49 per cent. that he intends the Government to hold under one of his proposals will be held by the Government ad infinitum?

Mr. Heseltine

My hon. Friend is, as he says, a Conservative, and so am I. One of the responsibilities of being a Conservative and being in government—a responsibility not shared by the parties opposite—is that every so often one has to take decisions. Sometimes they are lonely, but they can often be right. It is important to show a degree of leadership when one can see the way that the world is going, perhaps even in advance of public opinion and understanding.

It is important to have regard to the overall health of the industry and the national interests that are deeply ingrained in the future potential of the industry. We will listen very carefully to the consultation that will take place. We will certainly look at what commitments may be necessary and for how long in respect of whatever level of Government shareholding there may be.

My hon. Friend generously said that he welcomed the Green Paper and the consultation process. He will know that, throughout the process, we have listened to his views, as well as those of many of my colleagues. That is one of the reasons why today we have provided what is not essentially an economic answer, but a wide political, social and economic answer.

Mr. Dennis Skinner (Bolsover)

Will the Lord—I was going to call the right hon. Gentleman the "Lord President"; we shall soon be putting his head on the stamps. Will the President of the Board of Trade comment on the fact that we have a Green Paper rather than a White Paper only because of the Euro-elections, and that all the safeguards that we have been given on sub-post offices and all the rest will fade away after 9 June?

Mr. Heseltine

The hon. Gentleman is diametrically wrong. I had not intended to publish any sort of paper at this stage, because, as the House will see, there are questions that I am not yet in a position to answer. I am making the statement as a response to a leak, which I regard as a discourtesy to the House, and which I am trying to put right.

Mr. Barry Porter (Wirral, South)

As my right hon. Friend has been handed a Macclesfield black spot, may I offer him a Wirral green spot, and congratulate him on his proposal? As a member of the Select Committee who has listened to all the arguments, I consider my right hon. Friend's idea a most sensible way of approaching the matter. We have reached no decisions, except that we cannot leave things as they are. All that I can do now is to offer my congratulations to the President, and I trust that Macclesfield will go back to where it wants to go, sit in its own little village and think, perhaps, that this might be the best way in which to proceed.

Mr. Heseltine

I would not wish to intrude in any way in what sounds like something of an internecine war between my two parliamentary colleagues, so I simply welcome what my hon. Friend the Member for Wirral, South (Mr. Porter) said. However, I regard what he described as a Macclesfield black spot as one of the most encouraging green spots that I have ever heard delivered by my hon. Friend the Member for Macclesfield (Mr. Winterton).

Mr. Nigel Spearing (Newham, South)

As the President praised the Royal Mail in his statement, and implied that we could not keep the status quo simply because of the inevitable rising tide of competition, can he tell us why the House itself should not, through some legislative form, ensure that the magnificent letter service remains broadly as it is today?

Mr. Heseltine

Because the people charged with the responsibility of managing the service do not believe that that can happen, and because an all-party Select Committee, with a Chairman drawn from the hon. Gentleman's party, has advised the Government and the House that the status quo is not an option.

Dr. Keith Hampson (Leeds, North-West)

Is my right hon. Friend aware that the Chairman of the Select Committee first floated the idea of the BP solution—a part-privatisation—because the Committee could not see how any Treasury under any Government could provide the huge sums of investment necessary not only for the Post Office to compete abroad, but to stop the deterioration of services here at home?

That is why the sort of solution that my right hon. Friend suggests, which would enable the Post Office to raise funds outside the public sector borrowing requirement—no Treasury would ever agree to that—seems to fit the bill.

Will my right hon. Friend confirm that the Government stake would be no more than 49 per cent., and that the workers' stake in the operation would be at least, say, 10 per cent?

Mr. Heseltine

I have not given a figure for the Government stake today, although percentage figures can be considered in the Green Paper. Certainly one option that the House will want to have in mind, which I have mentioned before, is for the Government to have a large minority stake—suppose it were 49 per cent. The work people and the sub-postmasters might have a significant stake in addition to that. That is not quite the BP solution —I recognise that at once—but it is a variant of that solution, and I believe that it would give much reassurance to a wide body of opinion outside as well as inside the House. The Government will parade that and other options.

Ms Estelle Morris (Birmingham, Yardley)

If the President is concerned about the Post Office's lack of freedom to compete, does he agree that that calls for immediate action, not for further delay? He said that making the Post Office competitive in the public sector would cost the nation money, but does not he accept that privatisation of the Post Office would also lead to a loss to the nation's economy—for example, of the contribution of £750 million that has been made over the past 10 years? That has been the steady contribution of the Post Office to the economic health of the nation.

Mr. Heseltine

The hon. Lady takes a narrow view of the way in which one has to judge such matters. Nobody suggests moving the Post Office abroad. The issue is where the ownership lies, and to what disciplines it is to be subjected. The profit would be distributed within this country one way or another. The question is whether it should continue to go directly to the Treasury by way of a dividend, which means that the Post Office is denied the opportunity to invest in itself.

One of the Post Office's major complaints is that it is not allowed to keep back the amount of retained profit that it would control in the private sector, because the Treasury earns a larger receipt than would be paid in the private sector. If the House says that therefore we should not take so much from the Post Office, it is really saying that that would have an effect on the public sector borrowing requirement and the Government's finances. The money cannot go both ways.

There are issues that we have to face. However, I agree with the hon. Lady that we need to take decisions quickly.

Several hon. Members

rose—

Madam Speaker

Order. We shall now move on.