HC Deb 11 May 1995 vol 259 cc885-94 3.30 pm
Madam Speaker

We now come to a statement by the President of the Board of Trade. [Interruption.] Will hon. Members who are leaving please do so quickly?

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

Madam Speaker, I wish to make a statement on the Post Office and to set out a number of changes that I intend to introduce to the present arrangements.

In the case of Post Office Counters, we agreed last year that it should offer the services of the network of 20,000 post offices—19,000 of which are run as private businesses—to a wider range of clients. That policy has led to a number of new services being offered or trialled at post offices, such as bureaux de change services, travel insurance and the free payment of gas bills. Post offices are also the largest retailer of national lottery tickets. I welcome those developments, which should help strengthen the network of post offices, not least those in rural areas.

I intend a number of changes to the financial regime of the Post Office, notably the external financing limit, or EFL. Although no responsible Government could undertake to ring-fence the Post Office entirely from the pressures on public spending, I am prepared to agree that in future we shall aim to set the EFL at about half the Post Office's forecast post-tax profit. I hope to make progress in that direction this autumn.

I intend to adopt a more strategic corporate plan process and to remove the formal limit on the Post Office's capital expenditure, together with the associated detailed scrutiny of investment projects in its core business. Those measures should enable the Post Office to plough back the benefits of additional efficiency into improving services for customers.

I now turn to the board's wish that the Royal Mail should be able to extend its activities into adjacent markets. Although I am prepared to consider such requests, I have told the Post Office that in doing so, I would expect a considerable increase in the use of the private financing initiative, in respect of both activities in associated fields and increased opportunities for the private sector to participate in its existing activities.

There are certain provisos on my willingness to make those changes. First, there must be real pressure on the efficiency of the Post Office. I am about to appoint consultants to carry out a performance review of the Post Office's operations.

Secondly, the Post Office must generate the funds for any expansion from increased efficiency and not from increased prices. I therefore greatly welcome today's announcement by the Royal Mail that it intends to maintain its current domestic tariffs until at least March 1996. That means that there will have been only one domestic tariff increase in the first four years of this Parliament, a considerable achievement.

Finally, I have told the board that I would expect all new developments to be separately accounted and, where practical, to be developed through separately established Companies Act subsidiaries. As a first step towards that, I have agreed with the board that it will convert the main operating units of the Post Office into Companies Act companies.

Before concluding, I would like to thank the Trade and Industry Select Committee for its very helpful reports on these issues. My Department is replying in detail to its most recent report today.

The measures that I have announced today represent a pragmatic and balanced package for the Post Office and its customers. I commend them to the House.

Dr. John Cunningham (Copeland)

I have the pleasure of giving a general welcome to the statement, especially as it is a modest step. These are modest measures in the direction of policies for the Post Office for which we in the Opposition have argued for several years. The whole House should congratulate the management and all employees of the Post Office on the announcement today that it will hold steady prices for the Royal Mail. That is a significant achievement—an achievement in public ownership and in the public sector—by everyone engaged in the Post Office.

The President of the Board of Trade has just announced that, yet again, he is to appoint consultants to examine the Post Office. Is he aware that we know that he has already spent £2 million on engaging consultants to examine the Post Office? Even after that expenditure, funded by the taxpayer, he has come forward with only a very modest response to our requests, the requests of the management of the Post Office and the requests of the Select Committee on Trade and Industry for change.

What is new about the right hon. Gentleman's announcement that, in future, he will aim to set the external financing limit at about half the Post Office's forecast taxed profit? That is the status quo; it is not a change. It is recognition of the circumstances that exist in the Post Office and of its arrangements with the Government today. That is no change—no step forward.

Why has the right hon. Gentleman apparently abandoned his previous commitment, although he said that it was his lifetime ambition to set the rest of his political career in the track of privatising the Post Office? Is the reason that he knows that there is no majority in the House for the privatisation of the Post Office? Does he recognise that he is, again, admitting defeat on his principal personal objective?

Is the right hon. Gentleman aware that, a year ago, he told the House, the Select Committee on Trade and Industry and everyone in the Post Office that he was not in favour of the private financing initiative for Post Office operations? Why has it taken him a year to change his mind? Why, during that time, did the Government insist that the Post Office, which wanted to lease trains for the mail, should spend £50 million in cash to buy those trains when, using the initiative announced today, it could have saved that expenditure for other capital investment?

Is not the reality that the Government could now, without legislation, remove altogether the current capital expenditure limits on the Post Office, relax even further the scrutiny of specific projects, free altogether the Post Office management from the DTI's nit-picking interference, give new freedoms to Post Office Counters Ltd., end the closure of Crown post offices, and get off their backside and get on with the private financing initiative about which the right hon. Gentleman has prevaricated for so long?

Is not it also clear that the only way in which the public, who overwhelmingly oppose privatisation of the Post Office, can ensure the defeat of that privatisation is to ensure the defeat of this Government?

Mr. Heseltine

The right hon. Gentleman may not have read the Green Paper that we published a year ago as carefully as I would have hoped, because, far from rejecting the option of the PFI, I said on page 15, paragraph 9: The relaxations discussed in paragraph 6, together with use of joint ventures under the PH, would be of some value to Royal Mail. That is not what one would call rejecting the option, then or now. It is quite clear that we looked at that option. It was not the best option, but it was an option and it was the one that, in the light of the circumstances, we have decided to pursue.

I cannot accept for one moment that there is an argument for halting the closure or conversion of Crown post offices into sub-post offices. The fact is that the record of achieving that has been considerable. The benefits and efficiency that have been achieved have followed as a consequence. It is a matter for a management decision of the Post Office. It is continuing to do that, because it believes that it is in the interests of its customers.

The right hon. Gentleman is also wrong about the issue of the EFL. The fact is that it is true today that it is closer to 50 per cent., but it has been moving in that direction from higher percentages. It is because we want to try to discuss arrangements with the management of the Post Office for a more stable relationship in the future that we have attempted to quantify, within the constraints that I have set out, what that EFL might look for in the future.

I was again amazed that the right hon. Gentleman should be surprised that in taking this step to help the Post Office, I should be appointing consultants to look at the books within the Post Office.

Dr. John Cunningham


Mr. Heseltine

It is not a question of again. Does not the right hon. Gentleman realise that business is a dynamic process? If I am going to have to look at a whole range of judgments on the efficiency of the Post Office, it is no use relying on evidence that was given to me a year or two years ago. I have to see facts as they are and as they will be in the future.

That is a classic example of why the right hon. Gentleman and his party have never understood the weaknesses and frailties of nationalisation. They rely on the advice of the managers, as interpreted by their officials. I want to make sure that I have got someone inside the Post Office who can see the books and advise me about what is actually happening.

The right hon. Gentleman accuses the Government of attempting to adopt the policies of the Labour party. That, if I may say so, is rich. The party that says that it has abandoned nationalisation, is trying to dissociate itself from the trade unions and trying to repeal clause IV now somehow suggests that we are pursuing its policies. Exactly the opposite is the case.

When the right hon. Gentleman says that I have abandoned a lifetime's ambition to privatise the Post Office, let me say that I recognise that I failed to persuade some 10 of my Conservative colleagues to move to a privatisation process. I got a lot closer to persuading 100 per cent. of my party to back privatisation than the right hon. Member for Sedgefield (Mr. Blair) got in persuading his party to abandon clause IV.

What the right hon. Gentleman's opposition to our proposals revealed clearly is that he still hankers after a public sector solution. It is all very well to talk about getting rid of clause IV, but when the chips are down, that is where the Labour party's hearts and minds belong.

Mr. Patrick McLoughlin (West Derbyshire)

May I welcome my right hon. Friend's statement on his general relaxation of some of the rules relating to the Post Office? Could he say a little more about the future of sub-post offices? Already, some 19,000 post offices are in private ownership. There is a great feeling that they ought to be given far more commercial freedom to take on far more activities. The only way that rural post offices will survive is by giving them greater business opportunities. Will my right hon. Friend say a little more on that matter?

Mr. Heseltine

I am delighted to respond as positively as I can to my hon. Friend. Let me tell the House what I have said to the officials in my Department. I asked them whether we have turned down any requests for further freedoms. I am not aware of any requests from Post Office Counters that we have turned down. If any right hon. or hon. Member has some ideas that we should pursue to free up the rural and urban post offices, I shall be immensely sympathetic. To the best of my knowledge, they have the freedom to move in an increasingly wide area and I do not know of any additional freedoms for which we have been asked.

Mr. Nick Harvey (North Devon)

I welcome the right hon. Gentleman's statement and his conversion to the policy that he has outlined, albeit a little belated and perhaps rather grudging. Will he go one step further and remove the uncertainty that might arise from his decision to change the operating companies into Companies Act companies? Will he confirm that it is not his intention to come back later to try to privatise any of those companies? Will he tell the House why he intends to continue to levy an EFL of 50 per cent. of post-tax profit, which is clearly a higher financial burden on the Post Office than on any of its rivals or on any other private sector companies?

The right hon. Gentleman said that he intends to appoint consultants. In a previous answer, he sounded as if he intended to keep them on virtually a permanent basis. Does not the Post Office's achievement, which he rightly applauded, of managing to keep mail prices down, provide some evidence of good performance? Is it really necessary to use consultants on a permanent basis and at further expense?

The post office network has been referred to. Will the right hon. Gentleman tell the House whether the Government will invest in smart card technology in the rural post office network?

Mr. Heseltine

The hon. Gentleman will know that the automation of sub-post offices is now the subject of advanced negotiation. My right hon. Friend the Secretary of State for Social Security has negotiated an eight-year contract for the benefit arrangements. There will be a much more sophisticated facility available through a PFI arrangement to the sub-post offices, and I welcome that as one of the developments of their potential.

On the appointment of consultants, if I am to be expected to make judgments about how the business can expand, it is important that I have full access to the facts and figures. The hon. Gentleman made the assumption that keeping prices down has followed as a result of continued efficiencies. That is perfectly true. The question that has to be asked is how such large efficiencies were achieved after years in which the business had been a public corporation. That is a hard question, and there is only one answer: it had not been efficiently run in previous years. I am determined to do all that I reasonably can to change the climate. The 50 per cent. EFL is a matter of judgment and negotiation. I must have regard to the interests of the public Exchequer in securing a reasonable return by way of the dividend that the EFL represents.

Several hon. Members


Madam Speaker

Order. It appears that every time there is a ministerial statement I have to remind hon. Members to be brisk with their questions and to put only one question to the Secretary of State. As hon. Members know, at statement time I try to call every hon. Member who wants to intervene. That is unprecedented; my predecessors have not done so. I cannot go on doing that if hon. Members make statements and ask several questions. I shall have to look at statement time again if hon. Members do not co-operate with the Chair. One question each, please.

Mr. Jim Lester (Broxtowe)

As one of the 10—although I think that there were rather more than that—who opposed the privatisation of the Post Office, I congratulate my right hon. Friend on a pragmatic and coherent policy statement that will carry with it many people, particularly the general public who were worried about potential changes. It gives the Post Office and Post Office Counters a way forward that we can all support.

Mr. Heseltine

I am most grateful to my hon. Friend. I know that he was one of the small number of my colleagues who disagreed with my views. I do not believe that this is the ultimate and correct solution. It is the politically possible solution, and that is a step on from where we were. When I see what is happening across the world and the potential for the Royal Mail if we had turned it into a first-class international trading company, I must say that I do not bring this proposal to the House believing that we have ended the job.

Mr. Richard Caborn (Sheffield, Central)

I thank the President of the Board of Trade for his response to the Select Committee. I hope that we can get that into the public domain as quickly as possible, because there is a great deal of information there in which hon. Members will be interested. May I also thank him for at least agreeing that the status quo is unacceptable and that there should be some move towards commercialisation, even within the public sector borrowing requirement? How are the Royal Mail and Parcel Force to use the PFI if the private sector is not to be a major stakeholder?

Mr. Heseltine

The whole point of the PFI is to bring the private sector into partnership with the public sector. My announcement today merely indicates the ways in which we can move in that direction.

Sir Dudley Smith (Warwick and Leamington)

While many of us have complained from time to time that a letter has been unexpectedly delayed by the postal services, is it not a fact that postal services in other advanced countries are a joke compared with our service, which is extremely efficient? Is my right hon. Friend aware that the postal service in this country has improved enormously in the past few years? Is he not wise and sensible to put the utmost pressure on it to keep that up?

Mr. Heseltine

I agree that the Royal Mail provides a very high quality of service. The standards have improved, and the returns that the Exchequer is achieving have improved. I take the view—this is where I disagree with some hon. Members—that I should build on a success where I see it and give it a wider opportunity. The Labour party, by and large, takes the view that it should be constrained and limited to ensure—[HON. MEMBERS: "We do not."] It is no use Labour Members saying that they do not. We all know what they did. Capital investment in the last five years of the previous Labour Government, in today's money terms, was less than half what it has been in the past five years of this Government.

In the last five years of the previous Labour Government, the Post Office lost £300 million. In the past five years, under this Conservative Government, it has made more than £1 billion. That is the real world. There is no point in Labour Members lecturing us about what they would or would not do. We know what they do when they get power and that is the best possible argument for keeping them where they are, without any power.

Ms Kate Hoey (Vauxhall)

The President will be aware that the public will—generally—be very supportive of the small measures that he has announced today. The public, and hon. Members, will, however, want to know why it has taken three years—it could have been agreed three years ago—and £2 million of consultants' fees to reach a general agreement. Why has it taken that long?

Mr. Heseltine

Because I was investigating ways in which to make what I thought was the right step. To do that was a time-consuming business. It certainly took a proper period of time, and I make no apologies for that. What matters is not whether it took time to make the decision, but whether it adversely affected the Post Office in the meantime. One need only look at the results—the rising profitability—to realise that it has not affected the opportunities of the Post Office.

In real terms, we are talking not about nit-picking details, but about where the future of this great company will be among the increasingly sophisticated multi-media operations and world-class competitors of tomorrow. What the House will not face and has not faced is why American multinational companies should be free to come and trade in this country and take the business from our Royal Mail while we deny our Royal Mail the opportunity to fight on its own terms.

Dr. Keith Hampson (Leeds, North-West)

Does my right hon. Friend accept that that is precisely the point? If Opposition Members had found that it was possible to commercialise the Post Office, they would have done it. Unless the shadow Chancellor allowed another Labour Government to pay absolutely no regard to the disciplines of public sector companies, we can now go only one way and free those companies as far as possible. The statement, welcome as it is, is inadequate in one essential area. The companies should be totally free to raise the investment that they need when and how they need it in the private capital markets of the world. We should be privatising the Royal Mail. My right hon. Friend has not gone far enough.

Mr. Heseltine

I cannot in any way improve on what my hon. Friend has said. That is exactly my view. But from where we were, I have taken a step in the right direction.

Mr. Peter Hain (Neath)

In welcoming the President's statement, may I ask him about its European implications? In considering adjacent markets, would he allow the Royal Mail and Parcel Force to engage in joint ventures with—possibly—private sector operators in Europe so that the British Post Office may conquer the European mail market, which is critical for the future? Will he also categorically resist any attempt which, as I understand, will be forthcoming from the European Commission, to impose VAT on postal services in view of Swedish entry? That seems to be absolutely vital for the future. Will he guarantee a minimum level of the national network for Post Office Counters?

Mr. Heseltine

The hon. Gentleman will appreciate that we are doing everything possible, and far more than any other Government have ever done, to enhance the potential for Post Office Counters and sub-post offices. I am extremely grateful to the National Federation of Sub-Postmasters, which has widely praised what the Government are doing. There is absolutely no doubt about support for our policy.

Were we to inject a statutory minimum number of post offices, that would involve a degree of prescription that is economically unrealistic. Why should we stop at rural post offices? One could think of an endless stream of desirable features of an economic society that one could underpin with a state guarantee. 'That is an unrealistic suggestion, and it merely reveals the difference in approach between Opposition Members and those on the Conservative Benches.

As to how we deal with the European opportunities, it flows from my statement that I shall discuss them with the Royal Mail and the Post Office. The position there is changing a great deal. As the House knows, the Germans and the Dutch are moving to a private sector solution for their mail. I am prepared to look at a PH solution, but I shall take into account the two-way nature of such activity. There are significant operations within the Post Office that open themselves up to partnerships with the private sector. If I am expected to move in one direction by extending the opportunities, I shall expect the Royal Mail and the Post Office to do exactly the same with their activities.

Mr. Hain

What about VAT?

Mr. Heseltine

I have no reason to believe that there is any threat to the present status.

Sir Peter Emery (Honiton)

I thank my right hon. Friend for reinforcing support for sub-postmasters and sub-postmistresses throughout the country. He has asked for suggestions to assist them. May I therefore suggest that, if all sub-postmasters and sub-postmistresses were able to issue motor vehicle licences, which they have wanted to do for a long time, that would be greatly welcomed by people living in country districts? That would be a great step forward.

Mr. Heseltine

That is a constructive suggestion from my right hon. Friend. I keep asking for advice as to whether there are any outstanding requests. I am not aware of any, but I shall certainly consider that made by my right hon. Friend and write to him.

Mr. Dennis Skinner (Bolsover)

Is the Minister aware that he is in a very odd constitutional position? Three times already this afternoon he has bemoaned the fact that he cannot get through the policy he really wanted—that is, to privatise the Post Office. He has then come along and attacked people because they have put forward alternatives, saying, "Well, it is not really my policy. It is second best." Why does he not do the decent constitutional thing, as he did over Westland, and resign and launch his counter-attack from the Back Benches?

Mr. Heseltine

Of all the hon. Members to ask that question. Am I now to understand that, within the Labour party, the hon. Gentleman is against trade unions and against nationalisation, and is now abandoning his support for the Campaign for Nuclear Disarmament? If he is not, why has he not resigned from the Labour party?

Mr. Edward Leigh (Gainsborough and Horncastle)

Given the parliamentary arithmetic, most people would accept that my right hon. Friend's statement represents a sensible, pragmatic way forward. Can he explain whether there is any logic in the state owning a commercial organisation to which he has given full commercial freedom? There is no logic and no point in that.

Mr. Heseltine

There is no logic. My hon. Friend is entitled to great praise for the remarkable work that he did when he was with me at the Department of Trade and Industry to explore the very ideas under discussion. As he will know, logic is not always the controlling influence in politics.

Mr. Tam Dalyell (Linlithgow)

The right hon. Gentleman's blast to Bolsover will not quite do. Is the President aware that, in his candid, truthful, revealing and much-to-the-point answer to his hon. Friend the Member for Broxtowe (Mr. Lester), he said, "Look, I don't believe in this policy."? Is it old-fashioned to think that when he and I came to the House all those years ago, a Secretary of State in such a position would have asked the Prime Minister at least for transfer to other work? Is it not a serious matter when a Secretary of State quite obviously does not believe in the policies that he is putting forward?

Mr. Heseltine

If my blast at the hon. Member for Bolsover (Mr. Skinner) will not do, I am happy to have a blast at the hon. Member for Linlithgow (Mr. Dalyell).

I have made the position absolutely clear. The policy that I am putting forward today is better than the policy that is in place at the moment. It is not as good as the policy that I tried to persuade the House to adopt a year or so ago, but it will enhance the position of the Royal Mail in an acceptable way.

There is a better way, a better tomorrow, but if I am to be told that one must stay where one is unless one can reach the ultimate objective, I have to tell you, Madam Speaker, that none of us would ever move anywhere in politics if we did that.

Mr. Barry Porter (Wirral, South)

I am grateful for my right hon. Friend's remarks in relation to the Trade and Industry Select Committee, but I would not want him to think that some of us who are members of that Committee believe that what we proposed was the ultimate objective. I think that he has made that clear. Nevertheless I would like him to reiterate that we are making the best of a job—[HON. MEMBERS: "Bad job."]—and it is a pragmatic solution as we stand, but I hope that that is not the end of it and that there may well be bluebirds over some cliffs of somewhere or other.

Madam Speaker

Order. I was waiting for a question in all that. In fact it was a comment, and there was not a question. This is the time for questions on the statement. Perhaps the Secretary of State will make a stab at responding to that non-question.

Mr. Heseltine

I was about to burst into, We'll meet again—don't know where, don't know when", but I welcome another trimmer in the art of politics, my hon. Friend.

Mr. Peter L. Pike (Burnley)

Does the President of the Board of Trade agree that some of the commercial activities to which post offices cannot return are the services that were provided by Girobank, which the Post Office lost when it sold Girobank to the Alliance and Leicester building society against its will, and to which post offices are banned by the conditions of sale from returning?

Mr. Heseltine

That is an important issue. I know that discussions are going on—I am not sure what stage they have reached—with clearing banks about what facilities might be made available through the post office network. I do not have a specific statement to make on that subject, but there are interesting potentials out there.

Mrs. Ann Winterton (Congleton)

May I congratulate my right hon. Friend on realising that politics is the art of the possible, and may I welcome the statement that he made today—not least on the new arrangements for the Royal Mail? Does he agree that those arrangements will further enhance the service that is given to the customer? He has already announced that the price is to remain as it is, and all my constituents will welcome that.

Mr. Heseltine

My hon. Friend is right. They will enhance, but they will not maximise. That is the difference between us.

Mr. Brian Wilson (Cunninghame, North)

It is great to be discussing a public sector success story, but it is odd that, although the statement has been generally welcomed by Opposition Members, the President of the Board of Trade does not agree with the statement that he is making.

Will the President of the Board of Trade at least accept our gratitude for enunciating the new doctrine of permanent consultancy, whereby consultants report and he and his Department take a year to consider the report, by which time it is time for consultants to report again? It is a very lucrative doctrine for the consultancy industry.

Will the right hon. Gentleman confirm that article 100(a) of the treaty of Rome will remain the only legal basis for any policies adopted regarding Post Office liberalisation in future? It is a very important matter at present. Does he also recognise that the policy of closing down Crown post offices is despised in hundreds of communities throughout the country? If he does not recognise that after the local elections, he certainly missed something. Anyone who has visited places where the local post office has been shoved into the back of a supermarket knows that everyone resents what has been done and wants to retain a Crown post office in the town centre.

Finally, does the right hon. Gentleman accept that what we are discussing today, above all, is a defeat of his ambition to privatise the Post Office? The only way to ensure that that defeat is maintained is to defeat the Tories.

Mr. Heseltine

I am not aware of any changes in the relationships that we have with the European Union with regard to the Post Office. If that position changed, I would of course inform the House.

I am very interested in what the hon. Gentleman has to say about the continued unease of constituents in places where Crown post offices have been converted to public post offices. Such a conversion has taken place where I live. I cannot remember when I last heard anyone talk about it.

The service is perfectly satisfactory. There are 19,000 sub-post offices. I do not receive letters of complaint. Our proposals have been warmly welcomed by the National Federation of Sub-Postmasters. As usual, the only people who are completely out of touch are Labour Members who have listened to what the unions have said about the matter. They are so ignorant about the situation that they do not know that 19,000 out of 20,000 post offices are already privately owned.