HC Deb 25 March 2002 vol 382 cc565-80 3.31 pm
The Secretary of State for Trade and Industry (Ms Patricia Hewitt)

I should like to draw the attention of the House to my declaration of interests contained in the register.

With permission, Mr. Speaker, I would like to make a statement on the announcement that Consignia made this morning about its restructuring plan for Parcelforce and the outcome of its review of its distribution systems.

That announcement, although it comes as a blow to many hard-working employees and their families, is the first of several necessary steps that will lead to the renewal of postal services in Britain. As is well known, Consignia plc—the company running the post office network, the Royal Mail and Parcelforce—has been losing money. Its costs have risen at a time when the rate of growth in mail volumes has slowed, with competition from fax, e-mail and the internet affecting demand. The company is losing more than £1.5 million every day and Parcelforce Worldwide alone is losing £15 million a month.

In the 10 years of its existence, Parcelforce has never made a profit and has now amassed losses of close to £400 million. Parcelforce's business model has failed and repeated attempts to make it work over the past 10 years have not succeeded. The losses on parcels have drained investment from the rest of the Post Office. For the sake of the company as a whole, Parcelforce now needs to be restructured and restored to profitability.

It is important to consider how the company got into this position. The British Post Office used to be admired across Europe for its high standards of performance. But in the 1980s and 1990s—[interruption.] Hon. Members should just listen. During those years, other postal services across Europe began to modernise and invest so that they could deliver better services in a rapidly changing market. But successive Conservative Governments did not care about improving delivery. [Interruption.] They allowed the Post Office to stagnate and starved it of investment. [Interruption.]

Mr. Speaker

Order. Hon. Members must allow the Secretary of State to be heard.

Ms Hewitt

Thank you, Mr. Speaker. It must be all that sea air in Harrogate. [Laughter.] Oh go away; they are pathetic. While new technologies and changing markets were transforming the communications sector, our postal services were allowed to drift and decline. [Interruption.] I meant bracing air, okay? It must have been the Conservative party leader's speech that over-excited them.

Since 1997, the Government have given the Post Office the greater commercial freedom to meet those challenges that management and unions had long called for. Greater freedom within the public sector has meant freedom for the company to make more commercial choices. But with freedom comes responsibility. The company will be responsible for controlling costs, organising itself to meet the needs of customers and modernising the way in which it works. The Government have a responsibility too—to ensure that the company has the best possible management and the resources needed for investment. In this way we ensure that public and business customers will get the best quality service.

We have already taken several steps to strengthen the management, and today I have announced that Allan Leighton has been appointed the new chair of Consignia, a role that he has been playing on an interim basis since January. He will be responsible for getting a grip on the situation that the company faces, and that involves stemming the losses, reforming the company's industrial relations and developing a new vision and strategy for the future.

Allan Leighton has a proven track record of success in business. I believe that he has the determination, drive and energy needed to transform the Post Office's performance. As the interim chair and as a non-executive director of the company, he has seen at first hand both the problems that exist in the company and the tremendous potential that it has. He has already spent considerable time in sorting offices, post offices and delivery offices around the country and he was out there again this morning, talking to some of the work force about the changes that the company announced today.

The changes are as follows. The first is the integration of the universal parcels service into the Royal Mail itself. Under the universal service obligation, which we have enshrined in legislation, the company is responsible for delivering parcels of up to 20 kg to every part of the country. By giving this responsibility to the Royal Mail, the company will create a more efficient service, safeguarding the 30 million parcels sent by the general public every year so that people will still be able to send parcels from their local post office just as they do now.

Secondly, there will be a radical reshaping of the remaining Parcelforce business, which will in future concentrate on high-value, time-guaranteed express services. Thirdly, there will be changes to the mail distribution system. The existing network of road, rail and air has developed on a piecemeal basis. It has been causing delays, imposing excessive costs and reducing the quality of service to customers. The necessary rationalisation will increase the volume of mail carried by rail. Although the practice of sorting mail on trains will be phased out, bulk mail will be carried by rail during the day. The total number of road journeys undertaken by Royal Mail will be reduced, as will the number of vehicles used, cutting pollution as well as costs. [Interruption.] Conservative Members do not care about that, either. Fourthly, the company is stripping out layers of management and jobs in its operations and support services that are no longer needed as a result of the other changes.

The company expects that, together, these changes will mean the loss of 13,000 jobs over the next three years with a further 2,000 jobs going through natural wastage. The company has also made it clear that there will be further unavoidable job losses over the next three years. I will, of course, continue to inform the House as the restructuring of the company is taken forward.

As a contribution towards supporting the company as it restructures, I can also announce that the Government will forgo a dividend for this financial year, releasing an additional £64 million for the company.

I understand the very deep disappointment that postal workers will be feeling at this news today. This is not a decision that the company has taken easily or lightly, but it is unavoidable if we are to create a high-quality postal service that will offer good and secure jobs. I know that the whole House will welcome the fact that the company will offer as many of those affected as possible the option of continued employment in a different part of the business or a voluntary redundancy package. The company is, of course, in discussion with the trade unions. We will do everything that we can through the Employment Service and other agencies to provide support, assistance and new opportunities to those who lose their jobs.

These are difficult times for the company as management and work force grapple with the legacy of underinvestment and poor industrial relations and undertake the changes that are necessary to face the competitive postal markets of the 21st century. I have made it clear to the new chairman that there needs to be a better partnership relationship between the management and the unions if they are to deliver this. That was recommended by Lord Sawyer in his report published last year, and he believes that there is a genuine commitment to change from all sides in the Post Office and Royal Mail to achieve this. The benefits of that relationship have already been demonstrated since his report was published. Compared with more than 43,000 days lost to unofficial action between April and June last year—that figure itself considerably lower than in the last year of the previous Conservative Government—only 1,352 days were lost to unofficial action in the three months from October to December. That is a tremendous improvement and the whole House will want to see it maintained.

I am confident that the path that we are pursuing is the right one. Greater commercial freedom; strengthened management; universal service enshrined in primary legislation—in other words, a delivery every working day to every address in every part of the country.

Today marks a turning point for the company. In the words of the new chairman, the measures announced today will ensure that real progress is made in the first year of a three-year strategy to restore profitability, deliver positive cash flow, improve services and make the business a better place in which to work. Central to Allan Leighton and the company's task will be the relationship with the regulator. As right hon. and hon. Members will know, the postal regulator recently announced an extension of the consultation period; a welcome response, in no small part, to the concerns expressed in this House. In the coming weeks, Allan Leighton, the company and the regulator must have further talks and reach a shared analysis, both of the company's financial position and of the postal services market.

I know that today's news will come as a blow to many workers. But these changes, painful as they are, are unavoidable. Today must be the first step towards renewal, and towards creating a postal service that justifies the pride, and lives up to the expectations, of the millions of people in Britain who depend upon it every day.

Mr. John Whittingdale (Maldon and East Chelmsford)

May I first thank the Secretary of State for giving me an advance copy of her statement?

This afternoon's statement is a humiliation for the Government. Less than two years ago, the then Secretary of State, the right hon. Member for Tyneside, North (Mr. Byers)—who will have his own humiliation later this afternoon—said of the Postal Services Bill:

It will ensure a strong Post Office that is better able to serve all its customers in all parts of the country."—[Official Report, 18 April 2000; Vol. 348, c. 940.] Since then, the business has gone from recording a profit of nearly £400 million to losses currently running at £1.5 million a day. It has seen 547 more sub-post offices close last year alone, and 63,000 days lost in industrial action. Its performance has deteriorated so that it is failing to meet its delivery targets, and estimates put the number of lost items of mail at 1 million every week; although that may be less surprising, having discovered that the Secretary of State thinks that Harrogate is by the sea.

The Secretary of State, incredibly, has tried to claim that somehow it is all the fault of the last Conservative Government, yet this devastating decline has happened in the last two years. Her statement has signally failed to offer any proper explanation for what went wrong in the time since her predecessor was predicting such a golden future for the business.

Is not the truth that the structure for the Post Office created by the Postal Services Act 2000 was, in the words of the Chancellor's then spin doctor, "a dog's breakfast"? Have not the Government failed to give Consignia the full commercial freedom it needed so that, as a result, it has been unable to take the action necessary to modernise due to the constant interference from Ministers, while at the same time, its competitors in Germany and Holland, having been given that freedom, have gone on to become global players? Is not the result that the restructuring and job losses announced this afternoon have been made worse by the Government's abdication of responsibility and failure to act before now?

Turning to Parcelforce, the Secretary of State has said that its business model has failed. Will she confirm that the business model was approved by the Government, who are the 100 per cent. owners of the business? Is it not the case that Parcelforce is operating in a market that is already open to competition? Is it not the case that while its competitors have built up very successful businesses, it has pursued a strategy consisting of a series of disastrous acquisitions costing nearly £750 million over the last five years, in each case approved by the Government at the time the necessary finance was obtained from the Treasury's national loans fund?

Consignia's announcement of 15,000 job losses represents, we are told, just the first phase of restructuring. In her statement, the Secretary of State referred to further unavoidable job losses over the next three years. Can she confirm the reports that the total number of job losses required under Consignia's plans will in fact number anything up to 40,000? Will she say whether any of those will be compulsory redundancies?

The right hon. Lady's statement devoted just three lines to the regulator's proposals to introduce competition into the delivery of postal services, yet that issue will be crucial to the future of the Post Office. It is simply not good enough for the Government to pretend that they have no responsibility for this matter.

Will the right hon. Lady say whether the Government support the introduction of competition? Does she believe that the timetable set out by the regulator is realistic? Will she consider delaying the full opening up of the market to competition until the restructuring of Consignia has been completed? Will she confirm that whatever happens, the universal service obligation will remain the first requirement on the Post Office, with an affordable uniform tariff?

There have also been reports that the restructuring of Consignia will require the closure of up to 10,000 urban sub-post offices, yet that was not even mentioned by the Secretary of State. Will she say whether that figure is correct? She will also be aware that the majority of those businesses are privately owned small firms that are struggling to survive. Will compensation be paid to those who lose their franchise? How does she intend to deliver on the Prime Minister's pledge that all those who wish to continue to receive benefits in cash will be able to do so if more than half the sub-post office network is closed?

Finally, will the Secretary of State confirm the one bit of good news that has been reported—that the name Consignia is to be consigned to oblivion and that the business will revert to being called the Royal Mail? Is it not the case that the problems of the Post Office are summed up by the time and money that has been spent on rebranding the business with a name that is neither respected nor understood while the fundamental weaknesses have been left unaddressed? Is that not why the Secretary of State had to come to the House today and why 15,000 post office workers, with perhaps another 25,000 to come, are having to pay the price for her and her Government's incompetence?

Ms Hewitt

The hon. Gentleman has worked himself up into a great lather of synthetic fury. He fails to acknowledge that, precisely when the German, French, Dutch and Swedish Post Offices were getting commercial freedom, his Government refused to give the Post Office the commercial freedom in the public sector that the management and unions demanded and Labour Members supported. If the Post Office had been given commercial freedom in the public sector years ago, it would have been able to make the changes and investment that other European postal services were making, yet the Conservative Government refused to allow it to do so. That is the fundamental cause of the problems that have built up over years—years when the Conservative Government failed to invest and reform.

Parcelforce has lost money every year in its 10 years of existence. The Government enabled Parcelforce to make the investments that it needed to make, including the creation of the new distribution hub in Coventry and the track-and-trace technology that will form the basis for the renewed and strengthened company.

There is a great deal more work to be done to deal with the very deep-seated problems in other parts of the business and in our postal services. Allan Leighton has made it clear that, as chairman, he and the management will be taking forward those discussions with the unions and examining every part of the business to see what needs to be done to improve the service for the public, which is fundamentally what we all want. Future job losses will depend on the work that has to be done with the business.

Of course the Government believe first and foremost in the universal service obligation. As the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) should be aware, Postcomm's primary duty as the independent regulator is to maintain that obligation. Of course, we believe in competition too, and subject to the duty to maintain the universal service obligation, the regulator's job, as established in the Postal Services Act 2000, is to promote greater choice and competition. The Government support an independent regulator, as did the Communication Workers Union in its submission on the White Paper. It seems that only the Conservative party does not know whether it supports an independent regulator.

Today's statement has nothing whatever to do with the network of post offices, and I am very sorry that the hon. Gentleman has repeated some of the scaremongering that we have heard before from him and some of his colleagues. I again remind the House of what Colin Baker, the general secretary of the National Federation of Sub-Postmasters said: Talk of mass closures is scaremongering and wide of the mark. It is wrong to criticise the industry for being out of date and in decline and then create panic when we are doing something about it. We are investing both in a compensation scheme for sub-postmasters and in schemes to improve local services.

On the hon. Gentleman's final—and least important—point, the name change was proposed and decided on by management, with the support of the unions, a couple of years ago. I entirely agree with the new chairman's view that the sooner the name goes, the better.

Mr. Martin O'Neill (Ochil)

I thank my right hon. Friend for her statement and agree that consideration of the future of Parcelforce is long overdue. It should have been sorted out a long time ago, perhaps being sold off and dealt with once and for all. I welcome the forgoing of the dividend, which will provide the Post Office with additional resources to secure the most flexible redundancy arrangements that can be achieved.

Will my right hon. Friend confirm that the extension by Postcomm of the review period is largely due to the inadequate and inaccurate advice and information provided by Consignia accountants about the nature of the savings that could be achieved, and that Allan Leighton really needs to come in and sort out the Post Office, because most of us are sick and tired of an inadequate and incompetent management that cannot even produce proper financial information to enable the regulator to act effectively?

Ms Hewitt

I entirely agree, especially about the need to sort out Parcelforce. The proposal that the regulator made for opening the market to bulk mails above a certain limit was indeed based on information provided by the company, which has now decided that the figures were wrong. The important issue is that the regulator must, above all, make proposals for market opening that secure the maintaining of the universal service obligation, which is the No. 1 duty under the Postal Services Act. I hope that Allan Leighton and his colleagues will quickly sit down with the regulator to ensure that there is an exchange of accurate information to enable the regulator to make sound and sensible decisions that will secure the universal service obligation.

Dr. Vincent Cable (Twickenham)

I add my sympathy to that expressed about the 15,000 postmen and women who will lose their jobs. In the Secretary of State's discussions with Mr. Leighton during the past few days, did he specifically tell her that 40,000 redundancies are now in prospect? Was that one of the conditions that he set for his appointment as chairman of Consignia?

I welcome the new dividend policy, which the Liberal Democrat and Conservative parties have sought, but does the Secretary of State agree that £64 million, however welcome, is very small compared with the £2 billion that successive Governments have taken out of the Post Office in the past decade, undermining its ability to compete with the private sector?

Specifically on competition, I welcome the conversion of the Conservative spokesman to slowing the introduction of competition; it was the first statement to that effect that I have heard. Is the Secretary of State now part of that consensus, which seems to affect both sides of the industry and both sides of the House?

Finally, on the transfer of the universal parcel service as part of the universal service obligation, irrespective of whether that service makes a profit or a loss, is Parcelforce transferring a liability or an asset to the Royal Mail? Why is the private sector being introduced into not merely the parcel service, but the mail service, while making no contribution whatever through a levy to the maintenance of the universal service obligation?

Ms Hewitt

First, the conditions of Allan Leighton's appointment have nothing whatever to do with the job losses announced this morning or any that may be announced in future. Any question of future job losses has to do with the necessary modernisation and restructuring of the business. The point that Allan Leighton and I have discussed, which may be of interest to the House, is our agreement that we need to get away from detailed interference by Government and officials in the running of a company to which we have given commercial freedom. When the new strategic plan has been approved, it will be up to the company to deliver on that plan. It will report to us, and I, in turn, will report to the House at appropriate intervals.

The hon. Gentleman is right to draw attention to the enormous dividends that were taken out of the company during the Conservative years, when the dividend was set at 90 per cent. Of course, one of the first steps that we took was to cut that dividend to 40 per cent. As I announced a few moments ago, we will waive that dividend for the current financial year. A decision on dividends for other years, during which we have been in power, will be taken in the context of the strategic plan.

We made our position on competition clear when the Postal Services Act 2000 was introduced. The first and primary policy goal is to sustain the universal service obligation. Competition is valuable, and I would expect the hon. Gentleman to support the introduction of greater choice and competition to benefit consumers.

As for Parcelforce's detailed accounts, as I have said, it has made losses every year since it was established. I do not know how those losses break down between different parts of the Parcelforce business, and I am not at all sure that the company knows.

Mr. Tony Clarke (Northampton, South)

I listened carefully to what my right hon. Friend had to say, but does she not consider it to be a matter of gross incompetence that Post Office managers announced the 15,000 redundancies at the same time as they announced that they had got it so badly wrong in wasting £2 million on changing the name to Consignia? Does she not feel that workers in the industry may ask why they should trust their judgment now if they got it so badly wrong then? Furthermore, considering the inevitable instability that there will be in the industry, why cannot the Government tell Postcomm that the unilateral liberalisation of mail at this time, outside that accepted by our European partners, could sound the death knell for the Post Office as we know it today?

Ms Hewitt

As I said, we have taken steps in government to strengthen the management of the Post Office. Even before the appointment of the new chairman, we had secured the appointment of a new finance director to the company, and my hon. Friend the Minister for E-Commerce and Competitiveness recently announced the appointment of a new chief executive for the post office network. The unions and hon. Members, at least on the Labour Benches, have welcomed that.

On Postcomm, I remind my hon. Friend that when we consulted on the new proposals and the creation of proper commercial freedom within the public sector, the Communication Workers Union said that it wanted a new regulator independent of the Government, on the same basis as Oftel, Ofwat and Ofgas, for instance. That is precisely what we have delivered within the framework of an Act that makes it clear that the No. 1 duty of the regulator—independent though he or she may be—is to secure the universal service. I know that the regulator takes that duty seriously.

Mr. Edward Leigh (Gainsborough)

As the Secretary of State knows, the National Audit Office has produced a full report on the subject. Will she say more about Postcomm's proposals for the immediate liberalisation of mail and for achieving full competition by 2006, because those proposals go to the heart of the matter? Consignia accepts the need for competition but is against the timetable laid down by Postcomm, which it says will endanger the company. What timetable does the Secretary of State consider would ensure the survival, growth and profitability of that company and the maintenance of the universal service? Does she accept Postcomm's rationale that it is only by increasing competition to the extent that we have a fully competitive market by 2006 that the company can be saved?

Ms Hewitt

The excellent report by the NAO, to which the hon. Gentleman refers, clearly identifies two risks inherent in the situation. The first is that of introducing too much competition too fast, which might damage and jeopardise the universal service obligation. The second is that of not introducing enough competition, thereby removing from the company an incentive to modernise and to improve its service to its customers.

It is important at this stage for the company and the regulator to sit down and talk to each other, which they have only just begun to do, and to arrive at an agreed view of the company's finances and the nature of the market. On the basis of that analysis, the regulator will arrive at a sensible view of the situation and make a decision about market opening that does not jeopardise the universal service, but which delivers the benefits to the consumer that I would expect the hon. Gentleman to wish to see.

Mrs. Louise Ellman (Liverpool, Riverside)

Can the Secretary of State say whether Allan Leighton has been given complete commercial freedom in relation to urban post offices ? Do the Government value urban post offices? How will they protect services to deprived communities in Liverpool and elsewhere, and value post offices and sub-post offices for the services that they provide, as well as for the jobs that they offer?

Ms Hewitt

As someone who represents a number of deprived urban communities, I entirely agree about the importance of the services that local post offices provide in low-income areas, both urban and rural. The fact is that about two thirds of people in urban areas live within half a mile of two or more sub-post offices, many of which are struggling to survive commercially, as we all know from our constituencies. It makes sense for the Post Office to sit down and talk to sub-postmasters, to consider the detailed market within local communities and to produce proposals to rationalise and improve the network of urban post offices. That is what it will do, and it will not make any decisions on closures of any urban sub-post offices until and unless those consultations have taken place.

Mr. Keith Simpson (Mid-Norfolk)

The Minister will be aware from the course of the questions that she has been asked this afternoon that the House appears to be unhappy with Consignia's track record. Will she now answer the question put to her by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) and tell us whether Consignia's business plan, which seems to have failed, was signed off by her predecessor?

Ms Hewitt

I was referring to the business model for Parcelforce, which is the main subject of today's announcement. That model was put in place in 1986, and although it formed part of the previous year's strategic plan, this Government, and my predecessor specifically, noted concern about its viability. I have no doubt that the company is right to grasp this nettle and to recognise that we cannot carry on with a company that is publicly owned and has been given commercial freedom, but which has been losing money for the last 10 years. By integrating the universal parcel service in Royal Mail, which the unions, among others, have been arguing for, we will strengthen the universal service and stem the losses that Parcelforce has been making ever since its business model was established under the Conservative Government.

David Hamilton (Midlothian)

Does the Minister understand several points? One is that the work force already accept that restructuring should take place. Parcelforce is an example, and a bad one, of what happens when cherry-picking is allowed to take place throughout an industry.

The Minister spoke about vehicle losses that would take place under restructuring. Is she aware that in urban and semi-rural areas, workers require those vehicles because they are the only vehicles that they have nowadays to get them from one place to another? That is due to the subsidies that were paid, and indeed every local authority has to pay out millions of pounds because of that lot on the Conservative Benches. They sit there and cry crocodile tears over thousands of workers, but that is absolute rubbish. I can understand angry workers in the industry, but can the Minister understand why there will be great anger about what is happening under a Labour Government?

Ms Hewitt

The reorganisation of the transport system is something that the management and the unions have been discussing for some time. We are all familiar with the situation in urban and rural areas where a Royal Mail van that is collecting or delivering mail is rapidly followed by a Parcelforce van delivering parcels. That is not a sensible way to run a business, and by reintegrating the universal parcel service within Royal Mail, the company will be able to manage with fewer vehicles and deliver a better service to customers. Despite the fact that painful job losses will result from that, we should support the better service that will result.

Mr. Alan Duncan (Rutland and Melton)

Perhaps the only sympathy that one might have for the right hon. Lady stems from the fact that most of these problems have been dumped on her because of the incompetence of her hapless and hopeless predecessor, the right hon. Member for Tyneside, North (Mr. Byers). What plans are there to increase the price of a first-class stamp?

Ms Hewitt

That is a matter for the company and the regulator, and the company may well wish to apply to the regulator for an increase in the price of the stamp. But I do not think, and I hope that this is not what the hon. Gentleman was suggesting, that the problems faced by the loss-making Parcelforce or the inefficiencies inherent in an out-of-date transport system should be dealt with by increasing the price of the stamp paid by the customer.

John Cryer (Hornchurch)

Is my right hon. Friend aware that the Post Office has for many years been run with a steadily and steeply declining work force and a management that is vindictive and bullying in the extreme? The job losses that have been announced today and those that will follow from the announcement in the coming years will hit some of the poorest and most vulnerable communities in Britain, including many of the people whom I represent in the London borough of Havering. Is not the only real answer to start to invest properly in the Post Office and even to allow the price of a stamp to rise, which it has not for some time? In addition, we should tell Postcomm and the European Commission, which seem desperately keen to break up the Post Office, to open it up to commercial competition and to end universal service, to get lost and stick their plans.

Ms Hewitt

I agree entirely, and I have said so before in the House, that part of the Post Office's problems are down to poor management and appalling industrial relations in some parts of the country. That situation, for which the union as well as the management bears some responsibility, was well described in Lord Sawyer's report last year. I am glad to say that many of those problems now appear to be behind us and that the union and the company are now committed to partnership working of the sort that is essential in any modern organisation that is to deliver decent customer service and be a good place to work.

However, I repeat, today's announcement of job losses, extremely regrettable though they are, has nothing to do with the proposals from the regulator. They are a direct result of a parcels company that has been losing money for 10 years, an out-of-date and inefficient transport system, and inefficiencies in the management and support services—all of which are now being dealt with by new management.

Hywel Williams (Caernarfon)

Mr. Allan Leighton, the new chairman of Consignia, is charged with reforming the company's industrial relations. That he begins with 15,000 redundancies is a kick in the teeth for the Communication Workers Union, which has worked hard to improve industrial relations over the past few months.

It is a kick in the teeth for the people of Wales that the depots at Wrexham and Pontypridd are to be closed, leaving only the Swansea depot working. Will the Secretary of State tell us what environmental or commercial sense it makes for parcels to be delivered to the far reaches of my constituency in the Llyn peninsula from Manchester or Liverpool?

Ms Hewitt

As Allan Leighton's announcement made clear, parcels that fall within the universal service will be integrated within the Royal Mail and will therefore use the logistics and delivery system of the Royal Mail as a whole. As for Parcelforce, the only way in which a sensible organisation can be created from the existing loss-making one is to rationalise the distribution system in the way that Allan Leighton proposes.

Kate Hoey (Vauxhall)

The Secretary of State says that the regulator Postcomm is independent, but surely the Secretary of State ultimately has overall responsibility for the Post Office. Surely now is the time to discuss with the regulator the nonsense of accelerating the process of opening up to competition, to say that because of the current situation we need more time, and, as my hon. Friend the Member for Hornchurch (John Cryer) said, to tell the European Union that the process is not something that we can speed up?

Ms Hewitt

The proposals made by the regulator, on which the regulator is consulting, are clearly within the scope of the European directive and are not being imposed on us by the European Commission. However, the independence of the regulator, which was sought by, among others, the union itself, was enshrined in the Postal Services Act 2000, which Labour introduced and supported. Now, the company and the regulator need to sit down and discuss the restructuring needed in the company, of which today's announcement forms a part, and a sensible regulatory framework that will allow the company to go forward and, above all, continue to deliver its universal service obligation. I hope that the regulator and the company will achieve that rapidly.

Tim Loughton (East Worthing and Shoreham)

I am sure all our constituents are greatly encouraged by the fact that the Minister responsible for mail delivery thinks that Harrogate has a coastline, and even more encouraged to learn that even more of our mail is to go by rail and thus be the responsibility of the Secretary of State for Transport, Local Government and the Regions. Before she prays in aid the National Federation of Sub-Postmasters, which has its headquarters in my constituency, may I remind the Secretary of State for Trade and Industry that that organisation co-ordinated the gathering of 3.5 million signatures in petition in response to her original proposals? She complacently reels off the fact that everybody lives within half a mile of two sub-post offices, but may I remind her that half a mile is well beyond the reach of pensioners in towns such as Worthing, and that many of those sub-post offices are the life-blood of parades of shops in village areas within urban areas, and without those sub-post offices whole communities will quickly fade and die?

Ms Hewitt

I welcome the hon. Gentleman's support for sub-post offices, whether in urban or rural areas; thousands of them closed under the Conservative Government. We have responded to the deterioration in the post office network under the Conservatives with the comprehensive report of the performance and innovation unit, and we have already invested and committed £270 million to investing in the urban and rural networks. Of course, we put a requirement on the company to prevent avoidable closures—something that the hon. Gentleman's Government never did.

Mr. Lindsay Hoyle (Chorley)

I am sure that my right hon. Friend agrees that this is a very sad day for the 15,000 people who are losing their jobs. As the representative of the shareholder—the Government—I hope that she will try to ensure that there are no compulsory job losses and that they will be voluntary. We ought to stop hiding behind the protection of Postcomm, which is not acting for the benefit of the business or the consumer. It needs to be dragged back and told that we ought not to change in advance of our European competitors, as we would face the danger of the same problems that we had with electricity market, where France has still not opened up its market. We keep saying that we will provide a universal service; however, we can do so only if one is profitable.

Ms Hewitt

I entirely agree with what my hon. Friend said about the people who face the prospect of losing their jobs. As the company said, every effort will be made to find alternative employment in other parts of the business for people whose jobs will disappear as a result of the restructuring; the rest will be dealt with, as Allan Leighton said, through voluntary redundancies. When people lose their jobs and take voluntary redundancy, the Employment Service will be ready to help them get new jobs as quickly as possible.

My hon. Friend is of course right that the company must restore its profitability, above all to secure the universal service and a better quality of service for customers. It is for that precise reason that these difficult and painful decisions have been made today; they are in the longer-term interests of the company and its customers.

Mr. John Redwood (Wokingham)

What would the Secretary of State say to the postman in the Wokingham sorting office who told me that costs have got out of control on branding, imaging and an increasing number of managers—from three to eight in Wokingham alone— in recent years? He forecast that the bill would be paid for in job losses and the abolition of the early morning delivery. Despite all that nonsense about the universal service provision, the truth is that the first delivery in the early morning will go. That is the price of failure in spending far too much on branding, logos and more management.

Ms Hewitt

It is pathetic of the right hon. Gentleman to try and suggest that the £2 million spent on the rebranding exercise is the cause of the problem. It turns out to have been a waste of time, but it is certainly not the cause of the enormous problems that the company faces. Much more serious is the fact that costs have not been adequately controlled at a time when the expected growth in mail volumes has simply not been achieved. Let me point out to him that of the redundancies that the company announced today, 4,500 will fall in management and administrative support services.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

Does my right hon. Friend accept that many of us who supported the introduction of a postal regulator did not anticipate that that would result in throwing post office services into a competition for which investment had not been made? Will she assure the House that there will be investment in the capacity to compete? Will she ensure that people who lose their jobs—most of them will be older workers who will come forward for voluntary redundancy—will be offered flexibility so that they do not face the choice of a slashed pension or income support? In particular, will she ensure that the urban post office network, without which neighbourhood shopping in working-class areas in this country will not survive, will be the target of sustained meaningful and determined Government support?

Ms Hewitt

I share my hon. Friend's concerns about the urban post office network. In addition to the investment that I announced last week and the support that we have already provided, my right hon. Friend the Secretary of State for Transport, Local Government and the Regions has established a fund to support sub-post offices in deprived urban areas, where they are particularly essential.

My hon. Friend is right that the company has suffered from underinvestment for a very long time. We are now supporting it in making the necessary investment in restructuring and modernisation. Of course, as part of the voluntary redundancy package, the company will be taking steps to enhance and support the pensions of those leaving the Post Office.

Mr. John Greenway (Ryedale)

How can the Consignia business plan be taken seriously when, judging by the right hon. Lady's answers, she cannot tell us how many urban post offices will close, where the redundancies will fall or even whether the price of a first-class stamp will rise? How many postal workers in rural areas will lose their jobs? There is already a shortage of them, and the service is deteriorating. Is not the bottom line of what she has told the House, as with everything else under this Government, that the price people pay will go up and the service that they receive will get worse?

Ms Hewitt

The hon. Gentleman does not seem to understand the idea of commercial freedom—[Interruption.]

Mr. Speaker

Order. Let the Secretary of State answer.

Ms Hewitt

Thank you, Mr. Speaker. The whole point about commercial freedom, which we have given the Post Office and which the hon. Gentleman's Government wholly failed to give it, is that those in management are responsible for managing the company. They must make the decisions about the necessary restructuring and modernisation of the company, and they will need to decide whether a price rise is justified and whether they can justify that to consumers by providing an improved quality of service.

I do not think that many of us in the House have been satisfied with the quality of service from the Post Office over some years. This morning's statement and the appointment of the new chairman of Consignia—the Post Office—are essential first steps in restoring the Post Office to health and in ensuring that consumers get a service on which they can rely and of which we can all be proud.

Mr. Kelvin Hopkins (Luton, North)

May I ask my right hon. Friend about stamp prices? Are not stamps in Britain cheaper than in any other European Union country apart from Spain? A first-class stamp in Germany is the equivalent of 37p, as opposed to 27p here. Have we not had a Post Office on the cheap? Regardless of incompetent management—that is no doubt true—we have relatively low-paid postal workers and no blame should be attached to them for what has happened. Is not it as likely as day following night following day that, if the Post Office is opened up to competition and the private sector gets hold of some lucrative chunks, the first thing that will happen will be massive price rises to maximise profit?

Ms Hewitt

It is perfectly true that stamp prices here are lower than those in not all but most parts of the European Union. It is for the company to decide whether it wants to seek a price rise, and for the regulator, after consulting the consumer watchdog, to decide whether to grant it. However, we should be clear that stamp price rises, which may or may not follow, are not a way to get: round problems of inefficiency, poor management and bad industrial relations. Those problems must all be addressed in any case. This morning's announcement was the first step to sorting them out.

David Burnside (South Antrim)

Will the Secretary of State explain why in the necessary rationalisation of Parcelforce depots, Great Britain has taken a 50 per cent. cut but Northern Ireland has taken a 75 per cent. cut, which includes the closure of Belfast North, Londonderry and Portadown? Why are we taking more of the pain than the rest of the United Kingdom? When the Secretary of State is in discussion with Allan Leighton on job losses and consigning Consignia to the dustbin of marketing disasters of all time, will she see that the senior managers who are responsible lose their jobs first, rather than the ordinary people on the ground?

Ms Hewitt

I want particularly to pay tribute to the men and women working in the Post Office in Northern Ireland, who have continued to do their job with enormous courage in extremely difficult circumstances.

The specific proposals for rationalisation of the transport depots have been made by Consignia on the basis of a detailed examination of postal patterns in different parts of the country. I shall be happy to obtain further information on the specific point in relation to Northern Ireland, and I will write to the hon. Gentleman accordingly.

Mr. Tony Banks (West Ham)

Is it not a fact that Conservative Governments plundered billions of pounds from the profits of the Post Office, money that could have been used for investment purposes and restructuring? Is that not a further example of where we are inheriting the legacy of Thatcherism?

Will my right hon. Friend tell me—I have a large Parcelforce depot in West Ham—that there will be no compulsory redundancies? Will she tell us also to what extent there is still room for negotiation on which depots are due to be closed?

Ms Hewitt

I entirely agree with my hon. Friend's point that the Post Office has suffered from many years of drift and decline under the Conservatives. There was one review after another under the Conservative Government, and no decisions. There was a flat refusal to give the company commercial freedom within the public sector. Ninety per cent. of its profits were taken in dividend, and there was no investment. That was at a time when every other postal service in Europe was modernising.

My hon. Friend is right to say that it is this Government who have seized the problem and have put in the management that is required to make the tough decisions that are needed to start turning the Post Office round.

Sir Patrick Cormack (South Staffordshire)

Will the right hon. and geographically erroneous Lady confirm that on 25 March 1997 the Post Office was in profit? Will she tell us that she is confident that on 25 March 2007 the Post Office will be in profit again, that all the village post offices in my constituency will still be open and that we shall still have an early morning delivery?

Ms Hewitt

The profits that were being made in the Conservative years were artificially inflated to secure covert tax rises and the subsidy to the Treasury—[Interruption.]

Mr. Speaker


Ms Hewitt

There was little point in having a profitable company when the Conservative Government were taking 90 per cent. in dividends and refusing to let the company make the necessary investment. I believe that we are putting in place a management capable of restoring the Post Office to health. This is the first in a series of restructuring measures that will restore the Post Office to profitability and ensure that we have postal services throughout the country that will deliver for customers, including our constituents.

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