Post Office: Future (Hansard, 26 January 1998)

§ The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)
My Lords, the options for granting greater commercial freedom to the Post Office are being examined in the context of the review announced by the Government last May.

§ Lord Ezra
My Lords, I thank the noble Lord for that Answer, but last May is a long time ago. It is reported 5 that the results of the review have been in the hands of Ministers since early November. When will the report be published and when will a decision be reached? Is the noble Lord aware that a number of other countries have commercialised their post offices with great success and that the British Post Office has been under inquiry since 1992? In particular there is the question of the excessive dividend which is taken, amounting to no less than about 80 per cent. of the post-tax profit. That is double what any normal company pays, as the noble Lord well knows from his own past experience. Not only is virtually the whole of that profit taken, but the Post Office is not allowed to borrow externally. When will those two issues be put right?

§ Lord Simon of Highbury
My Lords, the noble Lord asks questions about international competition, dividend policy and indeed the time of the inquiry. It has to be said that the scope of any decision to change the competitive capacity of the Post Office has to be considered carefully. As was rightly said, it has taken a long time. At first it was difficult to reach agreement on how matters should be taken forward. That has now been achieved following an extensive consultative exercise. We shall shortly announce the terms of reference for the next review. I agree that international competition is growing. It is important that we meet that with the right kind of flexibility from our Post Office. As the noble Lord will know, the dividend policy will be decided as part of the next stage in deciding the right way to give commercial freedom to the Post Office.

§ Lord Stoddart of Swindon
My Lords, can the noble Lord say whether the privatisation of the Post Office and the abolition of the monopoly status have been ruled out?

§ Lord Simon of Highbury
My Lords, I do not think the purpose of the review is to decide whether it is privately or publicly owned, but rather whether the Post Office can act with greater commercial freedom to improve its service to customers and to compete in what is rapidly becoming a more international market. I do not think the status of the Post Office is in itself the key issue of the review.

§ Lord Skelmersdale
My Lords, is the Minister aware that there is a long running Treasury argument that changes to the PSBR would affect the exchange rate adversely? Now that many people, especially in industry, believe that the pound is too strong, does not that argument disappear out of the window, especially as regards the Post Office?

§ Lord Simon of Highbury
My Lords, as we know, the funding of the Post Office is part of the overall government programme. I point out to noble Lords that the capital expenditure of the Post Office is already running in the range of £300 million a year. The issue is how best to target that as regards international competitiveness. The Post Office pays an extremely good dividend to the Treasury and is meeting its targets. 6 It is the future capacity that worries me. Getting that right is relevant only to the competitive capacity of the Post Office and has little to do with the PSBR.

§ Lord Razzall
My Lords, will the Minister confirm that the reason for the delay—this matter was a clear Labour Party manifesto commitment—is not that the Treasury wants to keep its hands on the significant dividend that comes from the Post Office?

§ Lord Simon of Highbury
My Lords, that sounds like surmise. The most important issue is to achieve the right shape and structure for the Post Office. I do not think there is anything in people's minds other than ensuring that very wide consultation—the widest ever undertaken in relation to this service—brings about a good commercial structure.

§ Lord Fraser of Carmyllie
My Lords, am I correct in understanding from the noble Lord's second answer to the noble Lord, Lord Ezra, that the likely outcome of the first review will be the announcement of a further review? If so, how long are we to expect the process to continue?

§ Lord Simon of Highbury
My Lords, as long as it takes to achieve the right answer. The point I made was that the first exercise was scoping. The second exercise will be a review of the appropriate structure to meet the scope that has been defined.