HL Deb 12 May 1998 vol 589 cc941-4

2.54 p.m.

Lord Evans of Parkside

asked Her Majesty's Government:

Whether they have any plans to give greater commercial freedom to the Post Office.

Lord Simon of Highbury

My Lords, my right honourable friend the President of the Board of Trade announced in the other place on Monday 6th April the second phase of the Post Office review. This will make recommendations on the Post Office's future structure, organisation and financing that will best deliver greater commercial freedom for the Post Office within the public sector. The Government intend to announce their proposals in the autumn. Further details are set out in the Government's observations to the Select Committee on Trade and Industry on the third report of the 1997–98 session of the Post Office, which was published by the committee on 14th April.

Lord Evans of Parkside

My Lords, I thank my noble friend for that helpful reply. Does he acknowledge that the previous Tory government rather cynically used the Post Office as a cash cow, stripping it of most of its profits and denying it the freedom to develop its profitable areas of business? Will my noble friend consider the proposition that the best way forward for the Post Office is not privatisation but for it to be converted into a publicly owned plc with an agreed limitation on what the Treasury would receive from the Post Office's annual profits?

Lord Simon of Highbury

My Lords, my noble friend tempts me rather too soon to describe the detail of the structure which we wish to put in place after this next stage of the review. It is quite right to assume that we expect the Post Office to remain in the public sector but with a greater independence to achieve the kind of flexibility in commercial terms that we have long wished to see for it. In terms of financing, I believe the Post Office is currently investing between £400 million and £450 million a year, so the capital investment flows are quite encouraging. However, a limitation on the rest of the flows which would pass to the Treasury is a matter that we shall review during this second stage.

Lord Ezra

My Lords, following the supplementary question of the noble Lord, Lord Evans of Parkside, does the Minister agree that there are enormous technological developments in post offices throughout the world, and that the British Post Office, in spite of its great expertise, has hitherto been held back in meeting that challenge? Will the noble Lord therefore confirm—arising out of his answer to the noble Lord, Lord Evans—that in the solution found by the Government later this year they will make sure that they will not denude the Post Office of such a large proportion of its post-tax profits as has hitherto been the case; namely, up to 90 per cent. compared with about 30 per cent. from a normal company, and that it will be given the freedom to go to the market to raise money for valid propositions?

Lord Simon of Highbury

My Lords, I agree with the noble Lord that there are enormous technological developments taking place in postal services around the world. We certainly want to ensure that our Post Office is competitive in international markets. We shall not have to wait until the end of the review to make some progress because my right honourable friend in the other House announced that, with immediate effect from her announcement, there would be limited freedoms for the Post Office to enter into joint ventures in the domestic market to enable it to take advantage of these developing technologies, as has occurred in other countries. We are well seized of that. I shall not be tempted into discussing the numbers which fall from the capital budget and the Treasury requirements. That is something that we have to look at extremely carefully. The purpose is to have an internationally competitive Post Office. We must take care as regards the balance between capital expenditure and dividend to the Treasury.

Baroness Nicol

My Lords, will my noble friend exercise some caution in allowing flexibility to the Post Office as regards the closure of village post offices? Is he aware that if solely commercial criteria were applied to many of these organisations they would have to close, but they provide a social service which is irreplaceable by any other means?

Lord Simon of Highbury

My Lords, my noble friend is absolutely right. During the consultation period, which was undertaken before the announcement in April, it was made absolutely clear that the users regarded that as a high priority. Most of the 20,000 outlets are in private hands. Rural post offices need to be effective and profitable for the people who want to run them. That, of course, rests on the quality and range of services that they can offer. We are trying to make sure that the Post Office modernises and offers a wide range of services so that we can keep as many outlets open as possible.

Lord Ewing of Kirkford

My Lords, will my noble friend the Minister give an absolute assurance that whatever the Government propose in the autumn of this year they will in no way interfere with the universal postage rates which prevail throughout the United Kingdom?

Lord Simon of Highbury

My Lords, I believe that that was one of the criteria which were attached to the Statement that my right honourable friend made in the other House in April when the second stage was launched.

Lord Mackie of Benshie

My Lords, the Minister's previous answer seemed to imply that the Post Office would offer so many services that any rural post office would be able to be profitable. That will not be the case. I should like to hear the noble Lord say that the Government will continue the subsidy to these post offices after all the services have been exhausted.

Lord Simon of Highbury

My Lords, I hope that the noble Lord slightly misheard me. I did not say that all rural post offices would be profitable. I said that the objective of the exercise was to develop services to make it as attractive as possible for private sector individuals still to maintain trade through a wide network across the country. Clearly if one seeks to offer a universal service with a universal pricing basis, there will be occasions when the arithmetic does not work. We shall cope with those problems when we come to them. How that situation will be coped with will be part of the inquiry.

Lord Strabolgi

My Lords, is my noble friend aware that it is not only the rural post offices which are under threat but also some in central London? For example, the very busy post office in Eccleston Street near Victoria is under threat of closure. I believe that there is some question of selling the building as a capital gain.

Lord Simon of Highbury

My Lords, I was not aware of the detail of the Eccleston Street Post Office. However, if there are any plans to change its status, I shall try to inform my noble friend accordingly. I am not aware of that amount of detail.