Consignia

HL Deb 13 June 2002 vol 636 cc377-91

3.36 p.m.

Lord McIntosh of Haringey

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

"This morning, Allan Leighton, the chairman of Consignia, announced the second phase of the company's restructuring plans. He announced that the Royal Mail would save £350 million a year by moving to a single delivery at a consistent time, six days a week, and that those plans will result in a further 17,000 redundancies over the next three years. He said: 'The underlying loss from operations graphically shows why we need to restructure the company and embark on a three-year renewal programme to restore profitability'. "Thousands of postmen and women now face an anxious and difficult time. Those decisions are very painful for the workforce, who have shown their commitment to serving the public and who have often been frustrated and angered by poor management and failure to invest in better ways of working. Allan Leighton has made it clear that the company aims to achieve the reduction in jobs on the basis of voluntary redundancy and by offering alternative jobs within the company. Early indications from the Parcelforce restructuring, which I reported to the House on 25th March, suggest that that can be achieved. We will of course do everything that we can through Jobcentre Plus and other agencies to help people who leave the Royal Mail to get new jobs as quickly as possible.

"The need for radical action is underlined by the company's financial results for the last financial year, published today, in which it announced a —1.1 billion pre-tax loss. Much of the loss comprises exceptional costs from restructuring but the company made an underlying loss of —318 million on its day-to-day operations.

"Central to the programme to restore the mails business to profit and to improving service and efficiency is the re-organisation of mail deliveries that Allan Leighton announced today. The Communication Workers Union has said that it also supports the ending of the second delivery.

"Twenty years ago, 15 per cent of all mail arrived by the second delivery. Today that is just 4 per cent, but that 4 per cent of mail accounts for 20 per cent of delivery costs and 30 per cent of delivery time. Most other European countries, with far higher postal prices, make only a single delivery each day and none of them has a target of delivering before 9.30 a.m.

"In future, customers who regularly receive 20 or more items of mail a day will receive their delivery between 7 a.m. and 9 a.m. That will include people working from home as well as businesses. All other customers will receive their mail by lunchtime. Those changes will mean that 1 million more first class letters every week should arrive on time. The changes will also mean that postmen and women can work a five day week, instead of the current six.

"Let me put Consignia's announcement into context. Allan Leighton said this morning: 'These losses did not happen overnight. Unresolved issues and problems stretching back for up to a decade are reflected in these results'. "When this Government came into office in 1997, we immediately took steps to fulfil our manifesto commitment to give the Post Office what management and unions had long been arguing for—greater commercial freedom. The Postal Services Act 2000 completed that process, creating a plc and giving the company the freedom to borrow for growth investment. We cut back its 'dividend' to normal commercial levels and we announced the appointment of a new finance director in October 2000. In April 2001, Lord Sawyer was appointed to look at deep-rooted industrial relations problems in Royal Mail. This year, we strengthened management further by appointing a new chairman and securing a new chief executive for the Post Office network.

"Greater commercial freedom is the right policy. But in exercising these new freedoms, decisions were made that, with the benefit of hindsight, we can now see were wrong. In his announcement, Allan Leighton said that, management mistakes have been made over a number of years". "The company decided, for instance, to expand internationally—a strategy supported by many distinguished observers, including the Trade and Industry Select Committee. But other European postal operators were already ahead of the game—and in the meantime Consignia lost control of its costs at home. Costs went on rising at a time revenue growth was slowing. In 2001 the growth of mail volume, at 3 per cent, was half that of 1999. The financial results published today show that overall turnover grew by 3.6 per cent, but that this was outstripped by a 4.8 per cent rise in costs. The result is that the company is now running at an underlying loss of £1.2 million a day. These losses cannot continue, and over the next three years, under the renewal plan, the losses will be eliminated and the company returned to profit.

"I can also inform the House that the group chief executive, John Roberts, will be retiring later this year once his successor has been appointed. The search for his successor will begin immediately.

"Let me stress to the House that today's announcement, like the Parcelforce restructuring, is not the result of any decision by the regulator. Both announcements are about stemming the losses and creating an efficient company. Today's announcement would have been made whatever the decision made by Postcomm.

"But I would like to put on record the fact that I welcome the announcement by Postcomm about the adjustments to the timing of its proposals, the change in the definition of bulk mail and the decision to monitor the market closely to ensure that the universal service is not put at risk. In reaching its decision, Postcomm has clearly listened to the many representations made by honourable Members as well as from other stakeholders, including the Communications Workers Union.

"The challenge now is for Consignia to improve the quality and reliability of its services so that it can keep its customers rather than lose market share.

"Let me deal next with the financial issues associated with today's announcement. I have agreed a package of measures to put the company on the right financial footing to enable it to deliver this renewal programme. Consignia plc has reserves on its balance sheet of £1.8 billion, which represents accumulated past dividends and cash generated by the business. These are more commonly referred to as the 'gilts'. The Government now propose that the £1.8 billion of gilts will be held by the group holding company as reserves while the business is being turned around. These reserves will be available to back the investment required in the mails business to implement the renewal programme and to support the nation-wide network of post offices, subject, where necessary, to the relevant state aid clearances.

"As I explained to the House on 25th March, the Government have agreed to forgo the projected dividend for 2001–02, releasing an additional £64 million for the company. I told the House then that, 'a decision on dividends for other years will be taken in the context of the strategic plan'. I can tell the House today that the company will be allowed to retain the notional dividends for the previous year as well as part of the overall £1.8 billion of reserves. In addition, I can confirm that the Government do not expect to take cash out of the business by way of future dividends during the three years of the renewal plan.

"As part of our decision on the gilts, we have agreed to fund the Post Office network's historic losses. David Mills, the new chief executive officer of the Post Office, is working up a strategic plan for the network which will look at new ways of increasing revenues from commercial activities. As we informed the House on 26th April we have committed up to £210 million for compensation for sub-postmasters in the urban networks who are planning to leave the business and for investment in urban offices. The House will have a further opportunity to debate this when state aid clearance is granted.

"I welcome today's announcement by the company that it intends to change its corporate name to Royal Mail Group plc by the end of this year. Her Majesty the Queen has agreed in principle to this name change. Few will mourn the passing of the name Consignia, and I will not be one of them.

"Allan Leighton and his colleagues have shown that they are willing to make the very tough decisions needed to turn the company round. But the company is now set on a course for renewal and recovery. It will not be easy, but, as today's announcement shows, it is essential if we are to have a Royal Mail that the workforce can be proud of and that delivers the service that customers deserve".

My Lords, that concludes the Statement.

3.46 p.m.

Baroness Miller of Hendon

My Lords, I thank the Minister for repeating the Statement made by his right honourable friend the Secretary of State for Trade and Industry in the other place earlier today.

I expect the Minister is probably as sad as we all are to hear of the problems in Consignia and of the company's dreadful results last year, although, following earlier statements, they were expected and did not come as any great surprise.

Less than 10 years ago the Post Office was perceived as the best of its kind in the world. Unlike its European competitors it was profitable, its delivery performance was top of the international league table and its then chief executive boasted of the workforce as his 200,000 in-house consultants and ambassadors to the public. The "postie" was trusted and respected. Then we get today's Statement.

The figures are, by anyone's standards, quite shocking. Only three years ago, when the Post Office was making profits of around half-a-billion pounds annually, the then Secretary of State was pleased to announce that the Postal Services Bill, which was to become the Postal Services Act of 2002, would ensure that the company had a golden future and was set to become a global force. Instead, its performance has deteriorated; morale and performance in the workforce is low; and we learn that last year there was a pre-tax loss of £ 1.1 billion, equivalent to £1.2 million every trading day, with all of its businesses losing money.

The Statement repeats what Allan Leighton had said. There had been management mistakes over a number of years. I am sure that that is right. But no mention is made of the disastrous industrial relations of the company during that time. I know that the Government have to be aware of it because they set up the inquiry under the noble Lord, Lord Sawyer, to look into the business. Does the Minister agree that that factor has also contributed to the situation? Indeed, does he agree that the Government have also played a large part in the débâcle?

There will be no surprise at the terrible loss of 30,000 jobs. That has been trailed for quite some time. We are pleased and welcome the fact that it is intended to achieve those job losses by voluntary means. However, can the Minister give the House more information on the financial details which will allow the Post Office to use the money that has been invested in gilts over many years? Will this also require clearance from the European Commission under the provisions of state aid? This redundancy money has to come from somewhere, somehow, apart from the costs involved in the restructuring of the company.

It is said in the Statement that the announcement, like the restructuring, was not the result of any decision by the regulator. However, can the Minister state the Government's attitude to the application by the Post Office to increase the price of first and second-class posts? I would be interested to know what the Government think. Is the Minister confident that the Post Office is not simply trying to increase its prices in an area where it does have a monopoly in order to subsidise its heavy loss-making operation in areas where it is subject to competition? It is important, if the company is to get itself right, that we have all this information on the table and know from where we are starting.

We appreciate that the second-class delivery accounts for only 4 per cent of the mail but for 20 per cent of the costs. Are the Government confident that the fears of many people running small firms and working from home about the difficulties entailed if they receive their mail much later than others are unfounded? Will this not also mean a bigger burden for the Post Office if it is delivering first-class post between 7 and 9 a.m. but other businesses or homes in a similar area do not receive their mail until lunchtime?

The Minister has not said too much about the regulator's proposal to open up the market to competition, but we assume that that is still the plan. We welcome that. We believe that not only would competition assist the consumer but that it would assist the Post Office itself if it has to decide to work within certain parameters. Does the Minister agree that, in this area, there are still great opportunities for the Post Office, including potential sources of revenue from allowing other operators access to its delivery network? So far, the Post Office has been unwilling to negotiate realistic terms and prices on access charges. Does the Minister share our disappointment at that attitude? Does he agree that, if there is to be true competition, the issue of VAT will have to be addressed sooner or later?

When the Postal Services Act was introduced, we were told that the Post Office would remain a fully state-owned corporation. The Minister will recall the numerous questions that I asked his colleague, the noble Lord, Lord Sainsbury, as to whether or not the Post Office had been in negotiation with TPG, a Dutch company, to sell off the English Post Office. The noble Lord, Lord Sainsbury—and we certainly accept what he said—said that he was unaware of any of that. However, we later found out that that would most certainly have happened had the negotiations not broken down at the very last stage. So will the Minister now tell the House whether Her Majesty's Government would be willing to see the Post Office sold off to a foreign operator, or is the Post Office to remain—as defined at the time of the Postal Services Act—a fully state-owned corporation? It is important that a reply is placed on the record, considering all the previous confusion.

How will the Post Office network now be sustained, particularly in rural areas? There are only nine months to go before payment of benefits across the counter—which accounts for 40 per cent of the revenue—ceases.

Finally, we welcome—as I believe the whole House does—the dropping of the name "Consignia" and the return to the use of "Royal Mail". It was an absolute mockery of all good marketing techniques to drop a well-trusted, well-respected name, and to waste money in doing so, in return for a name that was never accepted from the word go. However, I should like the Minister to explain—although I have a certain sympathy with him; it would have been easier had the noble Lord, Lord Sainsbury, still been the responsible Minister—to explain this point to me. When I asked whether the name "Consignia" would be dropped and whether there would be a return to the original name, I was given a terse, curt, short answer. The answer was simply "No", and that was that. If it were not unparliamentary, I should say that it was a rude answer.

3.55 p.m.

Lord Razzall

My Lords, I join in the thanks to the Minister for repeating the Statement, However, I know from the remarks of the noble Baroness and from seeing the faces around this Chamber that we all regard this as an extremely sad day for the Post Office.

The opportunity should not be missed for both of the other political parties to accept their share of responsibility for what has happened. Up until 1997 the Conservative Party had every opportunity to give the Post Office the commercial freedom for which it was asking and it did nothing about it. It was during that period that the steps that the Post Office should have been taking in all kinds of areas were not taken because of the inactivity of the Conservative government. The situation today is the result of that inactivity.

Some criticism should also be accepted by Her Majesty's Government, first, for the delay that occurred in giving the Post Office what the Government say that it wanted. I noted very carefully the words of the Statement: When this Government came to office in 1997, we immediately took steps to fulfil our manifesto commitment to give the Post Office what management and unions had long been arguing for—greater commercial freedom". A word has crept in; namely, "greater". That was not what the management and unions were asking for; we debated this issue in the House. What the Post Office was actually asking for was "commercial freedom" full-stop. What we now have is the worst of all worlds. The Post Office has not had what it wants, and the Government have been sucked inexorably back into being the lender of last resort to the Post Office and into having to take the actions with taxpayers' money that the Minister has announced today. The House should recognise that both political parties during their period of office, for whatever well-meaning reasons, have been at fault.

I follow the noble Baroness in asking one or two key questions. She touched on the plight of urban post offices. When the Government brought forward their proposals for rural post offices, a number of us in this House made the point that the elderly and the frail have just as great a problem if they are living in an urban area if their post office is closed as they do in a rural area. The Statement says that the Government are bringing forward plans to compensate sub-postmasters in urban areas who will be retiring. Have the Government any plans to assist the elderly and the frail in urban areas who will be deprived of a very necessary service in their community in the same way that plans are being brought forward in regard to rural areas?

Secondly, before the name "Consignia" is consigned to history, will the Minister give some indication as to what the cost of the "Consignia" operation has been? What has it cost the Post Office to conceive, develop, reprint, and rebrand itself as "Consignia", and then to abandon it?

Thirdly, is this an opportunity for the issue of the opening up of competition for the Post Office to be reconsidered? Does the Post Office need a longer breathing space to get its act together and to get into a position to be able adequately to compete with the competition before it is introduced?

Finally—this is a fundamental point and was touched on by the noble Baroness—there seems to be some inconsistency in the Government's position as set out in the Statement. There is a bland comment about the noble Lord, Lord Sawyer, being asked to undertake a review of industrial relations in the Post Office. When the noble Lord's report was produced, and when it was debated in this House, a general feeling of optimism emerged that the worst was over and that all would be well if the recommendations were implemented. The Statement is rather silent on that aspect. I suspect that that is so because the remarks being made by Allan Leighton are not consistent with the optimism that was expressed by the noble Lord in his report. The House should be told whether the Government agree with the general optimism about employee relations expressed by the noble Lord, Lord Sawyer, or with the more critical attacks on the Post Office workforce made by Allan Leighton.

4 p.m.

Lord McIntosh of Haringey

My Lords, I am grateful to both noble Lords for their response to this Statement. I agree with them immediately that this is a very sad day. It is a sad day for the Post Office and a sad day for all of us as Post Office users. However, like the noble Lord, Lord Razzall. I have to say that the picture painted by the noble Baroness, Lady Miller, of a golden age of the Post Office in the good old days under a Conservative government is a little bit far from the truth.

I think that we should be humble enough to remember how, in the good old days, we used to criticise the Post Office. We used to criticise British Rail—did we not?—for multiple shortcomings. We have to recognise, I think, that Allan Leighton was right to say, as he has done today, that the problems of Consignia/Royal Mail Holdings are deep-seated and that the current performance is the result of failure to address these issues over a number of years. That failure refers not only to the Post Office management but to government. We should remember, and the Conservative Party should remember, that it was under a Conservative government that the external financing limit was set and that very considerable sums were drawn off from the Post Office which it was not able to use for investment. For example, automated sorting equipment which should have been in place many years ago was frustrated by the fact that the government were not allowing the Post Office to use its dividends or the cash it generated.

I think that everyone is right to pay tribute to the workforce. Again, however, the criticism that at the moment we have particularly low morale in the workforce does not square very well with the fact that, five years ago, industrial action in the Post Office accounted for almost 1 million days lost per year. It was the greatest single element of days lost through industrial action. Those figures are very much lower—enormously lower—than they were then. That must be some indication of the changes taking place.

I do not know that I am qualified to comment on the difference between what the noble Lord, Lord Sawyer, thinks and what Mr Leighton thinks, and I do not think that a third view from the Government is particularly called for. Clearly, however, the workforce who have indeed been threatened by these very significant losses have been behaving with a good deal of responsibility, and they have been supportive of some of the changes that are taking place. In particular, the union is supportive of the suppression of the second delivery.

The noble Baroness, Lady Miller, asked about the use of the £1.8 billion gilts and whether state aid clearance was available in particular for redundancy money. State aid clearance is required for some of the purposes for which the £1.8 billion will be available. That does not include restructuring costs, which are themselves an investment in a more efficient workforce. Clearly, however, there are state aid elements, particularly in support of the network.

What view do we take on the application for increased prices? We take the view that price rises should not be used to camouflage inefficiency. That is what happened in the past, and it is certainly what happened under Conservative governments. I do not believe that that is the case now, and the Government are convinced that an application for a price rise in the context of the renewal plan is an appropriate one for Postcomm to consider.

I think that there is some confusion about second class mail and second delivery. There is no change in second class mail. What is proposed is the suppression of the second delivery, which could be both second class and first class mail. It is a legitimate point to say that the target of delivery between 7 a.m. and 9 a.m. for small businesses and those with more than 20 items is a significant challenge for the Post Office. That is why pilots are under way as to how it can be achieved. If it can be achieved, that will be a significant improvement for many small businesses.

I agree with the welcome that the noble Baroness, Lady Miller, extended to the openness to competition. I also agree with her that the opportunities arising from competition are for both Post Office customers and the Post Office itself. As for the issue of charges for access to the network, if there is no agreement about it Postcomm is in place to monitor and take decisions in its regulatory role.

The noble Baroness, Lady Miller, asked about TPG and the negotiations between the parties. I know that she and the noble Baroness, Lady Blatch, are in correspondence with my noble friend Lord Sainsbury, and I do not wish to make of that a four-cornered conversation.

Baroness Miller of Hendon

My Lords, the matter has been sorted out. I was referring only to the future.

Lord McIntosh of Haringey

My Lords, I am delighted to hear that; I shall make no further comment.

As for the name, I am told that it cost about £2 million to change to Consignia. It will cost a great deal less to go back to Royal Mail Holdings.

4.7 p.m.

Lord Dearing

My Lords, may I say in particular as a former Post Office worker that this is a very sad day, possibly the saddest day in the history of the Post Office? I welcome the frankness with which Allan Leighton has addressed the issues and acknowledged management faults. However, I should also like to say that John Roberts, who is resigning later this year as managing director, is a man who contributed massively to the profits of those earlier years.

I have some questions for the Government. Allan Leighton has confessed management mistakes to which the Secretary of State referred in her Statement to the House, saying that with the freedom that had been given, mistakes had been made by the Post Office management. I refer to the Horizon project, which cost £1 billion. Mr Leighton says of it: The incremental costs of running the Horizon system has turned the counter services into a fundamentally unprofitable operation—a position that will be exacerbated by the move of Benefits Agency transactions away from the counters network after April 2003". Does the Minister acknowledge that the Government had their hand very much in the decisions of the Horizon project and transferred the Horizon project to the Post Office with a write-off of £571 million? Was there no government hand in that decision?

I shall limit myself to one other question. If there are all these commercial freedoms for the Post Office, how many officials are there in the department dealing with the Post OfficeȔ10, 20, 30? How many? And what do they do all day if there is all this commercial freedom?

Lord McIntosh of Haringey

My Lords, I do not dissent from anything that the noble Lord, Lord Dearing, says about John Roberts and his responsibility in the early years. However, I think that it is true to say that he is retiring rather than resigning later in the year.

Lord Dearing

My Lords, I understand that he was asked to stay on but decided to take retirement.

Lord McIntosh of Haringey

My Lords, the Statement makes clear that there have been many mistakes by the Post Office, probably before but certainly during the period of greater commercial freedom which has taken place since the Government took office. In so far as that greater commercial freedom is constrained, the Government must bear their share of the responsibility.

I do not know how many officials in the Department of Trade and Industry are dealing with the Post Office. I doubt whether a large number are dealing solely with the Post Office rather than having it as part of their responsibilities. My strong hunch is that the number would be considerably fewer than when the Post Office was itself a government department and there was nothing like the degree of commercial independence for the Post Office. As has been made clear, there is a price to pay for that commercial independence. One of those prices has been the Horizon project to which the noble Lord, Lord Dearing, refers with his great knowledge of the subject.

Lord Carlile of Berriew

My Lords, will the Minister assure the House that one of the consequences of this humiliating Statement about the Post Office's business will not be the further dilution of already skeletal services in many rural areas?

Lord McIntosh of Haringey

My Lords, we have imposed a duty on the Post Office to protect the rural post office network. That has had some results already in the sense that there are unavoidable losses when a sub-postmaster or sub-postmistress retires and no one can he found to replace them. If we talk of avoidable losses, those have been substantially reduced this year compared with last year. The Government, the Post Office and Postcomm have this matter very much in mind.

I can now give an answer to the noble Lord, Lord Dearing, about the number of officials. Apparently 30 officials are involved. The costs of the Horizon project will he covered by the use of the gilts.

The Lord Bishop of Guildford

My Lords, the House will welcome the frankness with which the Statement has been made. Will the Minister comment further on the significance of the return to a Royal service? That surely means not only that it is managed and run financially in a first-class way but also that the people of our country have a first-class service. We have heard that we are losing the second delivery—that may be financially justified; that private households may not receive their mail until the middle of the day; and that private enterprises with a mail of fewer than 20 items will not receive it until later in the day. Many people are anxious about the loss of rural and urban post offices. Will the Minister give us more of a steer about how the use of the Royal name will lead to a better service for the people?

Lord McIntosh of Haringey

My Lords, Allan Leighton replied rather effectively this morning to that point on the "Today" programme. I think he said that we have terrific brands, an unrivalled network, still a monopoly position for a large part of the service, and a dedicated workforce; and if we cannot make money in due course from that then we should all go home. The right reverend Prelate is right. The Royal name brand is a very valuable brand in marketing terms, as the noble Baroness, Lady Miller, would agree. It is very good news that we are going back to it with the approval of Her Majesty the Queen.

Lord Skelmersdale

My Lords, perhaps I may—

Lord Clarke of Hampstead

My Lords, my views are well known and clear. It is a Labour Government who have destroyed the British postal service. I shall not repeat what I have been saying over the past couple of years and before the Postal Services Act. Like the noble Lord, Lord Razzall, I view today as a sad day. It is terribly sad for the 17,000 people and those from Parcelforce, and their families, who face redundancy, whether or not it is voluntary. We all know how voluntary redundancies can be achieved. Is the Minister aware that the cream of the postal service workers will probably go? Because they have given longer service, they will take redundancy leaving the service the poorer. I hope that every effort will be made to keep those workers.

I am glad that Allan Leighton has been able to say, as we have heard in the Statement, that £1.8 billion is available to assist at this difficult time. That gives the lie to those ill-informed people who believe that the Post Office has received money from the Government from increased tariffs. That has never been allowed because of political interference. I am glad that that idea has been put to bed. The £1.8 billion is rightly to be used by the Post Office. I hope that the Minister welcomes that demonstration of how profitable and good our postal services were.

Does the Minister agree that the structure announced will assist in bringing about the long-awaited introduction of better working conditions? For the first time it includes a five-day week for people who get up at 4.30 in the morning to walk about in the rain. I should declare an interest. I was a postman. My former boss sits on the Cross Benches. He will understand that those people deserve that consideration. Allan Leighton has referred to low pay. I hope that the restructuring will bring about a better remuneration package for those who have suffered for so long.

At this dreadful time, perhaps we can avoid any suggestion that the chief executive who is to depart is in any way culpable for what has happened. I believe—it is not an ill-informed view—that John Roberts has performed his task admirably, dedicatedly and with great integrity given the political interference to which I have referred on a number of occasions. He has never had the freedom to manage his business that he should have had. We should put on record our gratitude for the job that he has done.

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Clarke, is too modest to say, as he is entitled to do, that during the passage of the Postal Services Bill he indicated that what has been announced today would occur. He was right: there can be no doubt about it. He is right to say that the loss of a further 17,000 jobs is tragic for those concerned, including their families. Whether that means that the cream of the workforce will leave is an issue of human resource management. I think he would agree that there have been severe deficiencies in human resource management as identified by the noble Lord, Lord Sawyer. But it is a challenge now for the management of the Post Office to ensure that that is not the case.

I am grateful for his welcome of the release of the gilts. I confirm what he says about better working conditions: a five-day week is now available although a six-day service is part of the universal service obligation which will be adhered to.

I agree with what the noble Lord, Lord Dearing, said about the early stage of Mr Roberts' career as chief executive and the fact that he ran a profitable Post Office at that time.

Lord Skelmersdale

My Lords, I am glad that I gave way to the noble Lord, Lord Clarke, because in essence he has made a point that I wanted to make. Occasionally, I meet a former chairman of the Post Office, who is not a Member of this House, at the bridge table. The other day he made a passing remark to me: "There is no such thing as a bad workforce, only bad management". Like other noble Lords, I welcome the frankness of the Statement in that respect.

However, I am confused by the Minister's partial explanation of the paragraph that refers to customers who regularly receive 20 or more items of mail a day and that they will receive their delivery between 7 a.m. and 9 a.m. I believe that I understood the Minister to say that that had no bearing on first and second-class posts, although he is looking at me rather woodenly. Perhaps I can take that as a nod. On this subject I regularly declare an interest as a director of a rural mail order and mail delivery firm. It occurs to me that our address is the only one for about four miles around to receive on average well over 20 items of mail a day, which means that the sorting office will send a special delivery to us between 7 a.m. and 9 a.m. However, the next door house, which receives perhaps on average three, four or five items of mail a day, will not have its mail delivered at the same time but, by definition, the mail will be delivered as part of a postal round that will take place later in the day. I cannot see the management logic of that. Can the Minister explain it?

Lord McIntosh of Haringey

My Lords, first and second-class mail refers to the targets for next-day or longer delivery with the corresponding price. That is a quite separate issue from whether there is a second delivery in any one year—I should say "day". First-class and second-class mail can be delivered by the first or the second delivery. I appreciate the point made by the noble Lord, Lord Skelmersdale, about small businesses that receive on average more than 20 items a day. I found the word "regularly" a little confusing—"on average" is clearer. I appreciate that to go down a long lane twice, once to a small business and once to the house next door that receives fewer than 20 items a day, would be madness. Such matters can be sorted out in the pilot projects that are being undertaken.

Lady Saltoun of Abernethy

My Lords, I am delighted that Consignia is no longer to be called "Consignia", but "Royal Mail". Can the Minister tell me whether I am justified in hoping that our postage stamps will continue to bear the Queen's head for many a year to come?

Turning to pricing, the Post Office has two very strong competitors in the area of letters: e-mails and faxes. That will need to be borne in mind when raising the cost of sending letters. It also has a huge delivery of what I believe the Minister calls "bulk mail" and most of us call "junk mail" and which most of us do not want. Is there a chance that losses could be recouped on the delivery of letters by charging a little more for junk mail?

Lord McIntosh of Haringey

My Lords, I can give the noble Lady, Lady Saltoun, the categoric assurance that we will not be taking the Queen's head off the stamps at any time in the foreseeable future. I appreciate her point about competition from e-mails and faxes. Some people are surprised that mail volumes continue to rise when there are such alternatives. She is right to say that a considerable part of the increase is what she calls "junk mail" and we call "bulk mail". There are severe limitations on the degree to which one can discriminate by price. The universal service obligation is that there should be a delivery every day to every part of the country at a fixed and standardised price. That limits the scope for doing what she would like to do.

Lord Hooson

My Lords, does the Minister agree, as has been hinted at by the noble Lord, Lord Clarke, that this sad news raises a broader issue for the Government? This week Mr Mandelson proclaimed that we are all Thacherites now. On these Benches we do not happen to be so. Does the Minister agree that that news, following recent bad news about our railways, raises a much broader point about whether there should be public ownership in certain spheres in order to deliver a good, universal public service? Does he agree that the Government should reconsider their proclaimed Thatcherite position and consider the need to revive public ownership of the service?

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Hooson, is not the only one who is not a Thatcherite. I am not a Thatcherite and I do not believe that any noble Lords on these Benches are Thatcherites. Mr Mandelson is not a member of the Government and can speak to himself—for himself. Once you start on malapropisms, you cannot stop! He was talking in a different context. The answer to the noble Lord is that the Royal Mail is publicly owned and it will continue to be publicly owned.

Lord Stoddart of Swindon

My Lords, I have three questions. First, will the £1.8 billion in gilts be available to the Post Office for all time to use as it wishes, without the Treasury having a lien on it? Secondly, how can we sustain a first-class service and a second-class service for the same amount of payment?

A noble Lord

My Lords, time!

Lord Stoddart of Swindon

My Lords, no other noble Lord will be able to ask a question now so I may as well stay on my feet! I could ask my questions much faster if I was not interrupted. The cost of a stamp will be exactly the same for private and for commercial customers, but one set of customers will be treated differently from another. In other words, one set will be treated worse than the other. I just wonder whether, if there is a challenge in the courts, that will be sustainable.

My final question relates to the Post Office network. In his statement, Mr Leighton referred to the fact that Brussels was holding up the application for a package of £210 million to assist the retention and the development of urban post offices. Can the Minister or the Government do anything to speed up such a decision, which I hope will be in the affirmative?

Lord McIntosh of Haringey

My Lords, the convention of the House is that I am supposed to answer no more than two questions from each Member. The Government recognise that it will be necessary for about £800 million of the £1.8 billion to he used for restructuring purposes and the Post Office can use the remainder for investment and for the protection of the network. I believe that the noble Lord, Lord Stoddart, is just confused about the issue of first and second-class stamps. That is not at issue in relation to the change from two deliveries to a single delivery.