Consignia

HL Deb 25 March 2002 vol 633 cc30-44

4.15 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

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

"I should like to draw the attention of the House to the declaration of interests contained in the Register.

"I would like to make a Statement on the announcement Consignia made this morning about its restructuring plan for Parcelforce and the outcome of its review of its distribution systems.

"This announcement, although it is 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 per 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, 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. They allowed the Post Office to stagnate and starved it of investment. While new technologies and changing markets were transforming the communications sector, our postal services were allowed to drift and decline.

"Since 1997, this Government have given the Post Office the greater commercial freedom to meet these 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—responsibility to control costs, to organise the company to meet the demands of customers and to modernise the way it works.

"Government have a responsibility too—to ensure that the company has the best possible management and the resources needed for investment. This way we ensure that the public and business customers will get the best quality service.

"We have already taken several steps to strengthen the management. 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 this situation: to stem the losses; reform the company's industrial relations; and to develop a new vision and strategy for the future.

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

"These changes are: first, 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 up to 20kg 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. This means 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 now 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.

"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 there will be further unavoidable job losses over the next three years, and I will of course continue to inform the House as the restructuring of the company is taken forward.

"I can also announce today, as a contribution to supporting the company as it restructures, that the Government will forgo a dividend for this financial year.

"I understand the deep disappointment that postal workers will be feeling at this news today. This is not a decision the company has taken easily or lightly. But it is one that is unavoidable if we are to create a high quality postal service, offering 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 with a different part of the business or a voluntary redundancy package. The company is of course in discussion with the trade unions. And we will do everything we can through the Employment Service, and other agencies, to provide support, assistance and new opportunities to those losing their jobs.

"These are difficult times for the company as management and workforce grapple with their legacy of under-investment, 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 an effective partnership relationship between the management and the workforce if we are to deliver this. This was recommended by the noble Lord, Lord Sawyer, in his report published last year and he believes that there is a genuine commitment to change from all sides within Royal Mall to achieve this.

"The benefits of such a relationship have been demonstrated since the report was published: 1,352 days were lost to unofficial action in the three months from October to December compared to 43, 198 between April and June. This is a tremendous improvement and the whole House will want to see it maintained.

"I am confident, however, that the path we are pursuing is the right one: greater commercial freedom, strengthened management and universal service enshrined in primary legislation. In other words, a delivery to every address in every part of the country—something that strongly underpins today's announcement.

"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 honourable and right honourable 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 of both the company's financial position and the postal services market.

"We know that today's news will come as a blow to many workers. But these changes, however painful, are unavoidable. Today must be the first step towards renewal, 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".

My Lords, that concludes the Statement.

4.24 p.m.

Baroness Miller of Hendon

My Lords, I thank the Minister for repeating the Statement made in another place. I feel sure that he is as saddened at having to make a Statement of that kind as I am to have to hear it. The current crisis in the Post Office, in my belief, is another public service failure of this Labour Government. It is a direct consequence of the Government's failure to allow the company to modernise in the way that it should and to give it the commercial freedom to deal properly.

Less than two years ago when the Postal Services Bill went through both Houses the then Secretary of State said in the other place of that Bill: It will ensure a strong Post Office that is better able to serve all its customers in all parts of the country". Since then a profit of nearly £400 million has turned into losses currently running at over £1.5 million a day. In the past year alone 547 more sub-post offices have closed and 63,000 days have been lost through industrial action.

There is nothing in the Statement to say why that has happened other than it is the result of years of Conservative government. What has happened has been an absolute disaster. The arrangement was, in the words of the Chancellor's then spin doctor, "a dog's breakfast". I shall not call it that; it was, however, a kind of hybrid animal. The company was not given full commercial freedom so that it was able to compete on a level playing field. Neither was it fully in the public sector and protected against competition. During the same period, companies in Holland and Germany, its main competitors, have become global, world market leaders: all we have is this terrible Statement.

Can the Minister tell the House something about the 10,000 urban post offices that will close? Will Her Majesty's Government compensate the postmasters who will suffer from these closures that now appear inevitable? Sub- postmasters in rural and urban areas run private businesses. They have invested their money. Now it appears they will face worse situations. Will the Government tackle the company's underlying financial problems instead of saying, as they have done, that it is a matter for Consignia? The Government have constrained Consignia from doing things the company felt it needed to do.

The Statement says nothing about the proposals of the regulator to introduce competition in the delivery of postal services. Since the Statement does not say anything, can the Minister say whether Her Majesty's Government support the regulator? They cannot pretend that they have no responsibility in this matter. This is crucial to the future of the Post Office. Is the timetable set by the regulator realistic? Will the universal service obligation remain a first requirement of the Post Office with an affordable, universal tariff?

The Statement also speaks of 13,000 job losses and a further 2,000 job losses through natural wastage. It also states that there will be further unavoidable job losses in the next few years. What are we talking about? Newspapers are writing about 40,000 job losses, but nothing about job losses to that extent appears in the Statement, simply a reference to further, unavoidable job losses.

The Evening Standard comments on 40,000 job losses being am attempt to stem the £1.5 million that the Post Office is losing every day. Could the figure be worse than 40,000? I shall be grateful to hear what the Minister has to say.

Can the Minister say what the cost of rebranding Consignia back to Royal Mail is going to be? Will he confirm that this whole enterprise was an expensive and ludicrous mistake with no advantage whatever to anybody? Given that Parcelforce itself has lost so much money and the Statement says that it is to be integrated with the Royal Mail, is the Minister certain that it will not cause severe problems for the Royal Mail when it has to take on Parcelforce as part of its operation?

The Statement also mentions changing the distribution service to making far more rail deliveries. Is the Minister confident that the mail can be delivered safely and speedily by rail, given the Government's track record? My final point is that we know that Allan Leighton has a fine business record. Because we wish the Royal Mail—as will be its new name—well, we hope that he succeeds.

4.30 p.m.

Lord Razzall

My Lords, I thank the Minister for repeating the Statement made in another place, but, like the noble Baroness, Lady Miller, we cannot help but consider the background and history of the Post Office, or Consignia. I must say that my recollection differs somewhat from that of the noble Baroness.

It was not this Government that year after year refused to give the Post Office the commercial freedom it wanted; it was the Conservative government. Hansard should record that, because it would be misleading to those who study Hansard if a wrong impression of history were given. As we all remember, what happened was that during that government's period of office, the Post Office was significantly profitable and the Treasury received significant revenues from it. In the run-up to the 1997 election, the Conservative government were extremely reluctant to allow the Post Office the commercial freedom that it wanted because they wanted to keep the revenue to secure the Treasury's finances.

So we should take no lectures from the Conservative Party about what has happened. The problem was that by the time the present Government gave in to the Post Office's pressure for commercial freedom—presumably the Treasury was overruled at that stage—deregulation had occurred and the Post Office proved to be in an insufficiently strong position to withstand the significant worldwide competition. That is what happened and that is why the Statement is being made today.

The Conservative Opposition cannot have it both ways. Either the Post Office has now been given the commercial freedom that the noble Baroness says that it ought to have had, but which her government never gave it, in which case the criticism is of Consignia, not of the Government, or it has not. As I understand it, the Post Office now has that commercial freedom, which is why the proposals have been brought forward today. Of course, bearing in mind their significance to the United Kingdom economy, it is entirely appropriate that the Minister should make a statement on the proposals, but if the Post Office has that commercial freedom it is not for us to suggest to the Government what they ought to be doing about it. That is a matter for Consignia. Our comments should be limited to what the Government can do. I have two or three suggestions.

First, as an aside, I share the view of the noble Baroness. I am delighted that Allan Leighton has accepted the permanent appointment as chairman of the Post Office. If the Post Office has such commercial freedom, someone of his track record is manifestly well qualified to act as chairman of the company, and the Government are to be congratulated on the arm-twisting that led him to take the job permanently. I must say—although this is a matter not for the Government but for Consignia—that I hope that not all the job losses will be among the poor bloody infantry, to coin a phrase, but that some officers will also bear their share of the costs of necessary restructuring.

I should like to press the Government on one or two matters. First, as they have rightly said—the noble Lord, Lord Sawyer, is to be commended on the work that he has done in this area—there have been significant labour relations issues in the Post Office. Those of us who live in certain areas of the country will know that for a long time unofficial action has affected the delivery of the service. I am especially pleased that the Government bring that fact out in the open in the Statement and that the Minister has had conversations with Consignia emphasising the importance of improving employee-employer relationships. There is no doubt that a long- standing, serious problem has affected not only the workforce but the public.

My second point is also within the framework of what the Government can do something about and relates to a fact that still puzzles me about the Post Office. In response to a debate initiated by a Conservative Member earlier this month, the Minister said that the Government were committed to ensuring the maintenance of the universal service obligation. If the regulator determines that there is to be significant deregulation and competition in postal services, how will the Government maintain the universal service obligation? Will they impose a subsidy requirement on companies licensed to compete with the Post Office or will the Government themselves subsidise the universal service obligation? The Minister will be aware that there is significant concern that that decision has not yet been taken. In the light of the commitment that he gave in a recent debate, this may be the opportunity for him to explain how it is to be achieved.

4.37 p.m.

Lord Sainsbury of Turville

My Lords, I, too, am saddened to have to make the Statement, but I must agree with the noble Lord, Lord Razzall, that it is necessary not because we have denied the Post Office commercial freedom. The Post Office may have made mistakes and not controlled its costs or increased productivity, but we cannot say that it has not had the freedom to take commercial decisions both in this country and in becoming a global player—if that was its strategy. It has had commercial freedom and has made decisions, and it is on the basis of those decisions that it must be judged.

As for the urban network, which is a separate issue, reorganisation is taking place, as it should, which will involve compensation. Despite her statements on commercial freedom, the noble Baroness, Lady Miller, also wants us immediately to interfere with Postcomm's proposals. The whole point of having an independent regulator is that he is independent and that the Government do not intervene on the issues that he considers.

Baroness Miller of Hendon

My Lords, I did not say whether I agreed, I simply asked whether the Government agree with the regulator's proposals. I did not say what was my view; I asked what was the Government's view.

Lord Sainsbury of Turville

My Lords, as I explained, the proposals are just that: proposals for consultation. As I said, the regulator has extended the consultation period and it is for him to seek views from the company and everyone else who wants to make representations and then make his decision.

I hope that I did not say—because it is not in the text of the Statement—that Parcelforce is going totally back into Royal Mail, only the part of it that relates to the universal service obligation, which involves parcels weighing up to 20 kg. I also share the respect of the noble Baroness for Allan Leighton, whom I know from personal experience to be a good retailer, which is a skill the Post Office needs. I agree with the noble Lord, Lord Razzall. The point is that we have given it commercial freedom for the first time ever. What he said was correct: it has had the commercial freedom but not the experience necessary to deliver on what it should have been doing.

It is for management and the trade unions to sort out industrial relations. They must sort them out, if they are to create a profitable and successful business in the new world of commercial freedom. The universal service obligation is the first, overriding responsibility of the postal regulator. That is his priority and comes even before any question of competition. It is not a question of subsidies. The first responsibility of the regulator is to make certain that the company that has the universal service obligation can maintain it profitably.

4.41 p.m.

Lord Clarke of Hampstead

My Lords, just over two years ago, I had the dubious pleasure of forecasting today's announcement in the House. With due respect to the Minister, his office, and the Minister in the other place, it is no good his trying to blame previous governments for the state we are in today.

At the 1997 election, the people of Britain were asked to vote on a manifesto that included protection of the Post Office, the universal service and the workers in the industry. I declare an interest as a former postman and a former official of the Post Office Workers Union. It is no good blaming other people; we have had five years of this Government. In the first couple of those five years, people messed about and did not make up their mind. We knew what the Government wanted to do, but that was not on the cards. The idea was to give the Post Office commercial freedom. Much has been said about that. The Post Office has had two years to make commercial freedom work. In those two years, nobody has addressed the major problem—underfunding.

In the previous debate, to which the noble Lord. Lord Razzall, referred, I said that one penny on postage would produce £182 million. If it had been two pennies—still the cheapest postal service in Europe—we could have wiped out the deficit that the Post Office faces today. I shall not go on; I will have plenty of opportunity in the future. I hope that the House will debate in depth the Government's failure to honour the commitment that it gave the British people and the failure to maintain the service in which I worked for over half a century.

I could do a delivery to businesses in Hampstead in the morning; do a 9 o'clock collection; deliver parcels between 10 o'clock and 12 o'clock; do a 12 o'clock collection; and still go on the sorting before I went home. It is no good the Government blaming Post Office management. The problem is that the service has been starved of the capital it needs to do the job. Parcelforce was always integrated with Royal Mail. It was divided into distribution and collection, and parcels were separated out. People said that that was nonsense at the time, but we had to learn the hard way.

I shall ask a question specifically about the enhanced redundancy packages. The Post Office pension fund is made up of two elements: the former Post Office staff superannuation scheme and the Post Office pension scheme. One of those is a shared cost scheme; the other is based on the Civil Service scheme. Under the trust deed of one of those schemes, there is the ability to enhance redundancy payments by six and two thirds of service, to make it a better deal. I want an unequivocal assurance from the Minister today that no money from the Post Office pension fund will be used to fund the redundancies that are to follow. If I am right in my suspicion that it will be, can I have an assurance that any money that is used will he returned to the pension fund within a reasonable time—a maximum of five years, rather than something like 40 years, which will probably be the Government's answer?

We will have a chance to talk about industrial relations, so I shall not deal with that subject now. Today, I am sad that the predictions have come true. Only one group of people is to blame for the situation in the Royal Mail, Parcelforce and the Post Office: the British Government. They have failed lamentably to serve the British people and the people who work in the postal industry.

Lord Sainsbury of Turville

My Lords, the noble Lord, Lord Clarke of Hampstead, can fairly claim to have foreseen this. However, I think that his arguments were wrong. Today's events have nothing to do with the Post Office Act or with starvation of capital. It is, of course, true that any organisation that has a monopoly and raises prices can get out of trouble, but today's events have everything to do with the management of the Post Office and the situation that it is in as regards costs and the growth of revenues.

Over 10 years, Parcelforce has never made a profit. It has losses of £400 million. That is nothing to do with the Post Office Act. That business has not focused on its structure, adapted itself to the changing marketplace or controlled its costs. After 10 years of losses and two major attempts to put in capital investment, it is now time to make certain that it gets back onto a profitable basis.

I do not believe that it would be possible under the terms of the pension fund for it to be used to make redundancy payments, even if there were a desire to do so. If I am wrong about that, I shall write to the noble Lord. Lord Clarke of Hampstead. I think that it is simply not possible, and it would not be desirable.

Lord Crickhowell

My Lords, I must press the Minister to answer the question asked from the Liberal Democrat Front Bench today and in the recent debate when he failed to answer it.

We have heard much about commercial freedom, but there is a universal postal obligation, and we have a regulator. We have also heard that the regulator has proposed opening up a substantial tranche of the most profitable parts of the Post Office's business to competition. How can one have true commercial freedom in a situation in which there is a universal postal obligation and a regulator who proposes to open up some of the most valuable parts of the Post Office's business? What happens if that leads to further substantial losses? Those questions were pressed in the recent debate and have just been pressed by the spokesman for the Liberal Democrats. In the previous debate and again this afternoon, the Minister failed to address that issue.

Lord Sainsbury of Turville

My Lords, that is not strictly correct. I answered that specific point by making it clear that the first responsibility of Postcomm—the regulator—is to maintain the universal service obligation. That is the regulator's priority. Only when that has been achieved can he consider the question of competitive forces. If he introduces competitive forces and liberalisation, and that means that the universal service cannot be delivered by the body that has the obligation, he will have failed.

In a situation in which there is, essentially, a monopoly, there is no surrogate for market forces unless there is a regulator. Commercial freedom in a monopoly situation is meaningless. The commercial freedom will be within a market situation set by the regulator.

Lord Dearing

My Lords, I declare an interest as a Post Office pensioner. I am not sure which scheme I belong to—one or the other. This is a sad day for those of us who care about the Post Office. I guess that goes for all of us. However, the appointment of Allan Leighton is good news. I congratulate the Government on securing his services.

In the Statement, the Minister referred to the tremendous potential of the Post Office. I agree with him. In saying that, however, and in saying that the decisions on the monopoly rest with the regulator, had he noted that Allan Leighton is recorded as saying that Postcomm's proposals represented "death by a thousand cuts"? I wonder if the Minister can be so confident of this great potential if the man they have just appointed is right?

Secondly, the Minister will be aware from correspondence of my concern that the regulator, in taking his decisions, may not be required to have regard to the national interest in all respects. I would be grateful if the Minister could, today or on another occasion, enlighten me.

The whole House is concerned about the future of the Post Office. I am not defending a monopoly. I think that to some degree it has to go hut, if we are to emerge from all of this with a very prosperous business, leading the post offices of Europe, it is a case of how fast and how extensively.

Lord Sainsbury of Turville

My Lords, I share the respect that the noble Lord, Lord Dearing, has for Allan Leighton. I can only say once again that the overriding responsibility of Postcomm is to maintain the universal service obligation. If he opens up the market and it leads to a failure of that obligation, then to that extent he will have failed.

I know that the noble Lord is particularly concerned about the Post Office having a strong and profitable base in this country, from which it can become an international and global player. I would argue that if one looks across Europe, the strongest players internationally are those which have had to face the toughest competition. It is not at all clear that making certain that your national players have a cosy life—in fact the record is entirely against this—is the way to breed companies which can be very profitable on an international basis. I agree with him, however, that it is important that the Post Office, and the Royal Mail in particular, is not constrained so tightly on a financial basis that it cannot take a global view of its responsibilities.

Lord Prior

My Lords, is the Minister aware that one can only excuse this Statement if one believes that it is written by a political adviser and not by the Minister at all?

To blame the last Conservative government five years ago for what is happening now is grotesque in the extreme, particularly as the Minister himself admitted that Parcelforce had been losing money for 10 years and had never made a profit. Surely that does impose some condition upon the Post Office, and perhaps even on the Government, to have done something before now?

Everyone blames the industrial relations, and the management must take the chief responsibility for that. My experience of the people who deliver the mail, however, particularly in country districts, is that they are loyal, decent, hardworking people.

Noble Lords

Hear, hear!

Lord Prior

My Lords, I think that the whole House has a responsibility to the Post Office. At a time when the Government need support over this matter, the sort of Statement they have made will not go down well.

Lord Sainsbury of Turville

My Lords, the noble Lord made a very telling point when he said that this situation with Parcelforce goes hack 10 years. To say that and then to blame it on the Government seems to me curious. It may be argued that we should have tackled it earlier. We did have a strategy to invest more into it, to try to put it on a sound footing, but we have not been able to do so. However, this has been going on for 10 years.

The point I make is that the Post Office did not have commercial freedom until recently, and commercial freedom is an essential part of this situation. I agree with the noble Lord that there are many areas, as we say in the Statement, where the members of the Post Office work both hard and very effectively in difficult situations to deliver the mail. However, one would be hard put to say that the industrial relations situation in the Post Office was not a major contributor to its difficulties, in particular the very marked service failures in recent years. If this business is to do well in the years ahead, it is absolutely fundamental that it improves that situation. A business like this cannot be run effectively and well if industrial relations continue as they are, taking up so much time.

As Allan Leighton said in a recent letter to the noble Lord, Lord Dearing, "If we spent as much time attacking the competition as we spend attacking ourselves, we would be doing a lot better".

Lord Hoyle

My Lords, I must first declare an interest, because the Commercial Managers Association is a section of Amicus, of which I am a member. Could I ask my noble friend to join with me in expressing sympathy and concern for those who are losing their jobs? They certainly have not had a "cosy life", as he put it.

Perhaps I may now ask about the regulator. The regulator, while he may have extended consultation, was due in April to open up 40 per cent of the most profitable part of the Post Office to competition. Will that he delayed? Will he also be asked to think again about the fact that he is not going down the line recommended to him by the European Commission, and also the fact that we are opening up our market far faster than anywhere else in Europe?

Lord Sainsbury of Turville

My Lords, I think that I have already said, but let me say it again, that I share the sadness about this Statement because of the many hardworking people who will have to change or lose their jobs. I do not think that I have said anything in the Statement about a cosy life.

It is for the regulator and Postcomm to make decisions about how quickly the market is opened up, subject to the overriding consideration I have mentioned with regard to the universal service obligation. He will have to do that. Thy most important aspect is that there is a proper dialogue between Consignia and the regulator to establish the facts, so that there is a clear view about what is happening and what can be done.

Finally, it is by no means clear that we are opening up our market faster than others. There are certainly some countries which have already opened up their market completely, in situations where the major national post office has maintained a very large share of the total market.

Baroness Byford

My Lords, may I return to the question posed by my noble friend regarding the closure of sub-post offices?

The Minister in his response to the noble Lord, Lord Clarke of Hampstead, said that the Postal Services Act did not have implications. Perhaps I may beg to differ with him. Under that Act, the Post Office has several responsibilities. One is for postal services and one is now to be for a parcel service. The other is the question of how we pay welfare benefits to millions of people.

It is one of the great problems that we have debated in this House. Indeed, we were reassured that it would happen by 2003. I understand that some £480 million was taken from the Post Office to invest in the Horizon project. We were told that it would all happen and that it would be perfectly all right. Now we hear of even more closures of post offices, urban and rural. Pensioners, and many people claiming welfare payments, already spend a good proportion of those payments in actually travelling to get them. If more post offices and sub-post offices close, I do not know what will happen.

This Statement does not refer to the implications it has for the payment of social benefits. Perhaps the Minister would comment on that?

Lord Sainsbury of Turville

My Lords, this is an issue that I remember well from the Postal Services Act. It was true then and is true now that the Postal Services Act has very little to say about these particular questions. In particular, there is no connection between the question of the new ACT system and the payment of benefits from post offices.

The original question of automation of the Post Office in relation to the payments of benefits goes back long before this Government. What has been debated and changed is the way that has been done.

However, that is an issue about automation of the postal network and the introduction of ACT in 2003. That is on track and moving forward. As I have said many times previously in the House, we are committed to ensuring that people are able to collect their benefits in cash from post offices, as they have been able to do in the past, without any additional charges.

Lord Davies of Coity

My Lords, I am extremely saddened by the Statement today, having spent most of my life representing the interests of workers and their families. I regard this as another stab at working-class people, who face tremendous difficulties.

I appreciate the Minister's views on commercial freedom and I know what the Conservative government did when they were in power, but I had expected more from a Labour government. The noble Lord, Lord Razzall, said that this is a matter for Consignia, not the Government. I had always thought that if, as a result of commercial freedom, anything happened which had an adverse impact on working people, then it was the Government's responsibility to intervene. There are many examples of such intervention. If I am not mistaken, I believe that it was a Conservative government that, for example, nationalised Rolls Royce. If the noble Lord, Lord Razzall, thinks that this is a matter for Consignia and not for the Government, perhaps he will take the same view when the next Statement on Railtrack comes before the House. There seems to be a measure of contradiction.

Over the past two decades, I have seen the closure of mines, the closure of steelworks and reductions in the number of people in work. What do we find? We have found that areas of this country are now destitute, with the male working population enormously reduced. We have found considerable increases in the levels of state benefits that have had to be paid. We have also found that many of these areas are becoming havens for crime and vandalism. If we anticipate, as has been reported in the newspapers, that something like 40,000 people are to lose their jobs in the Post Office and 3,000 post offices are to close, perhaps my noble friend on the Front Bench could tell me whether that will impact on the Government and the public purse in terms of the increased benefit payments that will have to be made?

Lord Sainsbury of Turville

My Lords, Parcelforce is a business which has been in considerable trouble for some 10 years. During that period it has not made any profit. The situation has grown much worse over recent years as a result of the sharp fall in the number of parcels being sent out in the particular range in which Parcelforce has concentrated most of its business. It makes no sense for Parcelforce or the Post Office not to tackle that situation. If it is not tackled, then the drain on the public purse will simply increase ever more. Parcelforce has to maintain a very large infrastructure while it simply does not have sufficient parcels to process through. Not only does it make commercial sense, it makes national sense to restructure the network.

The final point I should like to make is that the Post Office has made it clear that it will seek to redeploy those who lose their jobs, or deal with the job losses through voluntary redundancy or natural wastage. Every attempt is to be made to redeploy people, but it does not make commercial sense and it is not in the national interest to maintain a large infrastructure serving a parcel delivery service which is declining at a very rapid rate.