HL Deb 08 July 2003 vol 651 cc127-30

2.44 p.m.

Lord Berkeley asked Her Majesty's Government:

What evidence Postcomm will require from Royal Mail in order to determine whether it will be able to meet its performance after withdrawal of its rail freight services.

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

My Lords, Postcomm is in the process of considering the action plans Royal Mail has presented to it to underpin this year's service quality targets. I have no doubt that one of the issues it will be looking at will be the potential impact of implementing Royal Mail's multi-modal transport review.

Lord Berkeley

My Lords, I am grateful to my noble friend for that Answer. I declare an interest as chairman of the Rail Freight Group. Does he not agree that as Royal Mail is a government-owned company it should comply with government policy to use as much rail freight as possible rather than road? Should it not also in its appraisal use the Government's appraisal and methodology in comparing the benefits and the costs of road, rail and air for value for money, environmental benefit and performance? Will he ensure therefore that Postcomm requires the Royal Mail to do that as part of the review?

Lord Sainsbury of Turville

My Lords, it is for Postcomm to ask those questions. On the figures that I have the air and road only network results in fewer carbon emissions than the air, road, rail proposal. It also involves fewer lorry movements although more miles per annum. It is arguably a better environmental scenario.

Lord Roberts of Conwy

My Lords, is it not the case that Royal Mail anticipates that it will reduce its losses by some £90 million a year by switching from rail to road? Would it not be wrong to interfere with such a wise commercial judgment?

Lord Sainsbury of Turville

My Lords, the figure of £90 million is the total savings from the total transport review. Transferring rail services to road will save about £25 million which is a substantial amount of money. It is a commercial decision for Royal Mail to take rather than the Government.

Lord Ezra

My Lords, is the situation not complicated by the incidence of VAT which is payable on rail freight but not on road movements by Royal Mail? Of the saving of £25 million, how much is accounted for by VAT?

Lord Sainsbury of Turville

My Lords, as the noble Lord asked that question on a previous occasion, this time I can give him the answer. The £25 million saving would come down to £19.5 million. It would nevertheless still be a very substantial saving. It arises because VAT is not paid on stamps. Therefore, VAT cannot be recovered from the railways. I hope the noble Lord is not suggesting that we should charge VAT on stamps as a way of solving the problem.

Baroness Greengross

My Lords, what has to happen before the Government acknowledge that such a decision is of major public interest and is much broader than purely a commercial cost matter?

Lord Sainsbury of Turville

My Lords, in the past 25 years during which I have had any connection with the postal service, I believe that Royal Mail has suffered enormously under all governments through Ministers and civil servants interfering in commercial decisions. It is not the intention of the DTI to continue with that tradition.

Lord Campbell-Savours

My Lords—

Lord Renton

My Lords, will it be borne in mind—

The Lord President of the Council (Lord Williams of Mostyn)

My Lords, it is the turn of this side.

Lord Campbell-Savours

My Lords, my noble friend will be aware that a number of my noble friends are perplexed by the answers that he is giving on this particular matter. What is the point of Labour Members of Parliament and Labour activists knocking on doors up and down the land and assuring people that we intend to move freight from road to rail when we are totally incapable of intervening on this occasion when the public utility is owned by the taxpayer? It is owned by us. We are the shareholders.

Lord Sainsbury of Turville

My Lords, the amount of mail as a total percentage of freight is very small; it is about half of 1 per cent. The Secretary of State sets social and environmental targets against which Postcomm measures performance. However, as I suggested, in this particular case it is not at all clear that continuing with the rail freight operation is environmentally the best solution.

Lord Howell of Guildford

My Lords, the Minister said that it was correct not to intervene in a commercial decision, but has he seen discussion in the newspapers of proposals for a heavy congestion charge on the motorways? Up to 50p per mile is mentioned. As we are moving into an age of charges for transport on roads, what will happen then? Will the Post Office do its sums again and decide that it ought to go back to rail?

Lord Sainsbury of Turville

My Lords, as I am sure the noble Lord knows, the situation is that about 70 per cent of the future network connections—that is, the journeys that take place—will take place between 6.30 in the evening and 3 o'clock in the morning, when congestion is not a major issue.

Lord Brookman

My Lords, I assume that the Minister will be aware that, on these Benches at least, there is great concern about these proposals. For example, how on earth will the situation be dealt with at Christmas time, when some 150 extra trains are brought into play to deal with the Christmas surge? Does he think that that can be handled by road, or maybe by air as well? It seems absurd.

Lord Sainsbury of Turville

My Lords, it is very difficult—which is why it has been such a disaster in the past—for Ministers and civil servants to try to control the operational arrangements of an industry of this scale and complexity. It is simply not possible, nor do I think it desirable, for us to start imposing our judgment on how those operational services are run, at Christmas or at any other time.

Lord Renton

My Lords, will it be borne in mind that Royal Mail has always, so far, delivered first-class mail promptly? Will the Minister ensure that that continues?

Lord Sainsbury of Turville

My Lords, clear service targets are laid down by Postcomm, and it is the job of Postcomm to measure the performance of Royal Mail against those. In looking at the action plans of Royal Mail, it will take into account whether, in its judgment, they will lead to the service standards that it has laid down.

Lord Mackie of Benshie

My Lords, is the Post Office meeting its performance targets at present? Two cheques have gone missing from my mail in the past three weeks?

Lord Sainsbury of Turville

My Lords, I am very sorry that the noble Lord has had that particular problem, but I do not think it is relevant to the Question that we are considering.