Postal Services (Hansard, 3 November 2004)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, the universal postal service requires that in the UK there is at least one delivery to homes and one collection from access points every working day; and that there is an affordable, uniform tariff. There are no plans for the wholesale closure or sale of the directly managed network. Post Office Limited tells me that on current thinking, it estimates that around 20 directly managed Crown offices might close. That would in no way affect the provision of the universal postal service.

§ Baroness Gardner of Parkes
My Lords, I thank the Minister for that reply. However, is he aware of the debate that we had in January on this subject? In particular, I brought to the Government's attention the Postcomm publication A Review of Royal Mail's Special Privileges which made clear that Postcomm considered exemptions—such as the exemption from VAT and the right for Post Office vans to pull up and empty mail at post boxes—special privileges that it favoured removing. Will the Minister assure us that there is no question of putting VAT on Royal Mail services or postage stamps?

§ Lord Sainsbury of Turville
My Lords, the Question I was answering was whether, in view of proposed closure of major post offices, we are satisfied that, Postcomm is fulfilling its prime remit to exercise its functions in a manner best calculated to ensure the provision of a universal postal service". I took that to be a reference to the fact that there have been rumours that 200 Crown offices might be closed. As I pointed out in my Answer, that is not going to happen, so there is no impact on the provision of the universal postal service. On the question whether there is any intention to change that situation, I believe that there is not—but I shall write to the noble Baroness with the answer to her other question, which I believe is a different question.

§ Lord Razzall
My Lords, in many cities, including London, the closure of sub-post offices has been justified on the basis that Crown post offices would still be available. In the context of that consultation process, even 20 is still a large number of post offices to be closed. Would the Minister support the view that the proceeds of sale of any of those major outlets must be invested in the Post Office network?
307 Those of us who are concerned about my last question have not been motivated by newspaper campaigns or articles—but would the Minister agree with last night's London Evening Standard that the Post Office network is an essential utility which the Government cannot allow simply to wither on the vine?

§ Lord Sainsbury of Turville
My Lords, I was asked, first, about whether the consideration given, in many cases, by the urban reinvention programme as regards where people might go when looking for alternative post offices would be affected by the possible closure of 20 Crown post offices. Given that there are 15,000 sub-post offices and post offices, the answer is clearly "no". Twenty post offices closing over a number of years will not affect that situation.
Secondly, as for the use of the proceeds, as I have explained, there will not be many closures so there will not be many proceeds. There are going to be conversions, but that is a different question. The article in the Evening Standard, which the noble Lord obviously did not read, was based on the assumption that there would be 200 closures—which, as I pointed out, is wrong.

§ Lord Barnett
My Lords, would my noble friend clarify something for us? When a chief executive officer of the Post Office or the Royal Mail is appointed, is he given instructions that the remit for a universal postal service should take priority, even if it results in huge losses, and that he must therefore refrain from closing any post offices, even if he believes it to be wrong in terms of running a service?

§ Lord Sainsbury of Turville
My Lords, we go a lot further than that. As the noble Lord will remember, we put it into legislation, and the licence under which the Post Office operates clearly sets out the conditions for the universal postal service. The chief executive has to work within those parameters.

§ Lord Dearing
My Lords. I declare an interest as a Post Office pensioner. The Minister will be aware that postal prices for ordinary stamped letters in this country are far below those of most other countries in western Europe, and there is heavy cross-subsidisation of the service. Would the Minister consider that there is a possibility that, in such a situation of cross-subsidisation, the free entry of competitors on the basis of fair prices in the market place, which the Government want to encourage, is inhibited? With that in mind, would he agree that it may not be possible to sustain the universal postal service in a competitive market?

§ Lord Sainsbury of Turville
My Lords, it is correct that stamp prices in the UK are the lowest in Europe. Indeed, the Royal Mail's regulatory accounts for 2003–04 show a loss of £247 million on its regulated business. However, it is also true that, as reported in the Royal Mail's main report and annual accounts for 2003–04, it made an overall profit on its letter operations of some £253 million.
308 It is for the regulator, Postcomm, to consider whether the level of stamp prices acts as a barrier to the introduction of competition in the postal sector. Postcomm is consulting on the next price control and the early opening of the postal services market. I am sure that the views of the noble Lord, Lord Dearing, and others, will be taken into account, as regards the barriers that may inhibit a competitive market.

§ Baroness Byford
My Lords, will the Minister accept that the Government have discriminated against the Post Office, through trying to save money on the pensions and welfare payments system? How can they ask the Post Office to be commercially viable and at the same time expect it to be a public service? Does he further accept that they have compounded the decision by insisting that post offices are a commercial business?
The Minister referred earlier to the legislation. I took part in debates on the Postal Services Bill in 2000. The Minister will recall that the one thing that we said again and again was that if he withdrew welfare benefits payments systems from post offices—whether Crown or sub-post offices—the loss that he has just referred to would be exactly what would happen. That has sadly proved to be the case.

§ Lord Sainsbury of Turville
My Lords, the framework in which the Post Office operates involves economic and social targets. Within that, it is required to act commercially. That seems exactly the right framework within which such a service should operate. It would be absurd if it had no economic or social objectives; it would equally be absurd if it were allowed to pursue those objectives without any commercial considerations. So the framework is entirely right.
As for the whole question of benefit recipients, it is interesting that the universal banking service, which went live on 1 April 2003, has been a great success story rather than the disaster than many people predicted. It is also interesting that more than 63 per cent of benefit recipients now access benefit payments via a bank account, which compares with 43 per cent in April 2003 at the launch of direct payment and 26 per cent in 1996. That shows that our decision to invest heavily in systems for the Post Office was entirely right.

§ Lord Clarke of Hampstead
My Lords—

§ Baroness Greengross
My Lords—

§ Lord Imbert
My Lords—

§ Lord Clarke of Hampstead
My Lords, I believe that it was our turn.

§ Lord Grocott
My Lords, there will be time for everyone to speak, so let us take it easy.

§ Lord Clarke of Hampstead
My Lords, I also declare an interest, as a former Post Office worker—unlike the noble Lord, Lord Dearing, who was on one side of the table while I was on the other.
309 I do not get my comments from papers. Does the Minister recall the exchanges that we had during the passage of the Postal Services Act 2000, when he made very clear the role of Postcomm? He said that it had a duty to protect the public service. We talk about there being 15,000 sub-post offices left, but there were 22,000 to start with. Having seen that decimation in the number of sub-post offices, does he agree that Postcomm has failed in its duty to protect the public service? It has decimated the number of deliveries and kept prices artificially low. I have heard so many times that the day-to-day running is not the business of the Government, and I do not expect to see the Minister standing behind a counter or delivering mail—

Noble Lords
Question!

§ Lord Clarke of Hampstead
My Lords, what I would like to ask is this: as we are the owners of the Post Office, is it not about time that we sacked those people and got some people in who knew what they were doing?

§ Lord Sainsbury of Turville
My Lords, I do not agree that Postcomm has failed. Its main role is with the universal postal service. Even after the urban closure programme, 95 per cent of the population will still live within a mile of a post office.

§ Lord Imbert
My Lords—

§ Baroness Greengross
My Lords—

Noble Lords
Order!

§ Lord Imbert
My Lords, does Postcomm see it as part of its remit to persuade the postal authorities to employ postal workers who can actually read? That might give customers an increased chance of receiving their own mail instead of finding it distributed in the vicinity.

§ Lord Sainsbury of Turville
My Lords, obviously it is part of Postcomm's remit to consider the service as well as the cost of the service. Within that, we shall keep an eye on whether the quality of service is at the levels it should be.