HC Deb 12 March 2002 vol 381 cc175-200WH

Motion made, and Question proposed, That the sitting be now adjourned.—[Mrs. McGuire.]

9.30 am
Mr. Lindsay Hoyle (Chorley)

I thank you, Mr. Deputy Speaker, for giving up your time this morning to enable this debate to take place; I also thank the Minister. I know that many Members will wish to speak this morning, and I think that, by reducing the length of our speeches, we should try to ensure that everyone has a chance to do so. It is unfair that hon. Members should have to wait so long, when we often seem to repeat ourselves.

I emphasise the importance of today's debate, which is about the future of Consignia and postal services—the name Consignia is not appropriate, but we have to use it, at least for today.

Proposals for the introduction of competition in the United Kingdom postal services, forwarded by Postcomm—the Postal Services Commission—are currently out for consultation. The closing date is this Friday, 15 March. If the proposals are not altered—and all the indications suggest that they will not be—they will have a huge impact on our postal services. I, and other hon. Members, many of whom are here today, have a number of concerns that need to be highlighted.

I shall give the Chamber a good example of why I believe that Postcomm is not for change and does not want to extend the consultation period. One of my local councillors, Mr. Molyneaux, is a member of Chorley district council, which covers a rural area. He wrote to Postcomm asking it to consider extending the consultation so that everyone would have time to digest its proposals and put forward their views. The sympathetic listening ear of Postcomm replied, "Sorry, no change." That is not good enough, as it sets us worrying about the future of the people involved.

It is necessary to run through Postcomm's proposals first. In phase 1, from 1 April 2002, Postcomm will grant licences for operators wishing to provide large bulk mailing services with a minimum of 4,000 items. In phase 2, from 1 April 2004, licences will be granted for operators wishing to provide large mailing services with between 500 and 1,000 items. Phase 3, from 1 April 2006, will see the complete liberalisation of all UK postal services. In practical terms, phase 1 will open up the market to the extent of 30 per cent. of Consignia's inland letters revenue—40 per cent. of its volume—and phase 2 will open it up for 60 per cent. of inland letters revenue, or 70 per cent. of its volume.

Two questions, which are linked, arise immediately. First, one must seriously question the pace at which competition is being introduced. Secondly, the way in which the market is to be liberalised will, in my opinion, cause far more damage to the consumer and the Post Office. We are opening up the most profitable part of the postal service at the expense of the least profitable part. Logic should apply, and there should at least be a balance. In my opinion, the unprofitable part should be tested first. In any event, Postcomm should certainly not allow cherry-picking. That is the danger; that is why Postcomm is wrong.

I have grave concerns about the impact of competition on our postal network. Private companies will want to operate only the profitable services, which will result in cherry-picking. The unprofitable rural services will then lose the cross-subsidy from the profit made by the urban services, and prices for consumers will inevitably rise. That will be combined with a fall in the standard of service. In simplistic terms, in rural areas the price will rise and the level of service will drop. That is where the suffering will start.

The universal postal system, with its uniform tariff, is something that we should cherish. We should not allow it to be abandoned under Postcomm's proposals. Postcomm will argue that everything is in writing so we need not worry, but it cannot say how the service can be sustained. It worries me that Postcomm seems to think that it can sustain the cherry-picking of the most profitable areas, expect next-day delivery in all the rural areas, and still make a profit somehow. Only two things can happen. Either the rural service will begin to drop away or the price will go up so much that we will have to have a uniform price of about £1. That is when the cherry-picking will start, with competitors coming from outside to provide services much more cheaply.

Mr. Patrick McLoughlin (West Derbyshire)

So far, the hon. Gentleman has been very persuasive in his anger at the regulator's suggestions. Will he explain, therefore, why he voted to set up the regulator? There was no regulator until the Government introduced the legislation under which the Post Office currently operates.

Mr. Hoyle

I am pleased that the hon. Gentleman can still make political points, even if he came here to be constructive and helpful. Never mind; if he wants to play politics, let us deal with his point. We knew that there would have to be competition, and that something like Postcomm would come along. We set up Postcomm in the belief that it would help the consumer. That was the idea, but Postcomm has got it wrong and is working against the postal service and the consumer. We did not realise that it would understand its terms of reference differently from everyone else. I think that that deals with the silly point that the hon. Gentleman made.

One does not have to look too far to see that there will be problems. There are harsh lessons to be learned from countries that have already introduced liberalisation and competition. Sweden is a good example. Since 1993 the number of post offices there has fallen by 52 per cent., the public letter price has increased by 60 per cent. in real terms, and the Swedish post office is in financial crisis, having lost 1 million kronor in the first quarter of 2001. Since 1990, people in the smaller towns in New Zealand have been waiting an extra one, two or three days for mail. The market in Spain—for which the Government seem to have an affection—has been fully liberalised since 1960, but less than 70 per cent. of letter mail was delivered on target in 2000.

We should let those examples speak for themselves; they should act as a warning to Postcomm not to let such things happen here. Unfortunately, that warning has so far gone unheeded. We have all begged for an extension of the consultation period. Let us hope that ears are listening today.

I do not see how the problems that I have described can be avoided under Postcomm's present proposals. Indeed, Consignia has already let it be known that, on the basis of experience in Sweden, competition in the UK could increase the price of the first-class stamp from 27p to 40p and that of the second-class stamp from 19p to 30p. People may be willing to pay more if they get a better service, but that will not happen, particularly if they live in rural areas. If the profitable services are removed, Consignia will be left to pick up the pieces of the unprofitable services; unlike its competitors, it will be unable to refuse delivery. That will add further to the losses incurred over the past two years, and to the possibility of large job losses and post office closures. We are all well aware of that.

The Government, too, have a role to play. They are the major shareholder, and I urge the Minister to consider suspending their dividend requirement to help Consignia through this testing period, because Consignia is being hammered from both sides. Postcomm in helping no one—neither the postal service nor the consumers. The Minister should withdraw Consginia's obligation to pay off the Government every year, so that it will be able to use plenty of financial muscle in taking on the competition.

It should be remembered that such concerns are held not only by hon. Members here today; both the trade unions and Consignia have grave reservations about Postcomm' s proposals. A National Audit Office report entitled "Opening the Post" stated: the introduction of competition could result in a breakdown in the delivery of the universal service at a reasonable uniform price". The NAO was sending everyone a warning shot. The report stated further that Postcomm needed to make a convincing case to demonstrate that any steps they take to introduce competition will not endanger the continued delivery of universal service. An article in The Economist stated: By exposing Consignia to competition so quickly, Postcomm runs the risk that it will further weaken an already shaky service by allowing a challenge from strong European competitors…whatever Postcomm says, the price of sending a letter would increase significantly, while profits would go abroad. Those concerns have rightly been voiced about the pace of change and the way in which competition will be introduced. The European Commission proposals for liberalisation are different in two fundamental ways. First, the Commission has introduced competition by lowering the weight and price threshold, which covers all categories of mail and user, whereas Postcomm is opening up bulk mailing. That conflicts with the Commission's approach and relates only to large business. Secondly, the pace of liberalisation is more gradual, which I believe needs to be the case in the United Kingdom, given Consignia's present position.

Sir Robert Smith (West Aberdeenshire and Kincardine)

When the Select Committee on Trade and Industry visited the Commission recently, the Commission said that it was not up to it to tell any country how to run its service. However, it observed that the pace was much faster in the UK, and suggested that we might ask the Government how they expected a company that lost £ I million a day to sustain a universal service obligation.

Mr. Hoyle

I am pleased that the hon. Gentleman has highlighted those worries. We all share them, and I know that he has talked about them recently.

Although I am not wholly convinced by the proposals forwarded by the Commission, in terms of the mechanics and the timing, they are greatly preferable to those that we are currently considering. That is another message to Postcomm. Its proposals for competition, and eventually full liberalisation of the postal network, constitute a major threat to the universal postal service at a uniform tariff. I have grave concerns about the future of Consignia if the present proposals are allowed to go through.

If we are not careful, Postcomm could turn a great public service into another Railtrack. I therefore urge Postcomm initially to extend the period of consultation so that more time can be taken to consider in detail the proposals and all replies from interested parties, which are still being written to Postcomm. We must ensure that the present proposals are altered, so that companies cannot cherry-pick services and leave others to suffer.

I urge the Minister to use his influence and powers, and those of the Secretary of State, to ensure that Postcomm reforms its present proposals, so as to help the Post Office by supporting local post offices and avoiding more closures. An equal service in towns and rural areas must be assured. I also urge him to use his influence to scrap the name Consignia. The Royal Mail is the best known name in the UK after Coca-Cola, and it still sticks in my throat to say Consignia. Consignia the name to the dustbin and bring back the Royal Mail.

I urge the Minister to suspend the Government's requirement for the dividend and work with Consignia, the trade unions and Members of Parliament to build a constructive relationship, so that the Post Office can again be a successful, profitable company that delivers an essential and much cherished service.

Mr. Gareth R. Thomas (Harrow, West)

I understand that my hon. Friend was motivated to introduce the debate because he represents a rural area. Does he understand that there is considerable concern in urban areas, such as my constituency, too? Although the quality of Royal Mail services is improving in those areas, there is still concern about it, which has been exacerbated in our area by Consignia's apparent plans to slash the number of pillar boxes so as to save £1 million.

Mr. Hoyle

I agree with my hon. Friend. The problem that we face is that there is no relationship between the consumer and what is taking place; that is my worry as well.

I represent a rural area with an urban core—a town of 35,000 people—so I shall take Chorley and the districts around it as typical, and outline the situation that I do not want to see. I am sure that everyone can envisage it. In the commercial sector, lots of people will be running up and down in different coloured striped suits and different hats to deliver the mail at different doors. Then one or two of those people, in their different outfits and different little vans, might bring competition to the areas just outside that sector; Postman Pat might be consigned to them as well—but who will want the rural areas? Who will want to deliver to a farm on the moor near Chorley? No one.

All the firms will want the commercial sector, and that is where all the competition will be, as it was when the buses were deregulated. In the city centres one could not move for bus after bus, whereas the rural services were like a forgotten species. The same thing will happen with postal services if we are not careful, and that is why I hope that we will change direction—that we will scrap the name Consignia, bring back the Royal Mail brand and ensure that all services are protected in both urban and rural communities. We must ensure that the services provided by the good people who work for the Post Office in Chorley can continue, without the worry that Postcomm is causing them.

Several hon. Members


Mr. Deputy Speaker

Order. It is evident that many more hon. Members wish to speak than signified a wish to do so before the debate. I remind hon. Members that notification is helpful, because it allows some selectorial wisdom to be applied.

9.45 am
Mr. Patrick McLoughlin (West Derbyshire)

I congratulate the hon. Member for Chorley (Mr. Hoyle) on raising this important subject, which is of concern to many hon. Members, as the attendance at today's debate shows. However. I also gently chide the hon. Gentleman, because when he talks about Postcomm being his Government's Railtrack, he must remember that the man who wound up Railtrack is the same man who, when he was Secretary of State for of Trade and Industry, originally created Postcomm. That man is presently the Secretary of State for Transport, Local Government and the Regions, and he has a track record of this sort of thing.

It is no pleasure to anybody in the House to see the Post Office in the state that it is today, with the problems that it faces. Those problems are disturbing because, as has rightly been said, the universal service is well regarded throughout the country, and its continued maintenance is considered essential. When the Minister sums up the debate, no doubt he will tell us that we should all relax, because for the first time, the universal service has been enshrined in legislation. However, its provision was never in doubt before, whereas now there are doubts about whether the Post Office will still be able to afford it.

I am sorry—I keep referring to the Post Office, but I should, of course, be saying "Consignia". I join the hon. Member for Chorley in his plea about the silly name that the organisation has adopted. Nobody recognises it, and the change was a useless waste of money. Perhaps the organisation could go back to its original name, which was well understood and respected.

Mr. Nigel Waterson (Eastbourne)

Does my hon. Friend agree that in many parts of the country people are not receiving the basic universal service at the moment, because of union intransigence, managerial incompetence or a subtle combination of both? Indeed, Consignia is in danger of being penalised by the regulator because it is already failing to provide the service that people have a right to expect.

Mr. McLoughlin

I always agree with my hon. Friend. He is right about the services in certain areas of the country with specific problems. In my constituency, which is a large rural one, the Post Office is held in high regard and so are the postmen who deliver our mail. The uncertainty that they currently face is very worrying for them.

The situation has not been helped by certain remarks. The Secretary of State, in a recent debate on the Floor of the House, accused some Conservative Members of scaremongering about the future of the Post Office—but the scaremongering has been done by some of the senior management in the Post Office. When the chief executive appeared before a Select Committee just before Christmas, he let slip that there might be 30,000 redundancies. If that was not scaremongering, I do not know what is.

I want to keep my contribution short and to the point. The Post Office provides a good service, but that does not mean that it cannot adapt. It needs to adapt. Some time ago, when I occupied the position now occupied by the Minister, I had responsibility for it and it was well aware of the challenges presented by e-mail and the faster communications that we all want. How the organisation raises its game to respond to that challenge is vital, and I urge the Minister to treat the management of the transition with great care. Perhaps he will tell us what powers he has over Postcomm, the regulator. I know that that is a moot point; one is never sure what powers Secretaries of State have over regulators. Listening to the Secretary of State for Transport, one might think that he had never interfered with Tom Winsor, but Tom Winsor gives a different account. It will be interesting to hear what the Minister says.

The speed of change worries the many postmen who deliver our service, and who are welcomed when they do so. The Government must keep that in mind; it is no good their saying, "It's the regulator," because they created the regulator in the first place. Some hon. Members who are complaining about the regulator now voted to have one, and for this system of running the Post Office. What we have now is the Government's great third way, which they are coming to regret, because it does not seem to be working very well.

There is also great concern about the future of the post office network. I hope that the Minister will be able to reassure us about the speed of post office closures, which has increased dramatically over the past few years. The Government will say that there were many closures during 18 years of Conservative Government—but I have never argued that post offices would never close. They will close because people retire and sell the premises, and it is sometimes difficult to replace them. However, the number of closures last year—some 500—is way beyond what happened before. If the Minister chides me about the number of closures under the Conservative Government, I shall reply that over the five years that this Government have been in office, closures have run at double the rate that they did at any period during our 18 years. The Government's record is not good.

There is wide support for the Post Office in the House. However, that does not mean that it does not have to recognise and manage change and become more competitive. If it does not, the huge price rises that the hon. Member for Chorley suggested might be in the pipeline as a result of the changes that the Post Office faces will take place, and it will go into terminal decline. That will not be good for the country, and it certainly will not be good for the many rural areas that rely on their postal service.

9.52 am
Dr. Gavin Strang (Edinburgh, East and Musselburgh)

I am afraid that time will not allow me to respond to all the interesting points made by the hon. Member for West Derbyshire (Mr. McLoughlin). I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on having initiated this timely debate on the Post Office and the Royal Mail, and thank him for the tremendous job that he has done in campaigning to try to retain this vital public service. He has articulated the sense of alarm and foreboding that pervades the people of this country at the prospect of the road that we are taking. There is a fear that enormous damage will be done, and a British institution that provides a great public service will wither away. The concern not only is felt by trade unions and people in the Labour party, but extends throughout the population.

I shall quote a paragraph from a document produced by Postcomm in June 2001, called "Promoting Effective Competition in UK Postal Services": In introducing competition, Postcomm must act in a manner best calculated to ensure the provision of a universal service. Postcomm notes that this is not necessarily the same as ensuring Consignia provides a universal service if it could be provided in other ways, nor does it imply that the universal service is equivalent to Consignia's current range of products. For instance, Consignia's current operations and range of services generally do more than the minimum required to satisfy the universal service requirement in the Postal Services Act 2000". I repeat: Postcomm notes that this is not necessarily the same as ensuring Consignia provides a universal service". What does that mean? I grew up in rural Scotland, and my hon. Friend is well aware of the situation there. Does it mean that in rural areas the royal mail will be delivered by someone who is not a postman or postwoman? Are we talking about privatisation? That would be utterly unacceptable to the overwhelming majority of people who reside in rural areas.

We have heard alarming stories to the effect that some people's post may not be delivered to their doors, so presumably some pensioners will no longer receive that universal daily service. I do not believe those stories, but it is important that my hon. Friend the Minister should knock any such rumours on the head today, and confirm that the Government will not allow postmen and postwomen to be replaced by people from a private company. It is vital that the universal service, at a universal price, should remain.

The Minister may have read the article in The Scotsman the other day by Bill Jamieson, a great liberal free-market thinker. He says: Scare stories abound of no post before lunch-time (a state some say has already arrived), of 70p letters and the end of all mail deliveries north of Watford. Why can't the Post Office just stay as it is? Because it's bad, its broken, and its bust. That's why. The majority of British people totally reject that. My experience of the Royal Mail in my constituency, where I have lived for more than 30 years, is that it provides an excellent service. I have lived in two locations and our mail has always been delivered in the morning. In fact, most people in Edinburgh have their mail delivered in the morning. We do not have a second delivery at Newcraighall, although there was one at Portobello. I am very much in favour of a second delivery, which should be introduced in areas where it is not already provided. The internet is fine, but it is no substitute for a decent Royal Mail delivery. We cannot possibly argue that we are delivering better public services if we eliminate the second delivery in some areas. Providing better services means extending the second delivery as far as is practical, although I accept that will happen only in densely populated areas within a certain distance of the local post office depot.

Ever since my right hon. Friend who is now the Secretary of State for Transport, Local Government and the Regions made his original announcement, I have maintained a long correspondence on the future of the sub-post office network. The most recent letter that I received from the present Secretary of State for Trade and Industry is dated 22 November 2001. It relates to a concern of which the Minister will be aware, because of the situation in his own constituency—the fact that although the Government have taken significant action on rural post offices, they have not done the same for the sub-post offices most at threat. Those are the sub-post offices a high proportion of whose business is benefits business, and they are often on peripheral council estates, where the whole business depends on the footfall—to use the jargon—generated by people coming to claim their pensions and other benefits.

I am worried about the fact that a reduction in the geographical distribution of the sub-post office network is envisaged. My aim—and, I am sure, the objective of other hon. Members in the Chamber—is to ensure that that does not happen. The Prime Minister sent out the message that the Government's objective was not only to halt the decline of rural post offices but to deal with the problems affecting urban post offices.

I wanted to talk about the universal bank, plans for which have been curtailed, and to say something about making Post Office services universal, because some sub-post offices offer some services and others offer other services. However, time does not allow me to go into those matters, so I shall conclude by saying that the Post Office is a great British institution. That is not to say that it cannot be improved—but I trust that we will not go down the road proposed by Postcomm.

9.59 am
Sir Robert Smith (West Aberdeenshire and Kincardine)

Fortunately, a last-minute change in my diary enabled me to be here, because I want to congratulate the hon. Member for Chorley (Mr. Hoyle) on the excellent timing of the debate. The Minister has some questions to answer, which could help at least to reduce some fears.

Mine is a rural Scottish constituency in an area where there are many other rural constituencies. Hon. Members have already outlined how worrying Postcomm's proposals are for us and our constituents, and have talked about our great respect for the individual people in Royal Mail who deliver the post and provide a good service. In speaking of the universal service obligation, it is important to recognise that such areas are already penalised by the digital divide, as the Minister knows only too well. Yesterday, a constituent at my surgery said that BT had told him that the fact that his computer hangs up all the time on a bog standard modern was not its problem. Apparently, BT only has to get his voice through the line, because that is its universal service obligation. The worry is that competition will lead to the downgrading of the universal service obligation.

That is the most feared part of the current consultation. If one presses the regulator on how the circle will be squared if Consignia cannot cope after losing so much money, and on the fact that its understanding of how competition works will damage the universal service obligation, the regulator's terrifying response is, "We can always redefine the universal service obligation"—the obligation to our constituents, that is—"and reduce the burden." The idea that there is a threat to reduce the service to our constituents is not scaremongering; it comes from the consultation document.

Even more frightening for sensible, rational decision making, is the fact that the Government have published a document that is meant to guarantee the universal service obligation when there is competition, yet they have still to consult on how that obligation should be defined. That will be addressed in the next phase of consultation. It would be far more sensible to consult the public about what they require from the universal service obligation, and then consider how that can be delivered and maintained.

I confirm what has already been said by the European Commission: it is perfectly in order to levy the other operators that are allowed to compete to cross-subsidise the universal service obligation, if that remains with Consignia. Apparently the regulator does not have the power to do that at the moment, and it would be helpful if the Minister confirmed how such a power could be provided. Would primary legislation be necessary to confer it, or could that be done by statutory instrument? It would be even more reassuring if the Government confirmed that they are drafting the necessary legislation at least to ensure that the full range of options is available.

Finally, it is important that the Minister should explain in what form the Government envisage the universal service obligation surviving. Will he confirm that it will be retained—and not merely as a basic minimum to keep everyone happy and enable the Government to tick the box that says that there is a universal service obligation? We want a real universal service obligation that delivers to our rural constituents.

10.2 am

Geraldine Smith (Morecambe and Lunesdale)

In making this brief contribution, I shall confine my remarks to the Postcomm proposals that are currently the subject of consultation. I firmly believe that the proposals are ill founded and premature, and if implemented, will have a devastating effect on British postal services. Both the universal service obligation at an affordable price and the Post Office Counters network will be put at risk. Equally important is the fact that thousands of postal workers' jobs will put in jeopardy. Let us remember that that is in addition to the 30,000 jobs that are already threatened—a threat that has nothing to do with the postal regulator. Extra job losses would arise as a result of the regulator's actions.

As I said, the proposals are premature and will be implemented well in advance of the European proposals, which extend at least until 2009, and would provide for some sort of review before full liberalisation went ahead. That is not the case with Postcomm's proposals.

Postcomm's proposals come at a time when Consignia's financial position is already unsustainable. It is losing in excess of £1 million a day—the latest figure that I saw was £1.5 million—because it costs 28p to sort, distribute and deliver a letter bearing a 27p stamp. Yet when Postcomm said to the regulator last year that it wanted to put up the price of a first-class stamp by a penny, the regulator refused to allow that.

Sweden is often cited by Postcomm as an example of a liberated market that retains the universal service. If we followed the Swedish example, the price of a first-class stamp would be about 39p, but Postcomm has not said how much the ordinary public should pay for a stamp if competition is introduced into the postal service.

When the Post Office is losing money, it is ludicrous to propose that it open up one third of its most profitable business to competition in April. Let us be clear: we are not talking about fair competition, or ensuring a level playing field. The Post Office's competitors will not be required to provide a universal service at a uniform affordable tariff, nor will they have to sustain the unprofitable network of sub-post offices—not to mention the post bus service and all the other activities that the Post Office has taken on. On the contrary, they will be allowed to cherry-pick the most profitable town and city services that currently fund the unprofitable areas by cross-subsidy. Those competitors could include European postal operators, who will be able to cherry-pick our best services, yet their markets will still be closed to us. Their markets will not be opened up by European liberalisation. In my view, that demonstrates yet again the ill conceived nature of the proposals.

I am well aware that the Government take the view that the universal service obligation is not at risk because it is enshrined in legislation. They have formally committed the Post Office to maintaining a network of rural post offices and to preventing avoidable closures. I am sure that the Minister will reiterate those points in his reply to the debate. Upon examination, however, those commitments are not quite as good as they are cracked up to be. The standard of service apparently offered under the universal service obligation is substantially below that currently provided by the Post Office. The obligation requires only one collection from all post boxes on every working day and one delivery to each home or premises in the United Kingdom.

All hon. Members will be aware that the vast majority of post boxes are cleared several times a day, especially those in major city centres, where boxes are cleared almost continually. The primary reason for clearing post boxes is not because they would overflow with mail if not cleared, but because it enables mail to be processed and sorted ahead of the evening peak period. If mail could not be cleared throughout the day, the postal service would not be able to cope with the evening peak, which would cause delays in delivering mail.

Although the other obligation is to provide a daily delivery to homes and premises, most urban areas, including Morecambe and Lancaster, in my area, receive two deliveries a day, not one, so the obligation would guarantee only a reduced service. That is all that the universal service obligation would give us, so it cannot be claimed as a benefit.

Mr. McLoughlin

One of the other Post Office proposals is for later deliveries to households. Does the hon. Lady agree that that would be dangerous for the small businesses in our constituencies? It would be yet another argument against small businesses locating in the countryside. They would want to be in the towns, which goes against some of the Government's other policies that are intended to spread the load in the rural areas.

Geraldine Smith

I agree. The hon. Gentleman makes an excellent point. That would lead to a reduction in services, and businesses would feel it.

We should remember that under the universal service obligation, the average household would be lucky to receive a delivery every other day, because mail would be caught up in the system. The primary duty of the regulator is to protect the universal service obligation, and to introduce competition only if it could benefit the consumer. We need to send a clear message to the regulator, to ensure that the Post Office's competitors are not businesses that are simply looking for an easy profit. It is my constituents, and the vast majority of British citizens throughout the United Kingdom, who rely upon the postal services. They are the real consumers. They do not want to see the postal service run down or post offices closed, nor do they want to see postmen and postwomen thrown on the dole.

I make my final point directly to the Minister. The Post Office is a publicly owned company, and the Government have responsibilities. It is not good enough for them simply to say, "There's an independent regulator so we can't do anything about it." I hope that he will tell me that he has made strong representations to the regulator, that common sense will prevail and that the British postal system will provide an excellent service to the public.

10.10 am
Mr. Michael Weir (Angus)

I too congratulate the hon. Member for Chorley (Mr. Hoyle) on securing this excellent debate. It must be rare to have near unanimity in the Chamber, and I hope that the Minister takes note of it.

Those who argue for greater competition within the postal service should reflect on how many operators are likely to want to take on deliveries to rural areas, especially the highlands and islands of Scotland. There may be a universal service obligation, but there is probably already much less of a service in those areas than in many other rural areas. In some island areas, the universal service obligation is little more than a joke.

Mr. Alistair Carmichael (Orkney and Shetland)

Is the hon. Gentleman aware that several island communities, including some in my constituency, are already exempt from the universal service obligation? We are concerned, because we see the deregulation proposals as the thin end of the wedge.

Mr. Weir

Indeed, I was referring to that.

Even firms that already deliver parcels to the highlands and islands of Scotland charge much more than the charges in urban areas. That can only become worse under Postcomm's proposals. The universal service obligation may be enshrined in statute, but it is doubtful whether even that restricted obligation could survive the present proposals. In any event, current legislation would not prevent a substantial rise in prices or cut in deliveries. Consignia is no angel, as it has already considered ways of cutting deliveries, and one suspects that it would not be entirely unhappy if the universal service obligation were restricted. We are here to defend the Post Office and the delivery service, not Consignia.

I appreciate that the Government have suggested that they would insist on the retention of the universal service obligation, but I ask the Minister specifically: how will that be done if Consignia is losing business and haemorrhaging money? In the face of full-scale competition in which competitors cherry-pick the profitable parts of the business, how would one insist that a carrier continue with that obligation? Would the Government be prepared to give massive subsidies to a private company to continue that service? If the proposals go ahead, after Railtrack we could have Mailtrack.

The international comparisons are not encouraging. The Swedish example has already been cited. Prices there have increased by 72 per cent., and deliveries in rural areas are not made to the door, but residents collect mail from cluster points on the postman's route. The number of post offices in Sweden has halved from 1,900 to 900 in 10 years. The profits of the Swedish post office peaked in 1999, but it now runs a deficit that approaches £20 million a year, and staffing has been reduced by 20 per cent. In New Zealand, which is similar to Scotland in many ways, people in smaller towns now wait an extra day or two for mail.

The changes proposed by Postcomm would have a dramatic and detrimental effect on the rural areas of Scotland, which have suffered badly from the impact of foot and mouth and the downturn in the tourism industry—and I suspect that that is true of other parts of the United Kingdom as well. It is hard enough to find alternative employment in such areas, without our sacrificing services that already exist.

The Post Office is part of the fabric of rural life. We have already heard about the continuing threat to sub-post offices. It has been calculated that 80 per cent. of rural sub-post offices could go in some areas of Scotland, as a result of a combination of Postcomm's proposals and the proposals for automated credit transfer.

As the hon. Member for Morecambe and Lunesdale (Geraldine Smith) said, the Post Office runs a post bus service in many rural areas. The impact would therefore be not only on the postal service but on rural transport services. Under the proposals those would go, because they would be uneconomic for Consignia to continue. How do the Government propose to upgrade transport in rural areas to take account of falling services?

The proposals for the future of Consignia are thoroughly bad and should be rethought. The idea of a cheap universal postal service was introduced in 1840 because of the number of individual carriers who charged what they liked and caused distress. That postal service is now under threat, and ending it would be a disaster for Scotland.

10.15 am
Mr. John Grogan (Selby)

I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on his vigorous and passionate introduction to this debate. I shall make three brief points on Postcomm, Postwatch and good practice in Selby.

The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) had it right when he said that Postcomm's first duty and responsibility should be clearly to define the universal service obligation and how we deliver it at an affordable and geographically uniform price. The idea that consultation should follow in the autumn clearly gets things the wrong way round and beggars belief.

I disagree with my hon. Friend the Member for Chorley in that I believe that there is still hope of persuading the regulator to change its mind. Indeed, there must be hope, because the regulator must listen to parliamentary opinion, whether it is expressed here or in the three early-day motions. We want a steady-as-she-goes, cautious, unspectacular regulator that carefully and cautiously opens the postal market to competition. We do not want a gung-ho regulator. The decisions that the regulator makes in the next few weeks will define its role and how it is seen.

There is hope. The Financial Times carried a quote from Graham Corbett, the chairman of Postcomm, but no relation to Railtrack's Gerald: I don't think we are going to stand absolutely rigid…if we are presented with good reasons for changing our minds. The article goes on: Postcomm said there had been discussions with civil servants at the Department of Trade and Industry, but insisted no direct pressure was applied. I hope that those discussions were, and continue to be, robust. Indeed, the language beloved of Richard Mottram might not be entirely inappropriate, because it is crucial that Postcomm listens to parliamentary opinion.

An organisation called Postwatch is the voice of the consumer, and it, too, must be much louder and clearer in the next few weeks. Postwatch has nine regional councils, and I rang the northern council in Bradford yesterday. It is administered by the Bradford chamber of commerce, which is a fine, upstanding body that does a great deal for the city. It is crucial that Postwatch in the north shows that it is not a prisoner of big business interests, but that it will represent the whole north. I note that Postwatch has particular responsibility o serve the interests of the disabled, the chronically sick, pensioners, people on low incomes and those who live in rural areas.

Postwatch in the north of England has invited all Members of Parliament to its annual public meeting on 19 March—next week, after the consultation ends. I asked what views it would put to Postcomm, but it said that it could not tell me because it was going to feed them to national Postwatch, which would amalgamate those with other regional views and pass the results to Postcomm. I call on Postwatch in the north clearly to declare its regional views, because the age of devolution has come. It must present those views to next week's public meeting. There are rumours in the north that Postwatch there takes a slightly less gung-ho attitude than national Postwatch, which, however, seems to be a bit of a lapdog in certain respects. Let us prove that and get those views out in the public domain.

I want to draw attention to an example of good practice from Selby, because this has been a rather pessimistic debate in many ways. I must praise a gentleman called Bill Earnshaw, who is the business development manager—I think that is his title—for Consignia in the north. His job is to act as an entrepreneur and to reopen rural sub-post offices. In the Selby area, he regularly holds meetings with the Countryside Agency and the Village Enterprise and Rural Shops Association, which is run by a lady called Dorothy Muir and aims to help village post offices and shops. As a result, action is being taken on the three post offices that have closed in my constituency since 1997. One has reopened in Drax. We are having a meeting about another—Appleton Roebuck—on Friday and there are still problems with finding a new postmaster or postmistress for Sillingfleet. Co-operation between agencies can make a difference, and the Post Office is to be commended for that. The danger is that such initiatives will be swamped if the proposals go through unamended.


Hywel Williams (Caernarfon)

In the 1960s and 1970s, people in Wales campaigned tirelessly to have swyddfa post, which means post office in English, studded above the door. That is understandable. Consignia, however, is a nonsense word, and I do not know what it means in English, let alone Welsh. While Consignia is a nonsense word, the Postcomm proposals clearly are not nonsense. As other hon. Members have said, they are a threat to the universal service and the universal tariff. I want to consider the effect on rural areas such as my constituency, Caernarfon.

Under legislation, there must be a delivery and a collection every working day, but what does that mean for small, rural businesses such as those in my constituency? People who have set up new businesses there represent the cutting edge of rural life—they are the entrepreneurs of the future and they depend on the post—but the proposals are a serious structural threat to those businesses.

The problem is not just the cost of individual letters, but the fact that the terms will be skewed. There will not be a level playing field. The situation in my constituency regarding sorting and delivery is bad enough. Community councils and individuals in my area have raised the issue of the number of letters taken to Chester—and, at the weekend, to Manchester—to be sorted. A letter from a community such as Sarn Mellteyrn is delivered to Rhoshirwaun, just up the road, after being taken to Chester or Manchester.

Chris Ruane (Vale of Clwyd)

I, too, represent a north Wales constituency and I know that the postal service in north Wales has been centralised in Chester. Will the hon. Gentleman congratulate Consignia on having made some sop to Welsh pride? It has located the toilet block for the Chester offices in Wales.

Hywel Williams

That is welcome, if minor, news.

Will a commercial organisation cherry-pick the service? Would the French, the German or even the Swedish post office deliver a letter from Rhostryfan to Rhosgadfan for 27p? I doubt it tremendously.

The other effect that I worry about is that on sub-post offices. After a huge effort, the people of Llithfaen in my constituency bought their local post office and shop. This is not a private finance initiative venture or a public-private partnership; the local community is taking responsibility and working to counter out-migration and to revitalise the community. People from other communities in Wales visit Llithfaen to see what is happening there—some came from Cefn Pennar recently. It is a model for small, rural communities, and it is under threat.

Sweden is quoted by some as an example of which to beware, but is discounted by others. The discounters—the supporters of liberalisation—say that Sweden is a small country. So is Wales. Sweden, they say, has a large rural hinterland. So does Wales. They also say that Sweden has a right-wing Government who are fundamentally at odds with the values of the community that they govern. I shall say nothing about the situation in Wales.

The Minister will reaffirm the Government's commitment to the vitality of rural life, but the Postcomm proposals represent one more pressure on rural communities. They are not welcome in Wales and they should be withdrawn.

10.23 am
Geraint Davies (Croydon, Central)

Consignia faces losses of £1.5 million every day, as well as the loss of 30,000 jobs, and the regulator is to introduce changes in April—a year ahead of the European Union. It is estimated by Consignia that the EU liberalisation measures alone will cost the company £500 million a year. On top of that, the UK regulator will cost it an extra £250 million. Those extra costs are additional to the job losses that have already been announced. Although our European counterparts are ready to go in April, there will be no reciprocal opportunity for Consignia to compete in mainland Europe. Frankly, that smacks of unfair competition in its worst form.

Studying the EU proposals, one finds that they are characterised by progressive lowering of prices and weights in order to introduce competition gradually so that the impact on universal provision at a uniform price in terms of the customer can be examined over time. If one compares that approach with that of the regulator in Britain, the difference is that between a gradualist, sensible approach with the customer in mind and a big bang, the outcome of which is unclear in terms of market meltdown, services and prices. The regulator should definitely think again.

The National Audit Office has already done some work, which resulted in the report, "Opening the Post: How Postcomm are Regulating Postal Services", which suggests that the current regime of reducing real prices, requiring universal provision at a uniform tariff and accelerating competitive access will not hold up. It asks many questions about the sustainability of the universal service.

The regulator is completely unsatisfactory, even on the question of who would pick up the pieces in the event of Consignia's collapse. He seems to think that someone would pick them up, realising that there was a real opportunity. Martin Stanley, chief executive of Postcomm, said that cherry-picking would be impossible, because of the requirement to deliver to all households. When a member of the Public Accounts Committee pointed out that one simply had to deliver 90 per cent. oneself and the remaining 10 per cent. through Royal Mail so as to cover the rural areas, he seemed surprised at such great business insight on competitive activity.

I have no faith in the regulators; the propositions are completely untested and constitute a massive risk to the British public. There are no safeguards akin to those elsewhere in the EU and the Government should demand harmonisation with our EU counterparts in terms of liberalisation of the marketplace, so that we have a level playing field.

It is outrageous of the regulator to allow only six weeks for consultation, in breach of the Government guidance, which stipulates 12 weeks. That means that the Public Accounts Committee can interview the regulator, but not Consignia, because that interview is scheduled for after the consultation closure deadline. Hon. Members and the Government should demand an extension to the consultation, given the extent of public interest.

Members should also demand that the liberalisation reforms be delayed and restructured so that we can go hand in hand with our EU counterparts. Nine out of 10 people in Britain think that they receive from the Post Office a good service that provides value for money, so why destroy it? I call on the Government to act. They have been standing by, as the single shareholder, waiting for the regulator to produce its proposals. We have had the proposals, and they are unacceptable.

10.28 am
Dr. Vincent Cable (Twickenham)

I congratulate the hon. Member for Chorley (Mr. Hoyle) on introducing an excellent debate. He made his points sharply and captured a consensus that I largely endorse.

The regulator has come in for a certain amount of caning, but one must say that the consultation exercise has had two beneficial effects. It has opened up a public debate on the desirability of competition in the Post Office—how much there should be and how quickly it should happen—and stirred up a debate on the nature of the universal service obligation. What does it mean? Is there a social obligation? The radical and rather contrarian views of the regulator have, at the very least, helped us to focus on those questions.

As to whether there should be competition in the Post Office, most of us would argue that, in most markets, competition is desirable. It improves performance and makes people more conscious of costs. There is certainly plenty of inefficiency in the Post Office. I was recently taken round a highly mechanised sorting office in which a large group of postal workers were sorting envelopes. When I asked what they were doing, I was told that, when the machinery was ordered, someone forgot to specify the need to sort A4 envelopes, so they have to be taken out by hand and sorted separately.

The system is replete with such incompetence. A degree of competition to force Post Office management to pay attention to issues of efficiency is surely right, but the problem is that this is a peculiar industry in that it operates on a network, like the railways. If one reduces volumes in a network, one drives up unit costs. One cannot duplicate a network, which is a problem that was unforeseen when the railways were privatised. The more cream-skimming or cherry-picking that is allowed, the greater the danger that competition will push costs up rather than cut them. Price capping, such as applies in the postal service, means that the Post Office, rather than earning profits, suffers increasingly large losses.

How fast the growth of competition should proceed is an issue for debate. I agree with the hon. Member for Chorley that the balance struck by the European Union is probably about right, but the British regulator seems to have guessed the competition sustainable in the industry. Consignia argues—rightly or not I do not know, but the matter needs clarification—that the limit of 4,000 bulk items proposed by the regulator would account for half the Post Office's business. The regulator, on the other hand, seems to believe that it would account for only 25 to 30 per cent. That is a massive difference that would make an enormous difference to the economics of the Post Office. Will the Minister clarify his understanding of the new competitive threshold?

If the regulator pushes ahead with maximum competition, some consequences are inevitable, as we are already seeing. First, the Post Office will not be able to proceed with investment, because it will not have the cash to fund it. I can cite a good example from Twickenham, where a post office with a TW postcode is the only one in London that delivers within the first-class mail target of 92 per cent. It is a very efficient sorting office, but the machinery is antiquated and must be replaced within two years.

As a result of that, the Post Office sought planning permission a few years ago for a new development. The matter is controversial and I shall not go into the details. The new sorting office has been built and is sitting there, but the Post Office is not moving in. When I asked why, I was told that the Consignia board has frozen the investment because it does not have the cash. The postal service has suffered 20 years of the Treasury taking out dividends, which is now being compounded by a profit squeeze.

The cut in services is another damaging consequence of the way in which the competitive regime is evolving. We may consider the more dramatic possibilities, such as the withdrawal of elements of home-to-home delivery. The single delivery pilot scheme at first sight seems innocuous, but the feedback that we are receiving from a large number of self-employed people working at home is that enormous damage could be done. Segregating the bulk business of large-scale companies and giving them priority service disadvantages not only households, but small companies. There will be a lot of fallout from that decision.

We need to take a balanced view about the competition that the Post Office can reasonably sustain. That is the first issue. My second point relates to the meaning of the universal service obligation. I am increasingly confused by the arguments made by people in the industry. Many hon. Members have said that our understanding of that obligation is that it is a social obligation to protect rural areas, such as the far-flung parts of Scotland, which are costlier to service than urban areas. That is the right thing to do, but the message I have had from the regulator and his staff is that they reject that argument completely. They say that it is just as easy to deliver in Orkney and Shetland as in central London and that there is no problem associated with rural areas.

I have not been able to analyse the data, but I would like the Government to explain their understanding of the problem. If they share Postcomm's analysis, the basis on which the universal service obligation has been predicated for many years falls to the floor.

Mr. Carmichael

Some of my hon. Friends and I recently met Martin Stanley, chief executive of Postcomm, who told us that that part of Consignia's loss amounts to a mere £80 million a year. His argument was that the universal service obligation would be safe in a deregulated market because banks, building societies and credit card companies would want the same standard of delivery. He said that those big mail users would be the saviours of the universal service obligation in communities such as mine. Does my hon. Friend agree that that represents breathtaking complacency from Postcomm, which is surely born out of sheer ignorance?

Dr. Cable

It is certainly highly optimistic. I seriously wonder about the sustainability of rural areas if it rests on such acts of faith.

Mr. McLoughlin

I am sure that the hon. Gentleman will want to correct what he said a moment ago, as he was either wrong or does not understand. He said that universal service protects rural deliveries in Scotland, but it does not apply only to Scotland. Huge rural and remote areas of the United Kingdom outside Scotland rely on universal service.

Dr. Cable

The hon. Gentleman misunderstood. I referred to Scotland, which provides perhaps the most extreme example of geographical spread.

David Hamilton (Midlothian)

I represent not a far-flung place in Scotland, but a semi-rural area with small villages. Following bus deregulation, our local authority spends £1 million a year on subsidised transport. The proposals would have an effect not only on far-flung areas, but wherever there are villages in Great Britain.

Dr. Cable

I entirely agree. The problem is subtle, as the hon. Gentleman rightly emphasises. As a result of taking those interventions, I have used my 10 minutes, so I shall wrap up with two quick points.

The regulator brought to the surface the question of how the universal service obligation would be financed. The assumption all along has been that Consignia covers the cross-subsidisation, but as it makes losses it has found that impossible. I have asked why the new competitors cannot pay a levy to the Government that they would use to fund the universal service obligation. Mr. Corbett asked the same question on the "Today" programme on the morning that he launched his consultation, but he has never asked it publicly since. I have been told by the industry that someone from the Department of Trade and Industry rang him up to tell him that he was treading on thin ice and that it would be a good idea to say no more about it. The argument is that the Government forgot to create legislative powers to impose such a levy.

I would like clarification from the Minister. Were it possible, it would be sensible for the new cream-skimming competitors to pay a levy to contribute to the maintenance of the universal service obligation. They pay VAT, of course, but VAT goes to the Treasury, not the industry. Have the Government considered that option? What are the legislative possibilities for introducing it?

Another speaker touched on my final point: we talk about the universal service obligation, but the real need is not in the mainstream Consignia or Post Office business, but in that of Post Office Counters. That is where the threat to rural areas and small communities lies. The debate is separate, as that is a separate part of the Post Office, but it is worth flagging up the fact that the doubts remain as big as ever, despite all our discussions on the subject.

We still face a looming disaster. In a year, the counters business will have lost more than £400 million with no obvious sign of replacement income. Unless the Government clarify quickly how many people will be given the new post office card account to keep them in the network, there is a danger that that part of the Post Office will collapse, quite apart from the Royal Mail business.

10.39 am
Mr. Nigel Waterson (Eastbourne)

I congratulate the hon. Member for Chorley (Mr. Hoyle) on securing the debate, which has been interesting. Many concerns have been expressed about the state of our postal services by hon. Members from a range of parties and parts of the country. At times, however, I thought that I had blundered into a meeting of the parliamentary Labour party. There are clearly marked differences of view among Labour Members on the future of our Post Office and Consignia.

The hon. Gentleman and other hon. Members, including the Liberal Democrats, have spoken on the general theme that having competition is fine, but not too much and not yet. We must consider the background to the debate on the Postcomm proposals. The European Union has already agreed to phase in much greater competition in postal services from next year, so the only real debate is on how quickly or slowly that is done. The hon. Gentleman made a case for extending the consultation period, but even if it were extended by a month, six months or 10 years, I doubt that he or his hon. Friends, who make the same arguments, would change their views.

Geraint Davies

Is the hon. Gentleman aware that Postcomm's economic analysis has been published only in the past few days? It is unrealistic and unfair to expect the Government or Consignia to have made a rational appraisal of it.

Mr. Waterson

The problem is that the postal service and Consignia do not have any time left to get their act together. The arguments of the hon. Member for Chorley would be much more persuasive if our postal services were not in such an appalling mess. The theme of improved service to consumers peppers the Postcomm proposals and I remind him that Consignia is still miserably failing to hit its modest delivery targets—except in Twickenham, apparently.

Consignia has the worst industrial relations of any organisation in the economy. It loses £1.5 million a day and 1 million items of mail a week—it is simply in a mess. Hon. Members do not have to listen to me; they could listen to the regular interviews with Allan Leighton, the chairman of Consignia, on the "Today" programme.

Geraldine Smith

I do not accept the hon. Gentleman's suggestion that the Post Office is in a mess; it provides a good service to most areas of the country. I have had only one complaint about the Post Office from my constituents since I became a Member of Parliament. The Post Office provides the cheapest service in Europe. It is losing £1.5 million a day because the regulator will not allow it to put up the price of stamps. Its hands are tied behind its back.

Mr. Waterson

That says it all. During the debate, many crocodile tears have been shed about how awful it would be if the proposals were introduced, because they will put up the price of stamps. Two bodies are rather keen to put up the price of stamps: the trade union—which, incidentally, sponsors the hon. Lady—and Consignia's management.

Geraldine Smith

The Communication Workers Union does not sponsor me. There is no direct sponsorship of Labour Members of Parliament, but I do have an interest; I was a postal worker for 18 years. I think that I understand the industry.

Mr. Waterson

I am prepared to give way to the hon. Lady again if she is willing to contest the list that I have, which counts her among a number of hon. Members who are constituency-supported CWU Members of Parliament.

Geraldine Smith

The hon. Gentleman made the point that I was sponsored by the CWU. I am not; I have no interest to declare, and never have done. I would be grateful if he withdrew his remarks.

Mr. Peter Atkinson (in the Chair)

Order. May we return, broadly, to our business?

Mr. Hoyle

On a point of order, Mr. Atkinson. A serious allegation has been made against an hon. Member. It should be withdrawn, because it cannot be substantiated. That would be the right way to make progress. The issue should not be left in this manner.

Mr. Waterson

The issue is one of Members' interests, and the hon. Lady has made her position perfectly clear. What the hon. Member for Eastbourne (Mr. Waterson) said is not unparliamentary.

Mr. Hoyle

I think he should do the decent thing.

Mr. Waterson

I am happy to withdraw the suggestion that the hon. Lady is sponsored by the CWU, but I notice that she did not contest my assertion that her constituency party is supported by it.

Postcomm's proposals are designed to help the consumer, and it believes that customers' interests will generally be best served in a competitive market…Competition promises to give most customers improvements in service quality. Consignia's current monopoly in the letters market is not working in the best interests of postal users or Consignia". It adds that Consignia has consistently failed to meet its own delivery targets. It is worth reminding hon. Members that, for each year of the previous Conservative Government, the Post Office as it then was—and, I hope, will be again—made profits. Problems are arising because it is making substantial losses.

Mr. Colin Challen (Morley and Rothwell)

Does the hon. Gentleman accept that the Post Office is making losses because it faces a huge investment backlog that was created by 90 per cent. of its profits under the Conservative Government going to the Treasury?

Mr. Waterson

On those matters, I am happier to listen to the views of the chairman of Consignia. He admits that costs are out of control, which is why Consignia has a programme to save £1.2 billion of costs and to shed some 30,000 jobs. Attacks on the regulator have peppered the debate, but this Government set up the regulator two years ago and all Labour Members, including the hon. Member for Chorley, voted to set up Postcomm.

Mr. Carmichael

I have listened to the hon. Gentleman for seven minutes, and I am still no wiser. Is the Conservative party in favour of implementing the Postcomm deregulation proposals?

Mr. Waterson

May I come to the main part of my argument? The regulator was set up by this Government, not by the Conservative party. The consultation process ends this Friday, I think, at which time Ministers must make a decision about Postcomm's proposals. I agree with the point that was made about the dividend. When will Ministers recognise the fact that they cannot legitimately expect to take a dividend from Consignia while it is making such substantial losses?

The universal service obligation is not being met and in parts of the country people are not receiving daily deliveries. In many other areas, the obligations on next-day delivery of first-class mail are not being met. Sooner or later, irrespective of the competition proposals, the regulator may have to take action against Consignia because of its failure to meet its current obligations. Again, Postcomm, the regulator, makes it clear in its proposals that the universal service obligation must be protected. That is a central, statutory obligation on the regulator. I do not think that the Government would allow anything that would scrap the universal service obligation. Indeed, if they tried to do so, we would oppose them.

We have heard about the continuing closure of sub-post offices although, as the hon. Member for Twickenham (Dr. Cable) said, that is a separate debate. Last year, a record 547 post offices closed throughout the country. We are experiencing the aftermath of legislation passed by the Government that allegedly gives Consignia commercial freedom, but in reality allows Ministers to interfere in every level of Consignia's management. Only last Friday, The Times reported that Ministers were said to be deliberately interfering with Consignia's wish to get on with announcing proposals to bring itself back to profit. I turn now to the role of the union.

Mr. Carmichael

Will the hon. Gentleman give way?

Mr. Waterson

I shall not. I am running out of time.

The union is rather like the Bourbons: it has learnt nothing and forgotten nothing. In an interview in The Times, Mr. Billy Hayes was quoted as saying that the union may consider withdrawal from the Labour party at its annual conference. We are witnessing a debate on internal strife in the Labour movement rather than the interests of consumers, but the real issues are improving postal services for consumers, improving the reliability of postal services throughout the country, protecting Consignia's dedicated staff who deliver the mail to our homes and securing a future for our Post Office in the 21st century.

Postcomm's proposals require serious consideration, and we look forward to the Minister's decision on them. Whatever happens must happen quickly, or there will be no Consignia or Post Office for us to debate.

10.49 am
The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander)

Like so many others, I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on securing the debate. I pay tribute to his long-standing interest in postal matters.

My hon. Friend and other hon. Members raised a huge number of important points, and I shall endeavour to cover them during the last 10 minutes of the debate. Given the turnout, it almost goes without saying that there is real strength of feeling among hon. Members of all parties about the proposals. I shall address commercial freedom and then move on to the dividend, the name and the substantive question of Postcomm's proposals.

Mr. Carmichael

Does the Minister accept that today's turnout and the number of hon. Members who attended but could not be called to speak show that the subject should not be dealt with in Westminster Hall? Will he ask the Leader of the House to find time for a proper debate on the Floor of the House?

Mr. Alexander

I welcome the opportunity to have the debate. All hon. Members had the opportunity to attend and its virtue was established by the contributions that were made.

Many of the observations reflected the fact that in March 2001, for the first time, Consignia became a plc operating in a regulated postal market with a newly defined relationship with the Government, as sole shareholder. That decision was taken against the background of the Post Office in the latter years of the Conservative Government. I remind Opposition Members that it was deprived of investment and direction during many of those years.

As the hon. Member for Twickenham (Dr. Cable) pointed out, the Post Office slipped behind its competitors and also allowed its relationship with its work force to deteriorate to the extent that over half the United Kingdom's industrial action occurred in the company. The market is growing increasingly competitive, with competition from new forms of communications ranging from courier and express services to the progressive opening of the letters market. Consignia's problems are, therefore, deep seated and long standing, and its current poor performance results from its failure to resolve such problems over many years.

The explicit aim of Government policy, which was embodied in the Postal Services Act 2000, is to give the Post Office greater commercial freedom. Not only Post Office management, but the unions called for such freedom and believed it vital if the organisation was to address the needs of a changing marketplace and invest in new services. Other elements of that freedom included a new dividend regime that gave Consignia the right to retain a greater share of profits that could be reinvested in the core business and the ability to borrow to finance strategic investments.

At least two hon. Members mentioned the dividend payment. I confirm that, at present, the Government have not decided whether to accept a dividend from Consignia for 2001. A decision will be taken in the context of the forthcoming strategic plan and the review of capital structure that is due in the weeks to come. Additionally, the dividend regime is based on Consignia's own strategic plan and was designed, subject to Consignia meeting its profit target, to be half the rate at which profits were moved from the business under the Conservatives.

The new commercial arrangements of the business and the new arms-length relationship with the Government are designed to give Consignia the commercial freedom to develop new products and services, to invest, to price commercially for business users and to borrow for growth investments. That freedom was, and is, necessary to enable the business to respond to competition and to meet changing consumer demands in a better way.

My hon. Friend the Member for Chorley raised the name and offered a view that has widespread appeal—my discussions with my constituents show that. However, the decision to use "Consignia" was a commercial decision taken when the company was established as a plc. As such, it continues to use its Post Office and Royal Mail brands throughout the country. However, my hon. Friend may be comforted by the fact that Allan Leighton, the interim chairman, has made his explicit view on the name clear. He said that, although it is not his first priority because of the company's circumstance, he is reviewing all aspects of the business.

Chris Ruane

Is the Minister aware that the Government are considering a supermarket regulator? One name that has been bandied about is Offtrolley. If Postcomm were to consider a change, does he think that that would be more suitable and appropriate?

Mr. Alexander

As several hon. Members pointed out, the consultation ends on Friday, so I suggest that my hon. Friend endeavours to bring the matter to the attention of Postcomm's commissioners before then.

Mr. McLoughlin

Can the Minister help us out? I believe that he referred to Allan Leighton as the temporary chairman. When do the Government expect to announce a full-time chairman?

Mr. Alexander

I used the term interim chairman. A process to appoint the permanent chairman of Consignia is under way, but we are constrained by the timetable operating on that, given that it is a public appointment and that we must follow the Nolan recommendations. We are making as much progress as possible, consistent with our obligations under the Nolan processes.

A further feature of the structures established in the 2000 Act—the basis of today's debate—is the regulatory reform necessary to promote and protect the consumer's interests. The Act established not only an independent regulator, Postcomm, but Postwatch, which, as my hon. Friend the Member for Selby (Mr. Grogan) said, is specifically charged with responsibility for dealing with consumer needs. Given the tenor of some contributions, I must emphasise that the approach to establishing an independent regulator was widely sought, not only in the House, but beyond.

In a document circulated to all hon. Members in September 1998, the CWU, the union representing many postal workers, urged the Government to establish exactly such an independent body. Recommendation 9 from the CWU states: A Regulatory agency to be known as Ofpost—comprising a small panel supported by specialist staff—should be created by statute and appointed by Government and act as independently as the public sector status of the Post Office legally permits.

Consumer interest remains of principal concern to the Government and is the central feature of postal services reform introduced by the Act. The maintenance of that universal service, about which many hon. Members spoke, is of the highest priority. Our commitment is well demonstrated by the 2000 Act, which, for the first time, enshrined the universal service obligation in United Kingdom law, as several hon. Members made clear. In response to the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), I reiterate that the legal obligation to maintain a universal service is the primary duty of the regulator.

I assure my hon. Friend the Member for Chorley and the hon. Member for West Aberdeenshire and Kincardine that the daily postal delivery service to every address, irrespective of location in the United Kingdom and at a uniform tariff, remains at the centre of our approach to the postal service.

Mr. David Kidney (Stafford)

Is there a lacuna in the legislation that prevents the regulator from charging a levy on incomers to subsidise the universal service?

Mr. Alexander

The terms of the 2000 Act are well known. Consideration was given by my predecessors at the Department of Trade and Industry to determine an appropriate financing arrangement to secure the universal service obligation. As many hon. Members have made clear, there is scope for the regulator to raise prices. Under the previous proposal introduced by Consignia, a decision was taken by Consignia to withdraw that application. That should not prejudge any future application by Consignia in relation to pricing, however. Postcomm is an independent body regulating the United Kingdom postal market.

Sir Robert Smith

Is the Minister saying that, if Postcomm misjudges the market and Consignia cannot deliver the universal service obligation under the regime proposed, the only option will be sticking up the price and doing exactly what everyone fears? Prices will go through the roof to maintain the universal service obligation.

Mr. Alexander

No. I made it clear that there is scope in the 2000 Act for applications to be made to increase the price charged by Consignia for first and second-class stamps. Any determination would be made on the basis of merit and a decision would be forthcoming should any application be made.

I shall deal with the specific point regarding the timing of the consultation, given the strength of feeling communicated in today's debate and in an early-day motion tabled by my hon. Friend the Member for Croydon, Central (Geraint Davies). The proposal document on which consultation is taking place follows a document issued by Postcomm in June 2001, which set out options for liberalising the market. That document established a timetable, including a 12-week consultation on those initial proposals to start in June 2001, and that such a proposal document would be set out at that stage.

In response to Opposition Members' observations, I emphasise that the regulatory body is independent and will be guided by representations made during the consultation. The Government must be mindful of the regulator's position, and of the regulator's primary duty to uphold the universal service obligation. I understand that, as of the start of the debate, neither Consignia nor the CWU had formally responded to Postcomm's proposals.

I turn to the point raised by the hon. Member for Twickenham. With regard to the proposals, we would urge Consignia and Postcomm to see whether reconciliation can be achieved.

Mr. Peter Atkinson

Order. We must move on to the next business. Before I call Mr. Oaten, I ask hon. Members who are leaving to do so quickly and quietly.

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