Royal Mail and the Post Office

I congratulate my hon. Friend the Member for Argyll and Bute (Mr. Reid) on securing the debate, which is timely. He spoke clearly about the impact of the universal service obligation on his constituency and the importance of post offices as a social hub. I represent a very different constituency—an inner-London constituency. It was interesting for me to hear just how important is it for a rural area to have a universal service obligation and the impact losing it would have on people's lives. Although I represent an inner-London constituency, where picking up mail might appear to be easier, my constituents also feel strongly about this matter. They certainly share the same anger that has been spoken about today by many hon. Members, including the hon. Members for Isle of Wight (Mr. Turner) and for Meirionnydd Nant Conwy (Mr. Llwyd), whose constituency I hope I have pronounced properly—I have been practising it under my breath for five minutes. Both spoke about the impact of closures on their constituencies. There is a similar level of anger in Brent, where we have had a further six post office closures in the latest round, which is a 40 per cent. reduction since 1997. As my hon. Friend mentioned, the death of a post office often represents the death of a shop too. In an urban area, it can also represent the death of the local parade of shops because the post office ensures footfall and keeps local businesses alive. A number of people have studied the impact that post office closures have on the local economy. In a study looking at Manchester, which is obviously an urban area, the New Economics Foundation suggested that closing a post office would result in the local economy losing about £270,000. In a rural area, it suggested that for every £1 of subsidy, between £2 and £4 is generated for the rural economy. It seems to be a false saving to make the closures. As I mentioned in an intervention on the hon. Member for Stroud (Mr. Drew), the closure programme generates just £45 million of savings. My anxiety and that of a number of other hon. Members who have spoken, particularly in interventions, is that there does not appear to be a sustainable plan to keep the remaining post offices alive. I worry when I hear that just 7,500 post offices are required to meet the access criteria. If the post office network is losing money, what good reason do the Government have for keeping those post offices alive? I hope that the Government will commit to a sustainable plan and recognise the social value of the post office network. We cannot afford to lose another 3,000 post offices because we will undermine the whole of the network. There is no evidence to suggest that the 2,500 closures that are currently being forced through will generate the increase in footfall that the Government say is needed to maintain the financial viability of the network in the remaining post offices. A number of hon. Members mentioned the consultation process, including the hon. Member for Isle of Wight. The hon. Member for Stroud talked about whether communities could be involved in bringing forward finances to safeguard post offices that are threatened with closure. However, it is difficult to do that when we are given only six weeks' notification. We need a sustainable plan and a rapid injection of funds—both into the post office network and Royal Mail—not just to allow it to survive, which frankly it has just about been doing for the past few years, but to modernise, innovate and compete. That point was made well by my hon. Friend. Royal Mail has been starved of investment by successive Governments and unfortunately it was inevitable that it would struggle with the liberalisation process if there was no immediate injection of funds. It will be difficult for Royal Mail to modernise to allow it to compete. It continues to have a large pension deficit, as the hon. Member for Stroud pointed out, which goes up or down according to the state of the market. The deficit appears to be £3 billion or £4 billion and was caused by a decision made by the previous Government to take a holiday from payments when the equities market appeared to be performing well. There is a desperate need to invest in the infrastructure of the Royal Mail. At a time when the public purse is tight, particularly after a pre-by-election bailout, what are the chances that the Government will invest the dramatic amount of money required to ensure that Royal Mail can cope? Furthermore, successive Governments have been unwilling to give Royal Mail permission to go to the markets and borrow for investment. Part privatisation would give Royal Mail that permission because it would allow for a change in the nature of the business. Our policy is that there should be a separation of Royal Mail from the post office network, as other hon. Members have mentioned. I will say why that is necessary in a moment. Part privatisation of Royal Mail would enable the sale of 49 per cent. of the shares and the proceeds of that sale could be invested into the post office network to give it the kick-start that is needed. That will not solve all the problems of the post office network, but it will at least allow a kick-start in investment and enable the network to be modernised as required. The remaining 51 per cent. of shares could be divided between Government and a John Lewis-style trust for the benefit of employees. The shares could be held in a trust for the current employees of the business to ensure that they have a stake in the future of the organisation and can share in its success and profits. Employees would have a share in improving the performance of the business. I appreciate that some hon. Members disagree with that policy, but the truth is that the Government do not have another solution. I suspect that the postal services review was probably paving the way for recommending something similar, but so far the Government have refused to come forward with a policy that will lead to the sustainability of Royal Mail or the post office network. Separating the Royal Mail from the post office network is key to the survival of the network. My hon. Friend mentioned post offices acting as a depot for parcels, which would be particularly important in rural areas. Actually, that is important everywhere. How often have we had the frustration of having something delivered by a private company and finding that we have to go a long way to pick it up or have the persistent hassle of renegotiating times when it can be delivered? It would be so much easier and more convenient if a parcel could be delivered to a local post office and wait there for us to pick it up. That would provide a source of revenue for the post office and would be better for those of us who are trying to pick up things sent to us. The lump sum created by the sale would also allow investment in modernising the network, as I said. There is currently a particular problem with Crown post offices. They are not hospitable places to be and considerable investment needs to be made in training, in the appearance of the branch and in the infrastructure. That would allow the post office to function more efficiently and would be welcome. A number of hon. Members spoke about the need for new sources of income. The hon. Member for Dumfries and Galloway (Mr. Brown) spoke about the Post Office card account. The Post Office should be central to a new universal service obligation: that of providing basic bank accounts. I am relatively open minded about whether the Post Office itself should be the provider of that bank account or whether it should work in partnership with others. I would be interested to hear the Minister's views on that. There is a serious problem with financial inclusion and access to basic bank accounts. The policies the Government have so far pursued in trying to encourage other banks to provide such accounts does not seem to have been particularly successful. My proposal would marry together two different issues, provide a source of income for the Post Office, and recognise the value of the post office network as a public service. My hon. Friend the Member for Argyll and Bute made a number of good points about Government services being given to PayPoint and the need to think about criteria for awarding contracts. That is key. When we think about the use of the post office, we need to understand it as a public service and ensure that things such as the rural economy are written in. Several hon. Members spoke about the idea of a levy to pay for the universal service obligation for postal services. We deliberately left that open in our policy because of what we foresaw might happen if there was a failure to invest in Royal Mail. Judging by the interim report from the Postal Services Commission, it seems that such a measure will be necessary. I hope that the Government will think seriously about it because the universal service obligation must be protected. A levy may be a sensible way forward.