I will come on to that important point.
Among other things, Royal Mail is required by Ofcom regulation to achieve certain performance targets in the delivery of its universal service products to ensure that
consumers receive an adequate level of service. The regulator has powers to investigate and to take enforcement action, as it did when it fined Royal Mail £1.5 million in 2020 for missing its 2018-19 first class national delivery target.
Ofcom does accept that covid-19 has had a continued impact on Royal Mail’s service delivery, which is why Ofcom did not fine it for its regulatory obligations breaches last year. However, in that decision, Ofcom also noted its concerns, which should concern us all, about Royal Mail’s performance in the early part of the year, which Ofcom felt fell well short of where it should be. Ofcom believes that Royal Mail has had plenty of time to learn lessons from the pandemic, which will mean that it is unlikely to consider the factors considered for 2021-22 as exceptional and beyond its control in the future. Royal Mail has committed to restoring quality of service as soon as possible, and I expect Ofcom to keep a close eye on its performance over the remainder of this year.
Points about renationalisation were raised by the hon. Members for Glasgow East (David Linden), Coventry South (Zarah Sultana) and Glasgow South West and others. While Royal Mail undoubtedly faces challenges, the Government are clear that renationalising the business is not the answer. One of the primary reasons for the sale was to enable Royal Mail to access the capital it needs to invest. When Royal Mail was independently reviewed in 2008 for the last Labour Government, we were told that it was underfunded and had not kept pace; it was 40% less efficient than equivalents around the world.
Financial performance was raised by the hon. Member for Wansbeck and the hon. Member for Cynon Valley (Beth Winter). I think the hon. Member for Cynon Valley said that she had not had a response to her letter. I have asked my officials to look into that urgently, along with the letter from the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), to ensure that they get responses quickly; I apologise for that.
In terms of profitability, it is important to look at Royal Mail in isolation, rather than at IDS itself. Different figures have been bandied about. Look at profitability this year: as Members have mentioned, in the same period in the previous year it made a profit of £235 million —this year, it made a loss of £220 million. To answer hon. Members’ questions, in its regulatory notice in the Regulatory News Service—in which the information must be accurate—it blames that on the strikes, the lack of productivity improvements that were set out in the “Pathway to Change” document and the macro-economic climate.
The hon. Member for Wansbeck described the £1.7 billion invested as a war chest to fight unions; I do not think that that is an accurate statement. I saw it reported in one of the papers—I think it stated that it was £1.7 billion to invest across the businesses. That does not mean that it uses that war chest to simply fight industrial action, and I would not expect that to happen. We are keen to ensure that the dispute is resolved, and amicably.
Royal Mail has invested more than £2 billion in the UK business since privatisation, including £900 million over the last three years and £441 million in the last financial year, in areas such as electric vans, two new parcel hubs, automation and improving its poorest performing delivery offices. Importantly, that investment is transforming how Royal Mail operates, with parcel automation up from 12% in 2019 to 65% now. There is certainly room for improvement in Royal Mail’s service delivery. Ofcom’s analysis tells us that most consumers continue to be satisfied with postal services, but we should continue to challenge Royal Mail on its performance.
As I have set out, the Government remain committed to securing a financially sustainable and efficient universal postal service for users throughout the UK that is accessible and affordable. There are currently no plans to change the minimum requirements of the service.
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