Postal Services Bill [HL]

Committee (3rd Day)

16:49:00

Amendment 70

Moved by

70: After Clause 19, insert the following new Clause— “Protection for certain members and prospective members of the RMPP The Secretary of State may make regulations for the purpose of securing that— (a) no qualifying member of the RMPP is placed in any worse position by reason of—(i) any winding up, in whole or in part, of the RMPP; or(ii) any amendment of the RMPP which results in benefits under that scheme being reduced, or contributions by employees being increased, and is made otherwise than in such circumstances as may be prescribed;(b) no person who is an active member of the RMPP or who could be an active member of the RMPP upon the attainment of a specified age or upon making an election to be such a member is to be prevented from becoming entitled to or continuing to participate in or acquire pension rights under the RMPP by reason of any change of employer—(i) which does not affect his continuity of employment and is made otherwise than in such circumstance as may be prescribed; and(ii) in the case of which his new employer either is a participant in the RMPP or is wholly owned by one or more companies which or each of which is such a participant; and(c) no person is placed in any worse position by reason of any change of employer of a person which does not affect his continuity of employment but prevents him from continuing to participate in or acquire pension rights under the RMPP.”

Lord Clarke of HampsteadFirst, I declare my interest. I do not want to repeat it because it is on the record, but I was a Post Office worker and have had other contacts with the Post Office. I also apologise to the Committee for my voice. Until about three o'clock this morning, I did not think that I would be able to speak at all, but some of you may be pleased about that. My amendment 70 would follow Clause 19 and is headed, “Protection for certain members and prospective members of RMPP”. As I shall say later, the protection for members of the Royal Mail pension plan contained in the new clause has antecedents arising from the privatisation of other formerly state-owned industries. The new clause would spell out in unambiguous terms what the protection would be. It would not be an interpretation at a later date but a clear and meaningful addition that I believe is necessary.

As I said earlier, the proposal has antecedents. When the electricity supply industry and the railway industry were privatised, a new sectionalised scheme was created. There was the electricity supply pension scheme in the first case and the railways pension scheme in the second. Employees of the new private companies could lose all their future service rights under the newly created industry-wide scheme if the employer took the simple expedient of opting out of the scheme. The employer would have to pay off the deficit but, subject to that, could offer whatever future service provision it thought it could get away with.

In the case of the Royal Mail pension plan, the problem is heightened. The basic idea behind the Government’s proposal is to create a new sectionalised scheme that has no deficit, or a vastly reduced deficit. In that situation, the new companies would be mad not to walk away from RMPP as soon as they could. My new clause empowers the Secretary of State to make “protected persons” regulations similar to those applying in the electricity supply and railways protected persons regulations. The wording is substantially derived from the electricity supply regulations.

New paragraph (a)(i) states that no member can be placed in a worse position if his or her employer winds up their section of the RMPP, or if the RMPP winds up in its entirety. That means that the employer would have to create a new mirror-image scheme. Proposed new paragraph (a)(ii) states that the scheme cannot be worsened by amendments cutting benefits or increasing contributions. Otherwise, the employer could achieve the same basic purpose of walking away from the scheme by cutting benefits to a minimum level.

Proposed new paragraph (b) deals with the situation in which a member moves from one Royal Mail or Post Office company that participates in the scheme to another company. In that event, if the member’s continuity of employment is not broken, the member retains the right to participate in the RMPP. Proposed new paragraph (b)(i) would require continuity of employment, so if a member left the industry and then returned, their protected person status would be lost. Proposed new sub-paragraph (ii) would require both companies already to be participants in the RMPP.

Proposed new paragraph (c) deals with the situation in which an employee transfers from one company that participates in the RMPP to another related company that does not. Typically, that situation will arise when an employer creates a new subsidiary and transfers employees to it. The new company could open a new section of the RMPP, in which case proposed new paragraph (b) would apply. If it did not, under proposed new paragraph (c) the new company would have to make alternative pension arrangements that were at least as favourable. The proposed new clause would be an important protection for members. Without it, the very first thing that will happen if the Government assume responsibility for the deficit is that the new employers will opt out of the RMPP for future service. They will be free from the deficit, which is what prevents them from closing the scheme now. If they did so, they would have to pay for it. That is the imperative. I beg to move.

Lord De MauleyWhen the Minister responds, will he clarify whether the circumstances contemplated by proposed new paragraphs (a) and (b) of the amendment—respectively, a winding-up, which incidentally I would like to think we have no reason to expect, and a new partner changing the pension rules—would not more appropriately be a matter for the trustees rather than the Secretary of State?

On proposed new paragraph (c), is there any circumstance in which an employee could, without his consent, be prevented from participating?

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): Part 2 of the Bill sets out the Government’s proposals to address the deficit in the Royal Mail pension plan to facilitate a strategic partnership. As a result of this support, Royal Mail would be in a much better position to act as a sponsoring employer for the RMPP. In addition, the use of a clear cut-off date, which is intended to be 16 December 2008, allows the Government to provide certainty for members on the effect of the Government’s proposals, and to define and limit the liabilities for which the Government, and ultimately the taxpayer, will take responsibility.

On our previous day in Committee on Part 2, we covered the extensive protections for members that are at the core of the Government’s proposals. These protections are set out in Clause 19 and it may be helpful if I briefly go over them. The first layer of protection in subsection (2) limits the Secretary of State’s key powers in Clause 16 to establish a new scheme or to transfer rights to a new scheme, in Clause 17 to divide the RMPP into sections, or in Clause 18 to amend the RMPP. The Secretary of State must ensure that in exercising these powers he does not negatively impact the pension position of members of the Royal Mail pension plan.

The second layer of protection for members is in subsection (6). This limits the Government’s ability to amend the new public service scheme to protect the accrued benefits of members that have been transferred across from the RMPP.

As set out in our policy document, the RMPP will be in a much improved funding position as a result of the Government’s proposals in Part 2. In addition, existing pension legislation provides a number of protections for members of an occupational pension plan that will also apply to the RMPP in the future. These include: the statutory priority order for the distribution of assets, as set out in Section 73 of the Pensions Act 1995; the statutory debt, which is calculated on a buyout basis, which falls on an employer under Section 75 of the Pensions Act 1995 if a winding-up is triggered; and the creation of the Pensions Regulator and the Pension Protection Fund in the Pensions Act 2004.

17:00:00

Under this amendment, if the company and trustees decide to wind up the scheme, the Government would have the power to make regulations to secure that no member is placed in a worse position. However—I think that this is the point that the noble Lord, Lord De Mauley, raised—there is no reason to conclude that by achieving a properly funded RMPP, which is the right size for the business, it will lead to the winding up of the scheme. That is especially the case given the recent reforms to the RMPP which began to take effect from April 2008. These reforms, which included the closure of the scheme to new members, were designed to improve the affordability of the RMPP going forward.

Under the RMPP’s scheme rules, the company has no express power—I repeat, no express power—to wind up the scheme and would need the agreement of the RMPP trustees to amend the rules to do so. This agreement would also be required for any modification to the basis of accrual of benefits by members. Indeed, removing the cost of paying off the historic deficit should in fact significantly increase the viability of the scheme, not the reverse.

The proposed amendment would also give the Government power to take steps to preserve the pensions rights for members who transfer employers in certain circumstances, so that they would retain the right to belong to the RMPP or to a scheme that provides the same benefits as the RMPP. This goes well beyond what the Government have set out in their policy statement and could provide members with a new right that they do not currently have. In summary, the proposed amendment would give power to the Government to constrain the future pension arrangements made by the Royal Mail Group Ltd. We believe that decisions on future pensions provisions are rightfully an operational matter for the Royal Mail board and therefore we do not think that this amendment is appropriate.

My noble friend prayed in aid precedents; namely, the electricity scheme and the rail industry scheme. In relation to the latter, the protection provided to employees of the rail industry privatisation related to circumstances which I suggest are very different. In that case, the historic BR pension scheme was abolished and replaced with a new industry-wide scheme. In addition, employees were transferred from British Rail to a new employer—one of the newly created private sector rail companies. Neither of those changes applies here. The Government do not propose any changes to the RMPP and Royal Mail will continue to be the sponsoring employer of the scheme, together with Post Office Ltd. Both will remain under public ownership—Post Office Ltd will remain in 100 per cent public ownership—as enshrined in Part 1.

I hope that that provides reassurance to my noble friend and that we have made it clear that the Government are underwriting the accrued rights, as well as scaling down the scheme for RMPP going forward, which should make it much more viable. I should stress again that the sponsoring company, which I would suggest could not be overly influenced by a minority partner in any event, does not have the power to wind up the scheme. It could do so only if changes were introduced into the arrangements, which would require the agreement of the RMPP trustees, as well as RMG. I should remind my noble friend that the trustee board has an equal number of company-nominated and member-nominated trustees, plus an independent chairman. The trustee board is not controlled by RMG. I hope that that provides sufficient assurance to my noble friend to enable him to withdraw the amendment.

The noble Lord, Lord De Mauley, asked whether there were any circumstances in which a company might act in such a way as effectively to transfer the employment arrangements for an individual and therefore take them out of the scheme. Technically, that could happen at the moment, although there is no increased risk from the proposed arrangements. Clearly, if an employer sought to do that there would be substantial issues around employer relationships.

Lord Clarke of HampsteadI thank the noble Lord, Lord De Mauley, and the Minister for their comments. When dealing with this sort of amendment, one of the problems we face is the trust we have in the words of the Bill as a whole. My noble friend said that the existing provisions give the protection that my amendment seeks to get, and I am directed towards those parts of the Bill that purport to give these rights to the people concerned. I am surprised that the railway scheme was put to one side by my noble friend because the scheme has been abolished. You could have fooled me, because the scheme being proposed here as good as abolishes the Royal Mail pension schemes as they exist at the moment. However, the amendment gives me the chance to ask the Minister for an assurance that every single employee of Royal Mail, from the top to the bottom, will be in the scheme. Alternatively, will there be two separate schemes, one for senior management and one for the rest of the staff? If people move from one status to another, these things have to be clear.

I tabled this amendment to look at the question of trust. This has to be spelt out in the Bill because when we say we are going to protect members’ interests, we mean it. As I said when moving the amendment, we want this to be clear, unambiguous and meaningful. We have had some difficult experiences over the years with trustees and the pension fund, with the ownership of the fund and with the rights of the fund members. My suggested new clause would do away with the smoke and mirrors and deal with exact wording. Clearly there is a lot to consider in what the Minister has just said and I will look at the parts of the Bill he referred to. However, I want to know categorically whether we are talking about every member of Royal Mail being part of the same scheme, or whether there will be two schemes so that senior management gets an enhanced scheme over the rest of the staff. Perhaps he could comment on that before I decide what to do with my amendment.

Lord McKenzie of LutonI am happy to try to place as much on the record as I can to give my noble friend the quite reasonable assurances he seeks in a number of areas. As we touched on during the last Committee day, at the moment there are effectively three schemes: the RMPP scheme, the executive scheme and the new DC scheme into which all new entrants are directed. The DC scheme will continue to operate for new entrants. No proposals in this Bill impact on those arrangements, and neither do they impact on the current executive scheme. That will stand and fall going forward on the same basis as it does at the moment.

The provisions in relation to the RMPP, as we discussed on the last occasion, are meant to apply to qualifying members as defined. We have tried to make it clear that, subject to all the issues around state aid, it is meant to apply to all the existing members of the scheme at the relevant date.

Lord Clarke of HampsteadI thank my noble friend for that further clarification. If I have understood him aright, and I am not the brightest person in this House, there will still be an executive pension scheme which differentiates between senior people and the rest of the staff. Having said that, I need to consider carefully what my noble friend has said before we move on to Report. For the moment, I beg leave to withdraw the amendment.

Amendment 70 withdrawn.

Clause 20Transfer of assets of the RMPP

Amendment 70A

Moved by

70A: Clause 20, page 10, line 31, leave out paragraphs (a) and (b)

Lord HoyleWhat I have to say in relation to this amendment is very simple. Where the Bill states that:

“The Secretary of State may by order make provision for the transfer of assets to the RMPP”,

we want to delete paragraphs (a) and (b) referring to the “Secretary of State” and a “nominee of the Treasury”. That is what we are asking for. It is pretty straightforward and I hope that my noble friend will be able to agree to the amendment. I beg to move.

Lord Clarke of HampsteadAlthough my name is not on the amendment, the name of my noble friend Lady Turner is and, in supporting the amendment, I take the opportunity to tell the Committee that I spoke to her last night. She has had major surgery on her knee but she is in very good spirits and hopes to be back among us as soon as possible. In the mean time, she sends her best wishes to all her friends. It was nice to speak to her last night because her heart and mind are on the Bill, to which she is so committed.

As my noble friend said, the clause deals with the assets of the RMPP that will be transferred to the state in return for the state’s agreement to underwrite the past-service deficit. In other words, it is about the money, not the pension rights. The assets will consist of cash, government bonds, gilts and equities. The gilts and equities could be sold by the RMPP and transferred as cash, but that would suit no one as they might be sold into a falling market. The Government’s intention, as outlined in the debate on 31 March at col. 1023 of Hansard , is that gilts will go to the Treasury, cash to the Consolidated Fund, and other assets to a freestanding fund which would gradually sell them when the market was right. The effect of the amendment would be that all the assets were transferred to the freestanding holding fund. In other words, the gilts and cash would not be simply swallowed up by the Government.

The purpose of the amendment is that there should continue to be a fund available to underwrite the transferred pension rights. It would exist as a kind of trust fund, albeit managed by the Secretary of State’s nominees rather than by trustees. It would give additional security for benefits that might still be in payment 80 or 90 years from now. If the benefits are paid on a pay-as-you-go basis, they are only as secure as the political willingness of Governments over that period to leave them intact. In similar past cases, including rail and coal, the assets were left as a trust fund and not transferred to the Government’s coffers.

The Minister should remember that these assets are, in part, funded by the contributions paid by members over a number of decades; it is their money that we are talking about and not some mythical money that has been spirited out of the Treasury. I do not know what my noble friend Lord Hoyle intends to do, but I see this as a probing amendment and I ask the Secretary of State to give a formal, on-the-record guarantee that the transferred pension rights will be paid, come what may, if they are not underwritten by a fund.

Lord De MauleyThe amendment raises some important concerns about what the Government propose will happen to the assets they are transferring out of the RMPP. The Government’s policy paper says that their intention is to sell the assets,

“over a number of years to protect value for money for the taxpayer”.

That, of course, is sensible so far as it goes. We have debated the Government’s interesting timing in choosing to sell off a large minority stake in Royal Mail during a severe economic crisis, which has already raised concerns about whether the taxpayer will get value for money. The same, of course, applies to the pension assets. How are the Government going to decide when the assets will be sold? Do they have a target level for the Financial Times Stock Exchange index or some other index at which they will sell, or do they intend to sell the individual bonds and shares when they each reach what the Government regard as a satisfactory price? If so, how will they recognise a satisfactory price when they see one? We need to know a little more about the Government’s decision-making process.

Where possible, assets should be held on to until the best return can be got. To do anything else needlessly increases the taxpayer liability, already calculated to be somewhere north of £6 billion. I hope the Minister will be able to go into more detail on how long the Government are prepared to wait before liquidating the pension assets. Are they looking to offload them as soon as is reasonable, given the economic situation, or will they hold on to them until they need to be liquidated to meet the associated pension liabilities? What will be the remit of the person charged with the administration and management of the fund under subsection (3)?

Lord McKenzie of LutonAmendment 70A relates to the treatment of assets that are transferred to the Government. I shall start by setting out the Government’s intended approach to the treatment of assets and how we expect the pay-as-you-go scheme to be governed. Clause 20 covers the transfer of assets from the RMPP to the Government. The Government’s intention to transfer members’ qualified accrued rights to the new public service scheme represents an estimated £29.5 billion liability.

To partially offset that cost to taxpayers, Clause 20 provides that the Secretary of State can, by order, transfer assets from the Royal Mail pension plan to the Government. Based on the 2007-08 scheme accounts, the Government estimate that they will use their power under this clause to transfer something like £23.5 billion of assets, which amounts to 80 per cent of the cost of the liabilities transferred. At the point of transfer, the Government intend to leave the remaining RMPP with sufficient assets to meet its liabilities, currently estimated by the Government to be £3 billion. That will require state aid approval.

17:15:00

A transfer of assets will not affect the qualifying accrued rights transferred to the new public service scheme. To be clear to my noble friend, these will be protected in law and paid on a pay-as-you-go basis, as with many other public service pension schemes.

The Government are conscious that these changes could entail a significant transfer of assets out of the scheme. Those assets have been accumulated over many years through the contributions of scheme members, as my noble friend said, and of Royal Mail as the sponsoring employer, as well as returns on the scheme’s investments.

I stress that any such transfer of assets can take place only if the Government have also taken responsibility for the relevant liabilities—the qualifying accrued rights. In other words, at the point that the assets are transferred, the Government will also have taken on responsibility for the payment of past-service benefits to which those assets relate, as well as the responsibility for the shortfall in funding that will almost certainly be the case. It should also be remembered that, under Clause 19, members’ accrued rights that are transferred to the new scheme will be protected in law.

A number of questions have been raised with regard to the governance of the new pay-as-you-go scheme; the noble Lord, Lord De Mauley pressed some of these matters as well. Because many public service schemes are not established under trust and do not have assets to manage, they do not have trustees. Instead, the responsibility for the management of such schemes is delegated to a professional scheme manager, who is able to draw on the full range of professional advice available to a trust-based scheme. The interests of members are reflected through statutory protection for benefits, and through other stakeholder consultation arrangements as part of the broader governance of the scheme.

It is envisaged that similar arrangements to those applicable in other public service schemes will be developed in respect of the new scheme created under Clause 16. However, as the new scheme has no active members and there is no employer, many of the decisions that need to be made by other public service schemes, such as those relating to future benefit accruals, will not arise.

As a public service scheme, it is envisaged that the new scheme will prepare an annual set of resource accounts. These will be informed by regular actuarial assessments and updates of the key assumptions used to calculate the scheme’s liabilities, including longevity.

Given the nature of the liabilities that will be transferred to the new scheme, and the protection for members provided through the Bill and in the related secondary legislation, the Government regard the established model for governance of public service schemes as the most appropriate model to be applied in this case.

I turn to the detail of Clause 20. Subsection (1) contains provisions for where the assets will be transferred. We intend for any gilts and cash transferred to go to the Treasury’s Debt Management Office and the Consolidated Fund respectively. The intention is that the other transferred assets will go to a fund established by the Secretary of State and will be sold over a number of years, with proceeds going to the Consolidated Fund.

Clause 20(1)(a) allows for a transfer of the assets directly to the Secretary of State. That would allow for the transfer of any cash to the Secretary of State, who could then pay it into the Consolidated Fund. It is also a contingency measure, should the fund envisaged under Clause 20(1)(c) not have been established when the transfer of assets is required to take place. Clause 20(1)(b), which gives the power for the assets to be transferred to a nominee of the Treasury, is designed to allow gilts to be transferred directly to the Debt Management Office. I hope this has provided noble Lords with clarity on our proposed treatment of assets and how that relates to the transfer of qualifying accrued rights.

Amendment 70A, which I accept is probing, proposes to remove paragraphs (a) and (b) from subsection (1). The effect would be that assets could only be transferred from the RMPP to a fund established by the Secretary of State rather than directly to the Secretary of State or a nominee of the Treasury. That would have no beneficial effect for members, whose qualifying accrued rights would already be protected in law, and would be funded from general taxation and not from the fund established by the Secretary of State. However, it would restrict the flexibility which the Government may need in the interim to implement the transfer successfully and could add to the costs of asset disposal.

The noble Lord, Lord De Mauley, asked a number of questions about how the assets would be dealt with and, in particular, what we mean by their being sold over a number of years. Let me be clear that the Government are not interested in a fire sale of any assets; they are committed to selling the assets over a number of years. It would not be appropriate to include a timeframe in the Bill because it is not possible at this stage to predict when sales will be appropriate and deliver value for money. Similarly, it is not appropriate at this stage to predict when sales will be possible. Therefore, the decisions will be for Ministers and the BERR accounting officer to make. The BERR accounting officer will be responsible for ensuring that asset sales deliver value for money for the public sector as a whole. This follows the standard procedure used for all public sector bodies, as set out in HM Treasury’s publication Managing Public Money.

The Government recognise the importance of transparency on the pension proposals. We are currently considering the various options for how best to achieve this, including that of setting out a disinvestment strategy, but that is just under consideration.

I hope that that explanation has dealt with each of the points that noble Lords have raised. I ask that the amendment be withdrawn.

Lord HoyleThis is a probing amendment and I desire to go over in detail what my noble friend has said. We may have to return to this as we are concerned about the protection of members, but in view of what has been said already I beg leave to withdraw the amendment.

Amendment 70A withdrawn.

Amendment 71 not moved.

Amendment 72

Moved by

72: Clause 20, page 10, line 41, at end insert— “( ) The Secretary of State must inform Parliament of the classes of assets transferred under the order.”

Lord De MauleyThe amendments in this group address two concerns. Amendment 72 deals with which of the RMPP’s assets the Government intend to take. The more substantive Amendment 74A concerns the assumptions on which the safeguard in subsection (1) will be based.

Let me deal first with Amendment 72. Your Lordships will appreciate that some of the assets in the RMPP are of considerably better quality than others. The variety of assets is presumably very wide, ranging from property to overseas equities to index-linked bonds, and so on. Some are subject to much higher levels of risk. If the Government are not intending to take over all the assets, do they intend to take a fair selection of each class of asset, or will they seize only the safest, leaving the highest risk and most toxic assets behind for the ongoing fund to handle?

On Amendment 74A, following our debates on 31 March, the Minister helpfully wrote to my noble friend Lord Skelmersdale concerning the assumptions. It would be helpful if the noble Lord could expand somewhat on how the Government will ensure that an objective analysis of volatility and risk will appropriately be taken into account. I beg to move.

Lord RazzallI have listened with interest to the debates on the amendments moved by the noble Lords, Lord Clarke, Lord Hoyle and Lord De Mauley, and I am puzzled. Perhaps the Minister can help me. There seems to be considerable concern in your Lordships' House that somehow the Government are going to pinch the assets. We did not devote a lot of time to worrying about that on these Benches, and perhaps we were wrong. I had understood that the taxpayer was going to subsidise this pension fund and that one of the purposes of the Bill is to put in place the mechanism under which the Government—that is, taxpayers—subsidise the shortfall in the pension fund. Why does the Minister think that there is this concern that the Government are going to pinch the assets?

Lord McKenzie of LutonI start by responding to the latter point made by the noble Lord, Lord Razzall. While I cannot, perhaps, articulate why there are concerns, I can tell you why there should not be concerns. The issue is that liabilities—currently estimated to be some £29 billion—are being taken on and underwritten by the taxpayer on a pay-as-you-go basis. The assets of the scheme are being transferred to the Government, except to the extent that sufficient assets will be left with RMPP to cover its liabilities at the point at which the split occurs. The proposition that the Government are somehow pinching the assets is misguided. Liabilities are being taken on that are expected to exceed considerably the value of any assets that the Government will take on.

Lord RazzallWhen the Minister winds up on this point, will he explain why the Government are simply not agreeing to leave the assets there and meet any deficiency? Why does there have to be this transfer of some assets, leaving others behind, which of course is causing concern and suspicion to the noble Lord, Lord Clarke of Hampstead, the noble Lord, Lord Hoyle, and—dare I say—the Tories? Of course, we on these Benches would never suspect the Government of such skulduggery.

Lord McKenzie of LutonI am grateful for what I take to be a measure of support from the noble Lord. The reason for adopting this approach is set out in the impact assessment. Another option would be for the assets to be transferred, for there to be a funded scheme as the noble Lord suggests, and for the Government simply to plug the gap on some ongoing basis. The analysis in the impact assessment very clearly shows concerns over the investment risk that that would involve and leave the Government with. It was not an attractive option. It was estimated that, over time, it would lead to greater costs being borne by the Government and the taxpayer. That is the fundamental reason for adopting the current approach.

Amendment 72 would require the Secretary of State to report on the assets that are transferred from the RMPP to the Government. At present, as the noble Lord, Lord De Mauley, suggested, the assets in the scheme are a mixture of equities, gilts, properties, bonds and cash. The type and mix of assets left with the RMPP will be the subject of discussions with the trustees and actuaries. That is the discussion that must take place to identify the appropriate mix of assets to be left, bearing in mind the ongoing liabilities that the RMPP will have. An exact pro rata mix is unlikely, given the indivisibility of some investments.

The Government fully recognise the importance of transparency in any transfer of assets. Indeed, we would expect an order for the transfer of assets to include details of the classes of assets transferred, including, for example, details of any cash or gilts that were transferred to the Consolidated Fund or to the Treasury. However, the order will need to contain some flexibility on the exact mix of assets transferred, given that a transfer may take place some months after a transfer of liabilities and the time an order is laid. There could conceivably be some changes in the value and composition of the relevant assets to be transferred, so any order cannot be totally prescriptive.

Following a transfer of assets, the Government will also be transparent in publishing the breakdown of assets and the wider public finance impact in the Pre-Budget Report or Budget immediately following the transfer. As this information will already be in the public domain in the ways that I have described, we see no necessity for a separate obligation for the Government to report on the classes of asset transferred. I hope that the noble Lord, Lord De Mauley, will accept that because what he seeks to achieve in respect of transparency will arise from the mechanisms that I have just set out.

Amendment 74A concerns Clause 21. This clause limits the Secretary of State’s power to transfer assets out of the RMPP. It provides members with a legal safeguard to ensure that the transfer of assets does not worsen the funding position of the RMPP. In relation to this restriction on the transfer of assets, subsection (4) provides that the values of liabilities and assets will be determined, calculated and verified by a prescribed person and in the prescribed manner, the details of which will be set out in secondary legislation.

Similar to what Amendment 74A proposes, the Government intend to hire an appropriately qualified actuary, but we do not believe that it is necessary to put this on the face of the Bill. There are a number of factors that Government will need to take into account in procurement decisions, and this is just one factor. In addition, the relevant actuarial bodies could change in the future. I understand, for example, that a merger has been proposed between the Institute of Actuaries and the Faculty of Actuaries. It therefore makes sense to set out in secondary legislation the details of who will carry out the valuation and on what basis.

17:30:00

Amendment 74A also requires the valuation to employ,

“a conservative set of assumptions used in the private sector”.

This amendment appears to relate more to a full actuarial valuation of the scheme such as the one the trustees are currently undertaking. The purpose of the valuation referred to in subsection (4) is different and much narrower in its scope. It is purely to ensure that the restriction on the transfer of assets in Clause 21 is met. It is important that the assumptions used are appropriate to the RMPP and protect both scheme members and the taxpayer. As such, it is entirely legitimate for the Government to set out the assumptions in an order after consultation with the trustees. By contrast, the proposed wording of Amendment 74A is unclear and could hold the Government and the taxpayer hostage to fortune.

I hope that that explanation has reassured the noble Lord, Lord De Mauley, and that he will be able to withdraw the amendment.

Lord De MauleyI am most grateful to the Minister. I am also grateful to the noble Lord, Lord Razzall, who, as always, goes right to the heart of the matter, even if it was not the specific matter that I was raising in this amendment—but no less important for that.

I shall consider the Minister’s response in the context of his recent letter. For today, I withdraw the amendment while reserving my right to return to it later.

Amendment 72 withdrawn.

Clause 20 agreed.

Clause 21Restriction on power to transfer assets

Amendment 73

Moved by

73: Clause 21, page 11, line 4, leave out subsection (1)

Lord De MauleyOnce again, the noble Lord, Lord Clarke, who spoke earlier about trust, like us appears to have similar concerns about the discrepancy between government promises and the drafting of the Bill. At Second Reading, the Secretary of State made a clear statement, echoing what had been published in his policy paper, that:

“At the point the historic liabilities are transferred to the new public scheme, we will leave the Royal Mail pension plan with sufficient assets to meet its liabilities”.—[ Official Report , 10/3/09; col. 1067.]

That seems completely unambiguous. The RMPP is to be left fully funded, albeit, as we have discussed, on the 2006 valuation. However, this is not what the Bill says. Clause 21(1) is equally clear that the Secretary of State is not to be held to the promises that he has made. According to the Bill, the Secretary of State must only make sure that the RMPP is not left with a worse ratio between its funding levels and its liabilities than before the relevant time. Which is it to be—the soothing promises of the Secretary of State or the wording of the primary legislation?

If the Government intend to leave the RMPP fully funded, why have they not drafted the Bill in that way? This is just one more example of unnecessary and deeply concerning ambiguities in the drafting of this Bill. Do the Government intend that the RMPP should be fully funded or not? I beg to move.

Lord Clarke of HampsteadThis group includes Amendments 74 and 76. In Amendment 74, I am saying: “The power of the Secretary of State to make an order under section 20 (a “transfer order”) may only be exercised if the assets of the RMPP are sufficient, at the relevant time, to enable the RMPP to be wound up and all of its liabilities discharged in accordance with section 74 of the Pensions Act 1995 (c. 26) (discharge of liabilities by insurance, etc)”.

This is an important clause, because it defines the amount of assets that can be transferred to a new public scheme or a segregated section of the RMPP, sponsored by the Secretary of State. The value is defined negatively. Clause 21(1) tells you what must be left to the RMPP, rather than what it can transfer. It says that the funding ratio in the rump RMPP must not be worse as a result of the transfer. The funding ratio can be determined in a number of different ways; the relevant ones are on an ongoing basis or a winding-up basis. The winding-up basis is more stringent; broadly speaking, it is the cost of buying out the benefits by purchasing annuities.

Members of the scheme want the RMPP to be as strong as possible after the division. The strength of the new free-standing Royal Mail and Post Office companies is not all that clear—and I venture to suggest that there are not that many people either here or in any other place or in the Government who are clear on what is going to happen. That is why, when I talk about trust, it is difficult to have trust in something that is not very clear. In the case of a similar separation in the private sector, the trustees of the remaining section—that is, the rump RMPP—would insist that they are left with enough to buy out all benefits if the sponsor collapsed shortly after the separation into a number of different companies. Amendment 74 therefore says that once the assets are divided, the RMPP should be fully funded on a buy-out basis. The addition of new subsection (6) in Amendment 76 may not be strictly necessary until such times as we hear something that blows away some of the fog about the future of the company.

I have raised the question under Amendment 74, so I shall leave Amendment 76 as it stands and hope that it is not necessary to return to it. We want to suggest that the scheme should not be wound up. In an earlier contribution, the noble Lord, Lord Razzall, put his finger on it. If you go outside this building and talk to a Post Office worker who remembers what happened in the early days of my Government with pension funds—the way in which they took money out of not only that but many other pension funds—you will find that they are not terribly keen on seeing something that has been in place since 1969 being swept aside. It was made clear that this could be overcome by saying simply that there was a problem with the deficit—but why muck up the whole of the other scheme? Why destroy the trustee-based scheme that has served well, other than in the question of the deficit? Massive surpluses of billions of pounds used to be run up, until such time as both Conservative and Labour Governments allowed the terrible business of a holiday, with no money going into the scheme from the employer, although 6 per cent of members’ money still went in. That is why I speak very forcefully about the fact that it is our members’ money that we are talking about and not something handed down as some sort of gift. There is suspicion, and these amendments attempt to put that suspicion to one side and to clarify things. In fairness, I ought to say that even though we have been on a break I have been very pleased to have contact with Ministers about the need to get these things right. I am sure that there will be time between now and Report to see whether some of the fog can be blown away and we can come back with something that the Government can be proud of in its transparency, accountability and commitment to a structure allowing trustees to play their full part. I shall be very interested to hear what my noble friend has to say.

Lord HoyleI rise to support my noble friend. What we are on about here is the members and trying to protect them, because, as he said, while the two Governments were taking a holiday, the members were making their contributions to the scheme in any case. There has been talk of suspicion, fog, mist and a lack of clarity. I hope that when the Minister replies he will try to meet our misgivings; indeed, that he will end them and give us assurances that we have no need to fear what might happen. That will be a big test, because as my noble friend Lord Clarke has said, the members of the scheme are extremely suspicious of what might happen to the scheme and, indeed, what might happen to them. They have paid into a pension fund for such a long time and they want to ensure that it is protected. It is part of their security for the future and was part of wages they deferred in the past in going forward. Therefore, I hope that my noble friend Lord McKenzie can give us some reassurances, or at least some details that we can look at to see whether we have the kind of reassurances that we actually need.

Lord McKenzie of LutonI will again do all I can to try to make sure that on the record we give the assurances that I believe are embedded in the legislation. We will do all we can, both in these proceedings and, if necessary, at meetings outside to lift some of the fog that my noble friend may feel is still present around these proceedings. I say to my noble friend Lord Hoyle that protection is very much at the heart of what we are proposing in Part 2.

Amendments 73 and 74 concern subsection (1) of Clause 21. As we have discussed, subsection (1) requires that the ratio of assets to liabilities in the RMPP is no worse immediately after the transfer of assets and liabilities than immediately before it. The restriction applies to all sections of the RMPP, including the new sections for Post Office employees and Royal Mail Group employees. This represents an important legal safeguard for the trustees and for members with accrued rights remaining in the RMPP.

Amendment 73—I accept it is a probing amendment—removes subsection (1) and would remove this protection. It could allow the Secretary of State to leave the RMPP in a relatively worse funding position than at present. Not only could this be detrimental to the members of the RMPP, it would also present a barrier to partnership because of the additional risk that it would impose on any potential partner in Royal Mail Group. Therefore, the Government cannot accept the amendment. Amendment 74 aims to require that a transfer of assets to Government may only be made if the RMPP is left fully funded on a buyout basis. That is the most cautious basis for funding pension liabilities, often used to assess the cost of winding up a pension scheme. It would require that following a transfer of assets and liabilities, sufficient assets are left in the RMPP to fund the purchase of insurance company annuities covering all members’ benefits that remain with the RMPP.

Amendment 76 is consequential on Amendment 74 and clarifies that this does not imply an intention for the scheme to be wound up. I certainly accept that. In dealing with these amendments, we should bear in mind that both the Royal Mail pension plan and its sponsoring employers will be, as we discussed a moment ago, in a significantly improved position by virtue of the measures in the Bill. It would be perverse to argue in this context that the trustees somehow need full funding on a buyout basis to protect members going forward. Nor is it desirable to specify a particular funding basis for the purposes of Clause 21. The Government have stated their intention that when transferring assets and liabilities from the Royal Mail pension plan, sufficient assets will be left to cover its liabilities. In calculating those liabilities, the Government will work with the trustees to find an appropriate valuation basis that delivers value for money without putting members’ accrued benefits at risk. The details of the valuation will be set out in secondary legislation.

Let me repeat, as I think it addresses the point the noble Lord, Lord De Mauley, raised directly, that the Government intend to leave the RMPP with sufficient assets to cover its liabilities. That will require state aid approval. It is not appropriate, therefore, to include a requirement to that effect in the Bill. Although the Government are confident that it will be possible for state aid approval to be obtained, they cannot pre-judge the Commission’s detailed decision or rule out the possibility of modification to the proposals. That is why the Bill is not written in those terms, but the protection is written in there as I have just outlined.

17:45:00

Funding on a buyout basis could involve a large cost to Government and the taxpayer but provide members with little extra protection. It would also—I think my noble friend Lord Clarke identified this—provide an incentive for the company to wind up the scheme, which the Government have no intention of doing.

I can confirm in relation to Amendment 76 that, as we discussed earlier, there is no express power in the RMPP rules for the scheme to be wound up. There are, as I have said, state aid implications. The pension proposals, including the value of assets left with the Royal Mail pension plan, will require state aid approval. That is why it is not appropriate to include a requirement on the funding basis in the Bill.

Given the difficulties I have mentioned, I hope that the noble Lord, Lord De Mauley, and my noble friend Lord Clarke will not press the amendments, and that I have provided the assurance that I think they are seeking. If I have not, I am very happy to have another go and put something further on the record if that would help.

Lord De MauleyI am grateful to the Minister for his response. I would like the chance to think a little more about what he has said. Therefore, for today I am prepared to beg leave to withdraw my amendment.

Amendment 73 withdrawn.

Amendments 74 and 74A not moved.

Amendment 75 had been withdrawn from the Marshalled List.

Amendment 76 not moved.

Clause 21 agreed.

Clause 22Taxation

Amendment 77

Moved by

77: Clause 22, page 11, line 41, at end insert— “(5A) Regulations shall be made under this section that shall ensure that, for the purpose of any relevant tax, benefits payable or prospectively payable under— (a) the RMPP, and(b) a new public scheme,are treated as benefits payable under a single registered pension scheme.”

Lord Clarke of HampsteadThe amendment tries to get a single scheme for tax purposes. First, I am advised that the current basic rules for tax limits are that everyone has a right to contribute up to 100 per cent of his or her taxable earnings to one or more pension schemes. I am not worried about that: members will not be contributing to the new public scheme at all. They can contribute whatever they like to the RMPP going forward or to a personal pension to buy additional pension.

Secondly, everyone has a single limit on the total value of the pension rights that they can have from every pension scheme that they hold. This total value is described as the lifetime allowance. For example, if a member has three pension schemes—schemes A, B and C—the limit applies to the total benefits that they get from all three schemes. If pension A comes into payment at age 60 for instance, you work out the value of pension A and knock that off the value of the total to see what is still available. You do that again when pension B comes into payment and again when pension C comes into payment. Each time a pension comes into payment it is called a “benefit crystallisation event”.

The way in which the value of a pension is calculated is complex, but the key point is that it is the capital value of the pension. A defined benefit pension is valued at 20 times the value of the initial pension; for example, if pension scheme A produces a pension of £20,000 per annum, £400,000 of the lifetime allowance is used up. The lifetime allowance is set at £1.75 million for the tax year 2009-10 and will not bother many people. It certainly will not bother many postmen or postwomen; I can assure the Minister of that. This is not a big concern for most members, but might affect some high earners. Perhaps those people in the executive scheme that we heard about earlier on would fall into the lifetime allowance that I have just described. It just makes their lives a bit more complicated if one or other of their Royal Mail pensions comes into payment before the other.

Thirdly, there is a limit on the amount of pension that you can convert into a cash lump sum. This is the rule that matters: in short, you can convert up to 25 per cent of the value of your pension when it comes into payment. In my example, when pension A comes into payment, its capital value is £400,000, as I have just said, and the maximum lump sum is £100,000. In the case of the Royal Mail pension plan, let us imagine a member with a pension payable by the new public scheme that is worth £10,000. When the member retires, he or she has built up a further pension under the RMPP worth another £10,000. Each pension is worth a capital value of 20 times £10,000—£200,000. If he or she takes both pensions at the same time, the maximum lump sum is 25 per cent of £200,000 plus 25 per cent of the other £200,000, or two lump sums of £50,000 making a total of £100,000, just as before.

However, what if he or she takes one pension at the age of 60 and the other at age 62? If it is a single scheme for tax purposes, he or she can take the whole £100,000 out of the first pension at age 60. If there are two schemes, he or she can only take £50,000 at age 60 and the other £50,000 at age 62.

This is probably not the most important point in the world, but it affects some members who want to draw their pensions in two parts. Other tax rules have different effects, depending on whether it is one scheme or two. The tax administration of two schemes becomes twice as complex. If the RMPP trustee is going to administer both schemes, as the Secretary of State suggests, why not treat them as a single scheme? I beg to move.

Lord De MauleyThe noble Lord, Lord Clarke, has highlighted another complication that might fall on pensioners as a result of the Government's policy. I hope that the Minister will be able to reassure us that members will not be disadvantaged by the new arrangements as to their tax liability.

It is notable that Clause 22 gives powers to the Treasury, which is not bound by the material detriment safeguard in Clause 19. It therefore seems quite possible that new rules could be imposed on members to their detriment. Is that the case?

Once again, this clause allows the Government to do pretty much anything. As far as I can see, there would be nothing to stop the Treasury, by regulation, imposing 100 per cent tax on the income that members receive from both the new public scheme and the ongoing RMPP. I am sure that this is not the Government's intention—or, if it is, that we are not going to hear of it today—but it seems that this clause would allow for it. More realistically, it appears that the Treasury intends to tax the fund set up under Clause 20(1)(c). Is this the case? Why are the Government considering taxing a fund owned by themselves? I cannot think of a single beneficial effect except for the useful massaging of current account figures.

Similarly, in what circumstances do the Government envisage withdrawing relief on the ongoing RMPP? Would this not breach the spirit of the Clause 19 safeguard?

Lord McKenzie of LutonI think that the understanding of the noble Lord, Lord De Mauley, on the clause is a little misplaced, but I hope to put something on the record to clarify matters. I think that I followed my noble friend Lord Clarke’s example, but would need to read the record. Certainly, his exposition of lifetime allowances, benefit crystallisation and issues of lump sums was correct. I certainly accept that you could see an anomalous situation arising from the possible reorganisation if the clause were not available to address it, as it is intended to do.

The Government have outlined the framework for the pension proposals. However, the specific detail of the proposals for the reorganisation of the pension provision will be set out in secondary legislation and the reorganisation could result in unintended consequences. For example, a tax charge might arise solely as a result of the reorganisation.

Clause 22 will allow the Treasury to change how a relevant tax would apply tothe Royal Mail pension plan or its members; changes relating to the Royal Mail plan or its members; a new public scheme or its members; and a fund set up to hold the assets of the Royal Mail pension plan. This clause is necessary so that the Treasury can neutralise any tax disadvantage or advantage that may be caused by changes to the pension arrangements; its purpose is to neutralise the potential impact of tax in these circumstances. So where a reorganisation of the pension arrangements would otherwise create an unintended tax charge, that tax charge can be removed by amending the relevant legislation.

For example, Clause 22 will allow regulations to be made to treat the new public scheme as a registered pension scheme. So when members’ rights are transferred from the RMPP to the new scheme, tax charges of up to 70 per cent—equating to the amount of tax relief that will have been received—of the amount transferred will not arise.

Clause 22 also provides the power to make provision to remove the tax charge where assets of the RMPP are transferred to a fund in Clause 20(1)(c). If the fund is not a registered pension scheme, the transfer of the assets and the income and gains that arise on the investments would be taxable. This clause would allow regulations to be made so that the investments may attract tax relief as if they had been transferred to a registered pension scheme. To answer the point of the noble Lord, Lord De Mauley, on whether we are looking to tax the fund set up under Clause 20, I say no. The impact of this is to enable the fund that holds the assets to be treated in the same way for tax purposes as though those assets continued to be held by the scheme. Without the power, these amendments could not be made otherwise than by primary legislation at some time down the line. If this clause were removed, tax charges of up to 70 per cent on payments out of the pension savings could arise simply because of the reorganisation of the pension arrangements.

This sort of clause to neutralise unintended tax charges is not novel. In 2005, a similar power—Section 102 of the Finance Act 2005—was taken in relation to the Pension Protection Fund, the Fraud Compensation Fund and the board of the Pension Protection Fund. It was taken for similar reasons, essentially as a precautionary measure to ensure that, when the detail was finalised, unintended consequences could be dealt with. Therefore, it is important that this provision is flexible. The tax consequences will depend on the specific detail which will be set out in secondary legislation. Clause 22 provides the power to make regulations to meet any concerns that may arise on the taxation of the pension reorganisation.

Amendment 77 would require the Treasury to make regulations ensuring that, for tax purposes, benefits paid out of the Royal Mail pension plan and the new public scheme are treated as if they were paid out of the same pension scheme. This is unnecessary and could cause difficulties. Current Royal Mail employees will probably receive benefits from both the Royal Mail pension plan and the new public scheme. In previous debates on this matter, I have confirmed that the Government’s aim to protect members is at the core of these pension changes. For tax purposes, the Government aim to treat the members of the RMPP and the new public scheme, as far as is possible, as if the reorganisation had not taken place.

That is why we have Clause 22. If inadvertent tax charges arise out of the changes, Clause 22 provides the power for the Treasury to make regulations to vary the tax rules. The clause is included in the Bill to cover precisely this sort of detail. So where unintended tax charges arise from the pension proposals, Clause 22 allows the regulations to neutralise tax disadvantages that may be caused by changes to the pension arrangements. The amendment would oblige the Treasury to make regulations to treat the benefits as payable under a single registered pension scheme whether or not such regulations were an appropriate way to resolve the potential problem.

Even more seriously, creating the fiction that the benefits of the two schemes are paid out of the same registered pension scheme for tax purposes would introduce unnecessary confusion over which scheme is responsible for the payment, without providing any additional tax advantage over what is already possible under the existing version of Clause 22. This is because each registered pension scheme has to appoint a person responsible for its tax issues—the scheme administrator. This amendment would create uncertainty over exactly who has that responsibility and may even restrict the ability to make changes which neutralise the tax position.

18:00:00

The amendment provides a rigid requirement for the Treasury to make regulations when the tax consequences of the detailed pension proposals, and whether and in what form tax changes will be needed, are still unknown. The Government think that the flexible provision in Clause 22 is the best way of dealing with the tax consequences that may arise out of the pension proposals. My noble friend Lord Clarke asked why we should not treat as one scheme pensions taken two years apart. My note says that the treatment would be the same if £100,000 were taken first and another £100,000 were taken two years later, irrespective of whether the sums were in one or two schemes. The thrust of the point I am seeking to make is that the concerns on which my noble friend has alighted can be dealt with by Clause 22. That is the purpose of that clause. We believe that is a better and more flexible approach than having the rigid approach of treating the two schemes as though they were one for tax purposes, given the difficulties that could generate, as I have explained. I therefore ask that Clause 22 stand part of the Bill and I hope that my noble friend will withdraw the amendment.

Lord Clarke of HampsteadI am left with a feeling that my noble friend has been helpful, although I shall not become too euphoric about that but take it as it comes. However, some of his comments add to the problem. The framework of the scheme is there but not the detail, and secondary legislation might have to be introduced. These matters are uncertain; anything could happen in the future. That is why I have made such a fuss about the need for transparency and to get as much detail of the Government’s intentions as possible in the Bill. I leave my noble friend with the following comment. If the RMPP trustee is to administer both schemes, as my noble friend said, why not treat them as a single scheme for tax purposes? However, for the moment I shall withdraw the amendment as I am pretty sure that we shall return to it at a later stage.

Amendment 77 withdrawn.

Clause 22 agreed.

Clause 23Information

Amendment 77A

Moved by

77A: Clause 23, page 12, line 15, after “otherwise)” insert “that is not legally privileged”

Lord De MauleyOur final amendment on Part 2 from these Benches is very simple and I hope can be dealt with quickly. Our concerns here are about the drafting of the Bill, not the Government’s intentions; at least, I hope that they are not, because, having said that, it occurs to me that there has as yet been no indication of what the Government’s intentions are with this clause.

Have the Government had any difficulty extracting the necessary information from the relevant people? Indeed, the only people whom I can imagine holding relevant information are the trustees of the RMPP, and the Minister has said many times that the Government are working closely with them. Therefore, I cannot see why this clause is necessary. The amendment suggests the barest possible safeguard as regards how this provision might be used, which would be to protect legally privileged information. It is a common safeguard that has been drafted into many precedent pieces of legislation. Will the Minister explain why it has not been included here? I beg to move.

Lord McKenzie of LutonBefore I deal with the amendment, I wish to deal with the question that the noble Lord raised about our having difficulty getting information from the trustees and their having been reluctant to provide information. The answer to that is a very clear no. The power that we seek here is to safeguard future information requirements connected with the establishment of the scheme. To date there has been no requirement to exchange detailed information. We have been dealing with aggregate data in looking at the projections and the work that has been done.

I would like to explain the purpose of Clause 23. In order to implement the measures set out in Part 2, the Secretary of State will need access to certain information. We would expect such information to be readily provided by the appropriate parties but, should this not be the case, the clause provides a power for the Secretary of State to make an order requiring the provision of that information.

The information covered under this power will comprise principally details of the scheme’s assets and the liabilities related to individual members, which are currently held by the RMPP. The Government will require access to that information in order to make orders concerning the transfer of certain liabilities to the new public service scheme under Clause 16 and for the payment of benefits to members by that new scheme; to establish the new section for Post Office employees under Clause 17; to transfer assets from the scheme under Clause 20; and to ensure that any asset transfer order meets the requirements set out in Clause 21. The power to obtain information can be exercised only where it can be demonstrated to be required for the provisions under Part 2. Before it is exercised, there is a further requirement under Clause 24 for consultation with the RMPP trustees.

We will be discussing, as part of the ongoing meetings that we are already having with the RMPP trustees, the information requirements. We do not envisage that this power will in practice be used, other than in exceptional circumstances. However, access to the relevant information is important not just for the effective exercise of the powers under Part 2 but in order to safeguard members’ and taxpayers’ interests. The clause therefore provides the necessary powers, should they be needed.

The amendment would exclude from the power in Clause 23 any information that is “legally privileged”. The meaning of legal privilege is well defined. The British courts have been clear that legal privilege is a fundamental right, which cannot be abrogated by statute unless done so by express words in the statute or as a necessary implication of the words of the statute. The Government have not put in any such wording in relation to this power because they fully recognise the fundamental right of legal privilege and do not intend to encroach on this right. We do not therefore think that this amendment is necessary. I hope that the noble Lord understands our reasons and that he will withdraw it.

Lord De MauleyI hear what the Minister says, although I believe that there is precedent for including these words. However, for today, I am happy to withdraw the amendment while reserving the right to come back to it later.

Amendment 77A withdrawn.

Clause 23 agreed.

Clause 24Orders and regulations

Amendment 78 not moved.

Amendment 78A

Moved by

78A: Clause 24, page 12, line 21, at end insert— “(1A) The Secretary of State may not make an order under any provision of this Part which adversely affects a relevant pension provision contained in the RMPP without the consent of the trustee of the RMPP. (1B) For the purpose of subsection (1A), “relevant pension provision” has the meaning set out in section 19(3). (1C) Regulations made under section 259 of the Pensions Act 2004 (c. 35) shall apply to a proposal to make an order under this Part as they apply to a proposal by an employer to make a decision prescribed for the purposes of that section.”

Lord Clarke of HampsteadAmendment 78A is really a rehash of my amendment to Clause 18. I said then that any amendment to the RMPP should require the consent of the trustee in consultation with members. On the subject of trustee consent, my noble friend Lord McKenzie said at col. 1060 of Hansard that the Secretary of State needs to be able to amend the structure of the scheme as regards investment, governance and funding without risking a veto from the trustee.

The amendment that I propose today says that the trustee should have to consent to any relevant pension provision, which essentially means any benefits; in other words, the trustee should be able to comment on, and veto, amendments to the benefits structure. As regards consultation on members’ requirements, my noble friend Lord McKenzie said that members are adequately consulted because they have member-nominated trustees. That entirely misses the point that member-nominated trustees are subject to confidentiality obligations.

I will spend one moment on the confidentiality obligation of the trustee. One day, when the Secretary of State is in his place, I will be able to ask him questions directly. I will return to the question of the letter from the chairman of the current pension scheme, who, on 18 February, wrote to the Secretary of State after a meeting with him. The letter was published by the Secretary of State on 23 February. As I have told noble Lords before, that date is important, because it was the day when Post Office workers, responding to the lurid headlines of, “Posties’ pensions now at risk”, attended rallies and meetings convinced that their pensions were at stake. It did not matter how many times I or others who had some knowledge of the subject were able to say, “Not to worry”. We could not say very much, because the confidentiality obligations of the member-nominated trustees are paramount.

I asked some of my friends who are still trustees, as I once was, to tell me more about the sequence of events of the meeting, the letter, the publication and the retraction by the chairman—noble Lords may have missed that—in which, effectively, she disowned some of the things that she said in the letter following the meeting with the Secretary of State. I shall ask about those things again, because one day I will try to get a clear answer on the sequence of events.

The member-nominated trustees have this confidentiality responsibility. That is why the second part of the amendment would require consultation with members if benefits are changed. The reference to Section 259 of the Pensions Act 2004 is a reference to the provision that says that members must be consulted if benefits are amended. It would not give members a power to veto any change or even to delay changes.

I ask noble Lords to note that those two proposals go no further than what is required in every other private sector scheme and what currently applies to the Royal Mail pension plan. I ask the Committee to carefully consider and support the amendment, which I beg to move.

Lord De MauleyThe noble Lord, Lord Clarke, returns to the question of the Secretary of State amending the RMPP without the trustee’s consent. The Minister has dwelt on the close consultation that the Government are already engaged in, but I have not detected that he has made clear what would happen if any disagreements remained at the end of that consultation. Indeed, the whole matter is rather complicated by the possibility of plan B, which the Minister also went into on the last day of Committee on 31 March.

If the Government were unable to gain the necessary permissions to take over the old liabilities directly and were forced to sectionalise the old RMPP under Clause 17, there would presumably be much more government interference in the day-to-day running of that section and so even more scope for disagreements to come up between the Secretary of State and the RMPP trustee. Having said that, I have a hunch that the Minister will tell us that he has quite a bit more work to do on this whole area and, if he does, we will clearly need to come back to it in some detail on Report. I very much hope that the noble Lord, Lord Clarke, will not feel the need to press his amendment today.

Lord HoyleI support what my noble friend said. He is right to draw attention to what has happened in the past in relation to the chairman and the strange behaviour that took place. It is no wonder that there are some suspicions, which no doubt my noble friend can clear up for us. Again, there is the question of where we are going to draw the line and there is the question of the responsibility of the trustee. At the end of the day, we are trying to make sure that the members are protected in the best way possible. That is why we are saying,

“without the consent of the trustee”. I hope that my noble friend can throw some light on this and on the role of the trustee in the future because, at the end of the day, we are trying to get rid of the fog, the mist and the mistrust that appear to exist at the moment with the members of the pension scheme.

18:15:00

Lord WhittyI will intervene in the debate with a word of advice to the Government. If they want to avoid some of the mistrust to which my noble friend referred, which relates not only to the pension scheme but to the total package before us in the Bill, the full details of which are not yet clear, they would be as well, either by adopting my noble friend’s amendment or in some other way, to indicate that the Government do not have any intention of altering the terms of the pension scheme by Secretary of State decree.

I am not sufficiently informed to know whether my noble friend’s wording is the correct way to do this, but it seems to me that in Clause 19 we have made it clear that transfer would not immediately adversely affect any person in the scheme. However, the suspicion remains that the Secretary of State may have a power to change subsequently the entitlement of a member of the scheme and that therefore the guarantee in Clause 19 is not sufficient for the members of the scheme to feel safe that things would not be changed subsequently. As my noble friend Lord Clarke has said, the normal way of changing the terms of a scheme remains, which would have to involve consultation and eventually consent and agreement at the trustee level with the employer or, in this case, the Government.

I am not sure that the Government would lose anything by accepting the amendment, but they would remove a suspicion that the intention is to dilute or adversely alter the nature of the scheme some way down the line and thereby avoid expenditure by the Government. We should not avoid putting this in a broader context. We know that the Government and the Opposition have made some rumbling noises about public sector schemes in general. This is about to become a public sector scheme more explicitly than previously and it would be appropriate for the Government to give some reassurance to postal workers on this front, which may help them in their general dealings with the postal workers and their unions over the total package.

Lord McKenzie of LutonThis has been an interesting, if somewhat compacted, debate. Let me try to unpick one or two issues. My noble friend Lord Clarke raised several points about the communications between the chair of the trustees and what had transpired. Forgive me that I have no briefing on that. I have a copy of the letters. If there is a way in which we can add further clarification, I am happy to take that away.

My noble friend Lord Whitty asked for an assurance about the Government’s intentions going forward. He is right to say that there are clear protections for the RMPP members at the point that the scheme is effectively split into two. I will come onto that in a little bit of detail in a moment So far as the new public sector scheme is concerned, the Secretary of State would similarly be constrained by Clause 19(6) in respect of any adverse change to qualifying and accrued rights, and those would be dealt with only under very narrow circumstances, one requiring consent and one being amended in the prescribed manner for which, as we debated last time, we were trying to replicate what is in Section 67 of the 1995 Act.

The other principle is that the Government take responsibility for accrued liabilities going forward for the operation of the pension scheme, which is the routine, normal manner of the Royal Mail Group and Post Office Ltd in respect of their action, and that the protections that are currently available generally in pension legislation would continue to apply. The Government have no particular powers in the Bill to seek to amend the scheme, as far as I am aware, and I will certainly write if the contrary proves to be the case. The Secretary of State does not have that power going forward. The operation of the slimmed-down scheme will be a matter for Royal Mail Group, as should be the case. We have made that policy clear from the start.

More specifically, the amendment raises a number of issues regarding consultation that we touched on in our discussions on earlier amendments. I appreciate the importance of the issues raised by noble Lords and I hope that my response to these amendments will address any remaining concerns.

The first part of the amendment requires the consent of the RMPP trustee to be obtained where an order is made that adversely affects any relevant pension provision contained in the RMPP. In other words, although the general requirement under Clause 24 is that the Secretary of State must consult with the trustee before any order is made under Part 2 which affects the RMPP, the effect of the amendment would be to require the consent of the trustee in circumstances where pension provision within the RMPP was adversely affected as a result of an order being made.

I question how, given the existing protections in the Bill—this comes back to my earlier point—the circumstances to which this amendment is addressed would arise. Under Clause 19(2), an order by the Secretary of State to establish a new scheme, transfer qualifying accrued rights to the new scheme, sectionalise the RMPP or amend it cannot be made unless relevant pension provision for RMPP members is, in all material respects, at least as good immediately after the exercise of the power as it was immediately before. As I explained in response to an earlier amendment, the definition of “relevant pensions provision” at Clause 19(3) is broad in its effect.

These provisions in Clause 19 are a significant constraint on the powers of the Secretary of State and reflect the importance that the Government attach to protecting members of the RMPP from being detrimentally affected by the Government’s proposals. The clause explicitly rules out the possibility that the Secretary of State would amend the RMPP in a way that had a material adverse effect on relevant pension provision. Accordingly, I cannot see circumstances in which the amendment, if accepted, would serve any purpose. By definition, if there is no possibility of an order being made that had a material adverse effect on relevant pensions provision contained in the RMPP, the trustees would never have to agree to such an order being made.

Turning to the final part of the amendment, subsection (1C), I should make it clear that it is indeed important that members of the scheme, both current and former employees, should be made aware of what changes are being made and the effect of the changes particularly in terms of issues such as administration. The Government have already met representatives of current employees and pensioners to explain the proposals in the Bill. The Government intend to keep those organisations informed as the Bill progresses and we move towards implementation.

As I mentioned earlier this month, we are also discussing with the trustees and Royal Mail on how they should best engage with current employees and other scheme members as the proposals are developed. While this legislation is progressing through Parliament, it is right that member engagement is the responsibility of the trustees and not the Government. But we are rightly maintaining a close interest and have discussed with the trustees appropriate communications that would meet the needs of the scheme members, stressing the strength of feeling expressed in this House during our earlier debates in Committee.

I now turn to the proposed application of the consultation requirements set out in the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006, which are the regulations made pursuant to Section 259 of the Pensions Act 2004, as is envisaged by this amendment. Those regulations require employers with more than 50 employees to consult affected employees about a proposed significant change, known as a listed change, to their pension scheme for at least 60 days before implementing the change. Listed changes include closing the scheme to new members, changing the accrual rate in a defined benefit scheme, changing a defined benefit scheme to a money purchase scheme, reducing employer contributions and increasing member contributions. The requirement to consult gives affected employees the opportunity to have their say about future changes to the pension scheme. It ensures that affected employees are fully aware of the changes and the implications for their future pension provision.

The key point is that the Government are not proposing any such changes to the RMPP. Members’ pension entitlements accrued up to the cut-off date—the qualifying time—are not changing as a result of the Government’s proposals. Members’ future accruals in the RMPP will remain, as at present, a matter for the Royal Mail and the trustees. The Government are not proposing any changes. Were Royal Mail or Post Office Ltd to propose changes to the scheme, as employers they would be subject to the obligations under the regulations that I have described. However, no such changes are proposed as a result of the measures set out in the Bill, so the requirements under those provisions are not relevant here.

I hope that the explanation has provided some reassurance. I accept that my noble friend may wish to dwell on the precise wording, because it is important that we provide reassurance to people and make clear the protections that are available under these provisions. Accordingly, I hope that he will feel able to withdraw the amendment.

Lord Clarke of HampsteadI thank my noble friend for that very informative response to this short debate. He started by saying that it was interesting; it was certainly interesting to me once again to see that the willingness to talk about consultation and transparency is there in the Minister’s mind. I welcome that. It is another thing not to see that in the Bill.

It is said that the Government are not proposing any changes at the moment. We cannot live on the basis that it will always be “at the moment”, because at a different moment different people will be administering different things. That is why throughout these debates I have said there is a need for trust, consultation and accountability so that people can understand the situation.

There is not very much wrong with the first part of the clause. My noble friend is saying that there is no need to require the consent of the trustees. Over the years, consent in pension schemes has been as my noble friend Lord Whitty described; when a change is proposed, whether on an investment policy, the benefits structure or the administration of the scheme, there has been consultation. As I said at the time of the first deficit of £1.18 billion in the scheme in 1973, which was accumulated after only four years of the scheme, common sense prevailed and the parties came to an agreement.

All that this amendment says is you have to have the consent of the trustees. They are not out to try to hoodwink the employer or the Government; they represent the members. The trustees are looking after members’ money and investing on their behalf. It could be agued that some of the trustees may have not done that very well in the past few years, but I have explained time and time again that that was a direct result of the policies of former Governments and the present Government in allowing that almost obscene pensions holiday to take place, whereby the money accumulated from members’ contributions, not from the employer. At the same time money was pumped into the Exchequer from the external finance limit. So you could say that in the past the trustees may not have done their job as well as they might have done.

The noble Lord, Lord De Mauley, asked me not to test the opinion of the Committee this evening. I got the impression that he may want to bring something back to make this issue clearer. As I have said—now for the third time—if we do not get on the face of the Bill a clear and concise commitment to consultation, I shall, without any shadow of a doubt, support any amendment that states that there should be consultation. I know that consultation is provided for in other parts of the Bill, but when people read legislation, they want to see it wherever it is necessary. My amendment states that it should occur on this matter.

Lord McKenzie of LutonI think that sometimes in this discourse we are in danger of interchanging consent and consultation. I refer my noble friend to Clause 24, which makes it absolutely clear that the Secretary of State must consult the trustee of the RMPP before making an order under Clause 16 or any order under any other provisions of this part. That is embedded in the legislation and it is very clear. Perhaps we may look at what happens with the process going forward once the Government have taken on board the accrued liabilities. As I said a moment ago, in the normal course of events, going forward it is a matter for Royal Mail Group Ltd and the trustees. However, there could not just be a spurious adjustment to the terms of the RMPP going forward without requiring the processes set down in general pensions legislation to kick in. Therefore, a requirement for consultation is set down in the Bill.

18:30:00

Lord Clarke of HampsteadI thank my noble friend for that comment. He draws attention to Clause 24, which deals with orders and regulations. If it is good enough to put that in the orders and regulations, why not put it in here? If it is a principle worthy of putting into a later clause, why not put it into this one?

I look forward with great interest to the letter that I think will come regarding my comments on the relationship between the chairman of the existing pension fund trustees and the Secretary of State. I wish that the Secretary of State were here so that I could say this to his face but I shall say it once again anyway. I believe that there was some scaremongering in the department that sought to frighten decent people regarding the future of their pensions.

Lord McKenzie of LutonI have not been involved in the detail on this but I have certainly been in the presence of the Secretary of State—I think that it may have been said in this very Chamber—when he has made it clear that he published the letter and did not leak it. He published it because he believed that it was a significant issue that should be taken account of in the deliberations that were then under way. I do not think that it is fair to attribute to my noble friend any underhand or devious motivation, which I do not believe was present.

Lord Clarke of HampsteadMy old employers used to say that that sort of argument was the salami treatment, cutting one slice off at a time, but we have gone a bit further than that. My point is that we have not yet had a public explanation of why the chairman of the trustees has, in effect, withdrawn her comments regarding the Hooper review in relation to pensions. Some of those things had nothing to do with pensions; they were to do with quality of service and administrative matters relating to Royal Mail. That is the answer that I will continue to try to get. Why was it necessary for someone of as high standing as the chairman of the pension scheme to write to all the members assuaging their fears?

I am sure that we will come back to that when my noble friend has had a chance to have the drains up and has had a good look round and seen the sequence of events relating to the letter written on 18 February and published on the 23rd, and later when, following lurid headlines, some of the comments in that letter were withdrawn. Taking the advice of the noble Lord, Lord De Mauley, I shall not test the opinion of the Committee on this occasion but I shall continue to come back to the question of consultation and the relationship between the trustees and the Government. In the mean time, I beg leave to withdraw the amendment.

Amendment 78A withdrawn.

Amendment 79 not moved.

Clause 24 agreed.

Clauses 25 to 27 agreed.

Clause 28Duty to secure provision of universal postal service

Amendment 80

Moved by

80: Clause 28, page 14, line 17, at end insert— “( ) In carrying out its functions in relation to postal services, OFCOM shall have regard to the interests of— (a) individuals who are disabled or chronically sick;(b) individuals of pensionable age;(c) individuals with low incomes;(d) individuals residing in rural areas;(e) small and medium size enterprises;but that is not to be taken as implying that regard may not be had to the interests of other descriptions of users.”

Lord Clarke of HampsteadWe now move on to a series of amendments dealing with the duty of the future regulator. Amendment 80 seeks to reinsert into legislation the duty that was previously imposed on Postcomm—without me getting too excited about the way that it has helped to bring the Post Office to this parlous state—in the Postal Services Act 2000. That duty meant that Postcomm had to consider, in relation to the postal industry, the specific problems facing people with particular needs. I refer to the disabled, the chronically sick, pensioners, the poor and people living in the countryside. Of course, it can be said that Postcomm did not display any great energy in defending the needs of such people, but that must not be an excuse to ignore their needs in the new Bill.

There is no reason why Ofcom should have fewer obligations than Postcomm. Changing the regulator does not change the circumstances of the users of Royal Mail. I am pleased that the Bill restates the need to maintain a service for blind people but it is not clear whether the deletion of those additional duties on the regulator is due to oversight or deliberation. If it is an oversight, I expect the Government to accept this amendment. If it is a deliberate exclusion, we must have an explanation from the Secretary of State. After all, the current recession is, in part, a result of Governments around the globe deregulating services to excess.

The market does not provide solutions to many problems. Left to the market, postal companies see only higher costs in providing rural services; left to the market, the disabled, the low paid and pensioners find themselves with a bad bargain. It would be a great mistake to lower the social concerns of the regulator. I cannot accept that the loss of this duty is somehow compensated for by the ability of the Secretary of State to offer guarantees on,

“the attainment of any social or environmental policies”,

set out in Clause 52. Such guidelines should supplement the permanent concerns covered by the amendment.

In the interim report published by Richard Hooper in May 2008 entitled The Challenges and Opportunities Facing UK Postal Services , we find a fine observation:

“The postal service enables daily communications across all 28.4 million business and household addresses in the UK, regardless of the location, and beyond. It helps social cohesion by linking rural communities with more densely populated areas of the country, and ensures that older people and those with disabilities have an accessible, reliable means of communication and the capacity to send and receive physical goods”.

Unless your Lordships accept this amendment, that statement by Richard Hooper’s team will no longer be true, for those elements of social cohesion referred to in the report will be removed with the passage of the Bill as it stands. I cannot for one moment believe that this House wants to see, for example, a deterioration in the service offered to rural communities by the universal service provider.

There is an important difference between the duties listed in my amendment and those outlined in the Postal Services Act 2000. In this instance, I have added the category of small and medium-sized enterprises. I omitted them in my first submission on this clause and am now pleased to say that they feature as part of this amendment.

In Hooper’s interim report, there were many useful observations on the impact of competition on the mail market. Unfortunately, much of that work was forgotten by the time the final report was published—presumably because the final report is more concerned with justifying the privatisation of Royal Mail—so it is necessary to return to the interim report to get a clearer picture on the issue of competition. The report makes it quite clear. It says:

“There have been no significant benefits for small businesses yet as a result of liberalisation”.

It continues by pointing out that,

“small businesses have relatively little choice. The vast majority use Royal Mail’s services. Their dependence on Royal Mail seems to reflect an assumption that they are unable to attract alternative carriers, particularly if located in rural areas, based at home, or do not have high volumes to offer. Penetration by alternative carriers in the small business sector will increase over time, as owners have more information about their choices, are able to set out their needs, and new products are designed”.

Surveys so far carried out show high levels of satisfaction with the quality of service offered at today's prices. Some 83 per cent of small businesses believe that first class mail offers good value for money. The response is higher still for a medium-sized enterprise at 92 per cent. But they do not believe that the service fully meets their particular needs. In some cases, recent changes in collection and delivery have made it more difficult to carry out their business.

In spite of advances in technology and online banking, many small businesses are dependent on the postal network to organise financial transactions. More than 50 per cent of companies surveyed by the Federation of Small Businesses send over three-quarters of their bills and invoices through the post. When profit margins are tight, the ability to receive payment and avoid penalties for the late settlement of bills is vital. With that in mind, small businesses want later collections and earlier predictable delivery times. Liberalisation has not delivered that yet.

The introduction of a new cost-reflective pricing structure based on weight and dimension known as pricing in proportion means that consumers are more likely to need advice about sending their letters. Small business representatives in particular have expressed concerns about the growing complexity of sending mail. These changes will have the greatest impact on those who work and live in more rural areas as well as domestic consumers unable to travel to the nearest post office, including the elderly and those with disabilities. We can see that there is no real gain for small and medium-sized enterprises.

Market innovation by competitors has been almost entirely confined to the skimming off of the conveyance of bulk mail to Royal Mail sorting and delivery offices. Neither Postcomm nor Hooper suggested how liberalisation could actually deliver benefits to small and medium enterprises. Postcomm was convinced that there would be some sort of trickle-down benefit, yet that has not occurred. Why should competitors develop a highly dispersed customer base? Only Royal Mail has the network and coverage to address the needs of small and medium-sized enterprises. Therefore, it is appropriate to impose on Royal Mail the duty to consider the specific needs of small and intermediate enterprises and I hope that noble Lords will see the logic and sense in this amendment. I beg to move.

Lord HoyleI support my noble friend. Once again, he has stated the facts. Certainly, Postcomm, once it was charged with the provision of a universal postal service, was always more concerned about competition rather than provision. The emphasis in Hooper, in putting forward Ofcom as the best regulator, was to say that universal service provision must take priority. We should back that up in a little more detail for those who are absolutely dependent on a universal postal service.

It goes without saying that for those who are disabled, chronically sick or not mobile, the universal postal service is part of the value and quality of life, but the universal service must serve their actual needs. Once more, I could use a similar argument in relation to those on pensions because pensioners become less mobile as they get older—apart from those who attend this House, of course, who are the notable exceptions. Nevertheless, it is generally true that people of pensionable age require the provision of a universal postal service. Those with low incomes are always most adversely affected by any change and that would particularly be so if we did not ensure that the universal postal service served their needs.

My noble friend talked about rural areas. While I cannot be said to live in a rural area because, after all, our village has about 6,000 people, we are part of a rural area as my noble friend knows. Again, it is absolutely dependent. Information carried on the national news this weekend rang alarm bells. In remote parts of Scotland, the postal van has also acted as a people carrier and people have been passengers in it, but they are now told that that is not commercially viable. I should like to know from my noble friend why that is so. Surely it cannot be costing a large amount, yet those without a car will now have to walk. Their standard of living will certainly go down.

18:45:00

That is the kind of thing that will occur. The market cannot provide for that: it is about a universal service provision that caters for those people who so require it. As I said, it alarmed me when I heard about that. This is the first sign of going down that road, knowing that privatisation may mean that the service side will come second to the commercial side and the making of profit. It will be about efficiency, whatever that means. Efficiency can certainly mean depriving people who need it of the universal postal service, particularly in rural areas.

My noble friend was right to say that small and medium-sized enterprises depend on it. Certainly, competition has benefited large businesses: there is no doubt about that. It has given them a choice, but small and medium-sized businesses are absolutely dependent at this stage of their development. Certainly, as Hooper admitted, there has been no trickle-down to them to enable them to improve their choice from the competition that has already taken place. We must protect them. They are suffering at the moment in the economic squeeze that is going on. They do not need in addition to that to be affected by changes to the postal service being provided to them. Many of them will not be able to continue in business.

Listing all those categories, my noble friend and I are right to say that this is not to be taken as implying that regard must not be had for other descriptions of users. We are trying to protect the rights of those individuals in our society who are absolutely dependent on the universal postal service—one that can be provided not on the basis of competition or profits but on the basis of need. They certainly need it. I hope that my noble friend will reply to me and assuage the fears that I have expressed in all of these categories but particularly in relation to rural areas. As I said, developments have occurred in Scotland before partial privatisation has even taken place. I support my noble friend in this.

Lord WhittyI also support my noble friend in this amendment or something very like it. I declare an interest as the chair of Consumer Focus which inherited the duties of Postwatch. I also want to emphasise that I support the broad thrust of Part 3 of the Bill. I support putting the universal service obligation on the face of the Bill in unequivocal terms. There were fears that that would not be done. It ensures that the individual or business expects the same service on the same terms and at the same price whether they are in the furthest reaches of Fermanagh or based in inner London. I greatly welcome that.

I also welcome the transfer of responsibility—the abolition of Postcomm—for reasons that my noble friend hinted at and has previously expounded on. Postcomm’s tradition and attitude to consumers has not always been of the best, whereas Ofcom has a positive reputation in this regard, at least in general terms. I draw attention to a recent publication by Consumer Focus which rated Ofcom as one of the better regulators in relation to consumer interest. No doubt the Minister, the noble Lord, Lord Carter, who has just joined us, will take some credit for that in one of his earlier capacities. So I welcome the general direction of this part of the Bill.

However, two things are missing. One is that unless we say otherwise, the interests of consumers can be interpreted as the interests of the mainstream or average consumer. We need to make it clear that the interests of vulnerable consumers—whether geographically vulnerable or vulnerable because of their personal circumstances—need to be taken especially into account in Ofcom’s deliberations. In general, I am happy that the details of the regulatory framework are left to Ofcom, but it needs to be clear in the Bill that that consideration of vulnerable consumers is an obligation on the regulator. I hope that the Government would indicate through my noble friend that they are prepared to move in that direction.

The other point is that, despite the stipulations on the universal service obligation in the Bill, it will always be possible for the Government to alter or interpret it. It is very important that it is clear in the Bill, or at least in a ministerial commitment, that any change in the universal service order contemplated would be subject to consultation with consumer organisations including Consumer Focus—I repeat my interest there—and with representatives of organisations that purport to talk for small businesses, to which my three noble colleagues have already referred.

We need the double guarantee that the vulnerable consumer will be given special attention by the new regulator and that any change in the USO will be spelt out and subject to clear consultation. Both of those things need to be somewhere in the Bill.

Lord Hunt of WirralIn intervening for the first time today, I remind noble Lords of my interests as set out in the Register of Members’ Interests, including my having been a partner for more than 40 years in the national commercial law firm Beachcroft LLP.

I am very sympathetic to the amendment moved by the noble Lord, Lord Clarke. When looking at designating the UPS, Ofcom should consider not only the average user but those groups for whom an effective universal postal service is of the greatest importance. I was very interested to hear what the noble Lord, Lord Hoyle, and, in particular, the noble Lord, Lord Whitty, said. I had been reading Consumer Focus’s March 2007 publication, Rating Regulators , about Postcomm. I quote from page 10, where Consumer Focus argued against designating in the way in which the noble Lord proposes in the amendment. It said that this,

“labels everyone falling into these groups as vulnerable, which ignores the diversity of capability within these groups and feels patronising to the individuals targeted”.

I was not quite sure from what the noble Lord, Lord Whitty, said, whether Consumer Focus has changed its mind about that or whether that comment is now out of date, because Consumer Focus went on to suggest that a statutory framework—putting it into the Bill—

“may lack the flexibility to allow regulators to respond to changing ideas about the nature of consumer disadvantage”.

In expressing my sympathy with the amendment, I say to the noble Lord that I hope that the Minister will be able to reassure the Committee that the list of minimum criteria, such as that there be an affordable uniform tariff, will be assessed against the sort of groups that the noble Lord’s amendment highlights. Surely that is the main purpose of today’s debate.

Lord WhittyAs the noble Lord has asked the question, perhaps I can respond briefly. My point is that there needs to be some reference to vulnerable consumers or those who are likely to be more disadvantaged. The previous documentation objected to a list that implied that everyone within the list was vulnerable and that people who were not on the list were not vulnerable. The final paragraph of my noble friend’s amendment covers the second point. There may be other ways to cover the first point, but the principle is that particular attention must be paid to the more vulnerable and disadvantaged consumer, not simply the average consumer.

Lord Hunt of WirralI am grateful to the noble Lord for that explanation. It highlights the fact that we are now dealing with some important issues that are causing considerable concern to a wide range of people in this House, another place and outside. I hope that the Minister will be able to reassure us. It also gives me the opportunity to mention that the Business and Enterprise Committee in the other place has produced a report since our previous Committee sitting—it was published on 1 April—which raises a whole series of points that must give us all cause for reflection and, in various cases, concern. For example, the Select Committee in the other place pointed out in paragraph 88 of its report:

“The Communications Act 2003 requires Ofcom to have a Consumer Panel, advisory committees for different parts of the United Kingdom and on elderly and disabled persons. We are concerned about the extent to which Ofcom will be required to take into account the interests of vulnerable or marginal members of society in provision of postal services. Under the Bill their interests would have to be taken into account as part of Ofcom’s duty to review whether the universal service provider is meeting the reasonable needs of users, but members of particular groups may feel better protected if the requirement to address their needs is listed expressly on the face of the Bill, or if the Government can give an assurance that the advisory committees of the Communications Act 2003 will be expected to advise on postal services in addition to their existing tasks”.

There we have the problem; it is causing concern elsewhere. I wonder whether in responding to Amendment 80 the Minister might tell us what the Government intend to do about that detailed report, in which many points are raised. We could, during all these debates and when we return on Report, ensure that all the concerns are raised, but it may be easier and quicker if the Government publish their response to the Select Committee report within the normal timescale, which I understand is within two months. If the Government could by the end of this month or during next month respond in detail with their answers to all the questions raised by what I feel is a very good report raising all sorts of issues that we should consider more carefully, that would not only assist our understanding in relation to the noble Lord’s amendment but probably shorten a lot of our other debates.

19:00:00

The Parliamentary Under-Secretary of State for Communications, Technology and Broadcasting (Lord Carter of Barnes): I thank my noble friends for tabling the amendment. Before we delve into the detailed amendments, of which there are many to this section on regulation, I thought that, as this is the opening debate on this section, it might be worth making a couple of comments.

The first observation to be made on the Government’s behalf is that the purpose of the change is to achieve a clear rebalancing and reprioritisation of the regulatory regime for postal services. It is not to remove any element of competition from the postal services market. Indeed, Royal Mail, in both its written and its verbal response to the Hooper review, made it very clear that competition was a significant force for good. However, there was a clear question about balancing priorities where the search for competition sits alongside the universal service obligation and the nature of the regulatory regime.

I hope noble Lords will forgive me if I do not join the long queue of people rather gleefully burying Postcomm, as I have sat alongside it as a regulator—my noble friend Lord Whitty referred to this—and have been regulated by it, albeit in a non-executive capacity, when I sat on the board of Royal Mail. Postcomm in many ways did an admirable job, but it was working within a specific regime which we propose to change. Everyone, including Postcomm, is aware of that and welcomes it. It is time for a change. That change comes in many forms, not least in the overall regulatory regime change from a licensing regime to an authorising regime, which brings with it flexibility for the regulator which Postcomm did not have.

My noble friend Lord Clarke raises a number of issues, which I will come to in a second. He asked about small and medium-sized enterprises and the need to ensure that the regulatory regime takes their needs into account. He can rest assured that that is the case. Indeed, Section 405 of the Communications Act, which controls Ofcom’s overall responsibilities, specifically requires Ofcom to take into account the needs of small and medium-sized enterprises and the business consumer in the exercise of its responsibilities. The same is true of the at times vulnerable groups to which noble Lords have referred. I will come back to that.

My noble friend Lord Hoyle asked about the use of Royal Mail vans in remote areas. He might be reassured, and possibly amused, to know that I spoke only this morning to the current chief executive of Ofcom, who spent his Easter vacation on the remote Western Isles of Scotland, where he discovered, as a result of hitching a lift, the value of the Royal Mail vans in location.

Lord Clarke of HampsteadWill my noble friend get this right? They are post buses, not Post Office vans, and they are constructed for the conveyance of passengers.

Lord Carter of BarnesI stand duly corrected. As I was going to say, the use of the post bus service is an operational question for Royal Mail’s management, but I am sure that this evening’s debate will raise those issues.

On the security of the universal postal service, Clause 28 gives the Bill one of its essential features: Ofcom’s primary duty in this rebalancing is to secure the provision of the universal postal service. Amendment 80, tabled by my noble friend Lord Clarke, seeks to ensure that Ofcom takes into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas when it carries out its primary duty to secure the universal postal service. This is a laudable aim from my noble friend and one which the Government share wholeheartedly. The wording proposed by Amendment 80 replicates Section 5(2) of the Postal Services Act 2000, which requires Ofcom to have regard to the needs of special interest groups when carrying out its duties. The Bill does not include the same wording simply because Ofcom is already required under the Communications Act 2003 to take into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas. This requirement applies to all Ofcom’s functions, including its new responsibilities for the postal services.

Section 3(4) of the Communications Act 2003 requires Ofcom, in performing its general duties, to have regard to the needs of persons with disabilities, the elderly and those on low incomes and to the different interests of persons in the different parts of the United Kingdom and persons living in rural and urban areas. In fact, the Communications Act 2003 goes further than Amendment 80, as it requires Ofcom to take into account and explain a wider range of interests, such as the vulnerability of children, regional differences across the UK and ethnic minorities.

I therefore hope that I can reassure your Lordships that Ofcom will have to have regard to the needs of the disabled, pensioners, those on low incomes and those living in rural areas in carrying out its postal duties. There is no extra protection to be had by accepting this amendment, as it is already there in statute and, perhaps more reassuringly, already operates in practice.

Amendment 86 from my noble friend deals more broadly with the needs of users in accessing the universal postal service. It relates to Clause 32 on the designated USP conditions—conditions that Ofcom can impose on the designated universal service provider to secure the provision of the universal service. Those can require the universal service provider to do a variety of things, including,

“to provide, or make arrangements for the provision of, access points for the purposes of the universal postal service”.

My noble friend wishes to add to this his amendment to take into account the needs of users. I reassure noble Lords that the needs of users are at the heart of what we propose with this Bill and why we propose it. We have repeatedly argued that the universal postal service is part of the social and economic glue that binds us together as a society. It is therefore paramount that the needs of users in accessing that service are given a central place in the new regime that we are setting out.

Clause 28(3) clearly provides Ofcom with a duty to,

“secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service”—

all users whom Ofcom will be required to take into account. Clause 29 then requires at least one collection from access points for letters and packets within the universal postal service order. The Bill therefore ensures reasonable access to the universal postal service. I would add that in this respect, on a practical level, the Bill mirrors the current system whereby, through its licence granted by Postcomm, Royal Mail is required to provide access points that meet the reasonable needs of users.

On the broader points made by the noble Lord, Lord Hunt, and my noble friend Lord Whitty about the role of advice from the consumer panel and my noble friend’s own organisation, Consumer Focus, noble Lords can rest assured that Ofcom will be well advised by its own consumer panel—a critical friend that is within the regulator but is without it in terms of its ability to offer advice across the new extended remit—and by Consumer Focus’s broader responsibility to represent the consumer interest in these discussions. I assure my noble friend Lord Whitty that Ofcom will consult fully and in the normal manner on any changes to the universal postal service order following the general duties that apply in best regulatory practice.

I hope that these comments have reassured noble Lords that the needs of users generally and the particular groups mentioned in the amendment are catered for in the Bill and that my noble friend Lord Clarke will see fit to withdraw his amendment.

Lord Hunt of WirralI am sure that the Minister is about to deal with my question, which could help to shorten some of the debates not only on this issue but on others: do the Government intend to respond to the very detailed report by the Business and Enterprise Select Committee? The report raises a whole series of questions not only in this area, which the Minister has dealt with in part, but elsewhere. It would be of great assistance if he could reassure the Committee that the Government intend to respond in detail, certainly in the next month. Any advance information would be very useful to your Lordships in dealing with a whole series of issues that we have still to debate.

Lord Carter of BarnesMy apologies: as the noble Lord has said, it is an important and excellent report. I am afraid that my official briefing says that we will of course look and publish our response as soon as possible. I am not sure I find that terribly clarifying and I suspect that he does not. I will do my best to get a more specific response to him forthwith.

Lord Clarke of HampsteadThis debate has been interesting. I am astounded that we have someone in this House who has confessed to being a supporter of Postcomm and followed that up with the words that it is time for a change. The time was eight years ago. I have dug out a copy of Hansard which reports my, approximately, fifth attempt to expose not only the bias and unfairness, but the almost sleight of hand, of an organisation which purported to be a regulator, but was so biased against the Royal Mail and the Post Office. I am tempted to go into more detail, but I will not. However, I will refer to some of the things I said in 2006. I spoke about cherry-picking, downstream access and the cost to the Royal Mail of subsidising our competitors. I said that a number of times in this Chamber.

Eight years after I first raised that issue, the Government have said it is a time for a change. That time has gone. I have the greatest respect for my noble friend Lord Carter, who takes responsibility for Postcomm. I wonder whether later this evening he will be able to advise me on my issues with Postcomm. When will the French liberalise their post? The answer might be that it has nothing to do with us. Why do you interfere with the tariffs of the Post Office? He might answer that that is the Government’s responsibility. Why do you not charge the right amount for the downstream access? Again, the answer might be that it is nothing to do with us. It is late so I will not go on. However, anyone who wants to can read about the times I have raised the unfairness of a regulator that did not ever regulate, but which promoted Federal Express, Business Post and all the competitors, and showed them how they could make money off the backs of postmen and postwomen who were delivering mail that was collected under the arrangements that Postcomm agreed. I had better leave that there before I get excited.

I am delighted that my noble friend Lord Carter described the business report referred to by the noble Lord, Lord Hunt, as excellent. I would say that, wouldn’t I? From Second Reading, I have been trying to say that the Government have got this issue wrong, that it has been ill thought-out and has been dressed up as a group of things to try to justify selling off the Post Office and the Royal Mail. I thank all those who were able to see the picture clearer than those who have brought this discredited Bill to this House.

When people mention post buses, I get a little emotional because I was one of the officers who negotiated the provision of post buses in the Highlands and various parts of the rural community. I remember our arguments with management about the insurance, the seats, the seat belts and all the rest of it, but we won. My colleagues in the Post Office provide an excellent service, which is why I reacted to my noble friend calling them vans. They are not vans. They convey passengers and are doing a first-class job in many parts of the country.

I have nothing but admiration for people who can link their jobs with giving a valuable public service, which is at the base of this issue. Do we or do we not want a public service? If you want a public service, you have to pay for it and will the means to do it. If you do not want it, you can do what our political opponents are likely to do, which is to sell the blooming lot off in one go. That is what would happen. I hope that all my colleagues who were so sure that this bit of ownership would be temporary until we get another Labour Government are right. Last Friday, I was 77 and I do not know whether I will live long enough to see what will happen to my Post Office.

A noble LordOh yes you will.

19:15:00

Lord Clarke of HampsteadI thank my noble friend very much for that. But, quite seriously, will we always have this benevolent Government who say that we do not have to worry about getting the relevant words in the Bill because something is already inherent? Yes, it is time for a change. I thank all those who have taken part in this debate. I am conscious of the time and we have lots more to do today. I hope that what has been said in this debate will be taken away and that the report referred to by the noble Lord, Lord Hunt, is read. Noble Lords do not need to read it all; they can read just the bottom of the first page and part of the second page of the summary. The Government have not thought this matter through and it is about time that this House raised its voice. We do not want to be awkward people, but deep down we have a belief in the public service.

Amendment 86, to which the Minister did not give much credence, would insert,

“taking into account the needs of the users”.

Is that a bridge too far for the Government? We are asking them to take into account the needs of the people who we aim to serve. I have no doubt that I shall come back to this amendment, and I shall probably be armed with pages and pages of my reports about the activities of Postcomm. For the moment, I beg leave to withdraw the amendment.

Amendment 80 withdrawn.

Clause 28 agreed.

Clause 29The universal postal service

Amendment 81

Moved by

81: Clause 29, page 14, line 37, at end insert— “( ) a network of access points and postal offices whose density and adequacy ensure universal access to the service provided for in this subsection,”

Lord Clarke of HampsteadAmendment 81 deals with access points, to which my noble friend Lord Whitty referred at Second Reading. When he referred to the obligation imposed on Ofcom he noted that the Bill was silent on Ofcom’s duties towards Post Office Counters. It is very difficult to talk about the Post Office without realising that the brand is not just those people running around in post buses, but is about such things as counters, delivery people and trunking. When we look at the services of the Post Office, we also have to look at the access referred to in this amendment.

As the noble Lord, Lord Whitty, noted, Postcomm had the duty to look at the level and adequacy of the number of post offices. I am one of those people who will rejoice when we emblazon across all the newspapers what the Secretary of State recently told this House: namely, that there will be no more closures. Was it not good news for those people on all sides of this House who have spoken about people walking with their Zimmer frames to a post office that is more than a mile away? Wonderful people from various parts of this House have said that it is wrong to deprive decent, ordinary, hard working and sometimes very vulnerable people of access to a post office. Now we have it: there will not be any more closures. I suggest that wherever noble Lords go they make sure that the Secretary of State’s words are repeated. They might even do some good if noble Lords are canvassing for a candidate.

It would be a grave mistake to leave the network of post office branches without statutory protection. This amendment locates the network of branches within the universal postal service. In future, the universal service provider, which in reality can be borne only by Royal Mail, would be obliged to maintain a branch network which guaranteed universal access for all customers. I welcome the recent move by the Government to underpin the work going through the network of post office branches. I particularly congratulate the Government—I nearly said the Secretary of State—on ensuring that the Post Office card account replacement is to be managed by the Royal Mail. Further, I greatly welcome the suggestion that the Government are anxious to examine ways of increasing the products and services delivered through local post office branches. I hope that this will lead them to look favourably on the proposal for a Post Office bank offering comprehensive and innovative services.

Given the continued turmoil in the financial markets, it is noticeable how the Post Office is a trusted and reliable brand for large sections of the public. Such good will needs to be built upon. This will not be possible if the existing network collapses through neglect or by design. The amendment would ensure that such a scenario was not possible. Local post offices are a powerful platform for delivering the universal service, and the regulator will have to take this into account with its guarantee in legislation. I notice that during the second day in Committee the Secretary of State said that no more post offices would be closed, and I hope I live long enough to see that promise fulfilled.

I know that such a statement is generally welcomed, and the noble Lord, Lord De Mauley, did exactly that in summarising the debate around Amendment 31. However, I will draw the Secretary of State’s attention to the Labour Party manifesto of 2005. The document represents a promise made to the British people, who responded favourably enough to give the Labour Government a further term in office to honour it. In particular, I draw attention to the commitment which states that,

“we have given the Royal Mail greater commercial freedom and have no plans to privatise it. Our ambition is to see a publicly owned Royal Mail fully restored to good health, providing customers with an excellent service and its employees with rewarding employment”.

I shall stop there because I was going to repeat the long quote when we first heard that in the 2000 Act. At the time, Stephen Byers MP gave certain assurances to the British people. We might get a chance to return to the point when it is not such a late hour and I will be able to tell noble Lords exactly what we told the world in 2000 and 2005.

It still sticks in my throat that we are debating plans to privatise Royal Mail, or as they say, at least part of it—I say “they” meaning the Government, who I do not agree with. Given that, what begins to emerge is the commitment made by the Secretary of State to the future of the counters network. Does he mean that the Government have no intention of supporting any programme of post office closures before a general election or does he mean that the Government would actively say to the electorate in 2010 that they oppose any further programme of post office closures and will wish to be elected on that basis? The seriousness of our concerns about the future should lead the Government to consider embracing Amendment 81. I beg to move.

Lord CotterI support the noble Lord, Lord Clarke, in the points he has made, including that about no more closures. We all welcomed the Secretary of State’s words, and indeed had I not been sitting down I might have collapsed in a heap. Such a specific commitment was very welcome and pertinent to what we are talking about, particularly the commitment of noble Lords on these Benches to post offices and the universal service. The noble Lord, Lord Clarke, also asked whether the commitment to no more closures is to last for ever. I assume so because it seemed to be made on that basis, but certainly it is welcome, as indeed is his Amendment 81.

I shall speak to Amendment 85A, tabled in my name, which addresses a more specific point. We seek to provide for access points specifically “within each postcode district”. The general commitment to provide a reasonable number of access points, while well made, does not address the specific argument that has been put to us by a number of people. Using “specifically” again, my colleague the Member for Argyll and Bute has said that his constituency shares a postcode with urban Renfrewshire. This means that many parts of the constituency of Argyll and Bute could be left without a post office. So I look forward to the Minister’s response because this is a key issue, since we are all dedicated to the concept of universal service provision. If the point made in our amendment and that of the noble Lord, Lord Clarke, is not answered specifically, a situation could arise where if delivery of your mail is attempted when you are out, you will be required to go somewhere else to retrieve your post—and that place might well be an unsustainable distance away.

I am making this specific point in addition to what the noble Lord, Lord Clarke, has said, and I look forward to the Minister’s specific answer.

Lord HoyleIn supporting my noble friend once again on access points, I say that he is right that many of us were surprised but delighted at the Secretary of State’s statement that there are to be no more closures. I hope that when the Minister comes to reply, he will underline that. We are still reeling at the news and wondering whether it is exactly true. Did the Secretary of State mean it? I am sure he did because I have great respect for him, but if the Minister could say, “Yes, that is what we mean”, that would be a great help. As my noble friend Lord Clarke pointed out, the Government were elected on that.

I am concerned about a town like Chorley, which I know very well. After the main post office there are only two sub-post offices for the whole area, despite its density of population. One widely used post office was closed. There was no reason for closing it, and it means that people are now finding it difficult to access a post office because they are often over a mile away. The speaker on the Liberal Benches was right to make the point that someone may have to travel several miles to collect post that could not be delivered. If you have not got transport of your own, access can be very difficult.

Given all that has been said, I cannot see any reason why my noble friend could not accept these extremely reasonable amendments. After all, he would only be reiterating what the Secretary of State has said. The fact that we are not to have any more closures is very important indeed. If my noble friend accepts these amendments, we will not need to return to them, which would be quite positive in relation to the Bill, and indeed there is no reason why they cannot be accepted in view of the categorical assurance given to us by no less than the Secretary of State.

Lord De MauleyThese amendments raise some very important questions about what sort of network of access points will be maintained under the new regime. The importance of an access point is unrelated to the number of users who rely on it. The lack of alternatives to the universal postal service, especially in rural areas, makes those access points critical. The idea of the noble Lord, Lord Cotter, of assessing a proper network by means of postcodes is interesting, but I think I would prefer to see the UK-wide network safeguarded by ensuring that Ofcom keeps the importance of rural access points in mind. I hope that the Minister will reassure us that there will be no pressure to cut costs by getting rid of services in far-flung regions.

The amendment of the noble Lord, Lord Clarke, also mentions post offices. As amendments we tabled to Part 1 showed, we are completely in support of maintaining the current post office network, and if possible even reopening some of the post offices that have recently been closed under this Government. Having said that, I am not convinced that the post office network should be protected through regulation by Ofcom. We feel that it should be a matter for the Secretary of State, and we will certainly return to this issue on Report.

19:30:00

Lord TunnicliffeBoth Amendment 81, tabled by my noble friend Lord Clarke, and Amendment 85A, tabled by the noble Lord, Lord Razzall, deal with the issue of users’ access to the universal postal service. I should like to reassure your Lordships that the needs of users are at the heart of the Bill. The universal postal service is part of the social and economic glue that binds us together and it is paramount that the needs of users in accessing that service are given a central place in the new regulatory regime.

Access to the universal service for consumers is via both post boxes and post offices. With respect to Amendment 81, I understand my noble friend’s concern that Postcomm’s existing duty to review the post office network is not being transferred to Ofcom. Section 42 of the Postal Services Act 2000 requires Postcomm to provide advice and information about the number and location of post offices. This power is not transferred to Ofcom because, in our view, it is not needed. Consumer Focus, the body which represents consumer interests, can already investigate anything in relation to the number and location of post offices and, under the Communications Act 2003, Ofcom already has the power to undertake research in relation to any matter relating to its functions.

There is already provision within the Bill to address my noble friend’s concerns. Clause 28(3) will widen Ofcom's functions to include ensuring the provision of access points, such as post offices and post boxes, to meet the reasonable needs of users. It is therefore part of Ofcom’s primary duty in respect of post. This means that Ofcom would, in any event, have the power to monitor the size and distribution of the post office network. On a practical level, the Bill mirrors the current system whereby, through its licence granted by Postcomm, Royal Mail is required to provide access points which meet the reasonable needs of users.

Amendment 85A, in the name of the noble Lord, Lord Razzall, seeks to require that an access point for the universal service exists in every postcode district. I believe the reference to access point actually means a reference to post offices. “Access point” can also mean post boxes, so it is important to be clear. A sufficient number of access points is crucial to the provision of the universal postal service. I have already pointed your Lordships to the requirement that Clause 28(3) puts on Ofcom but I will repeat it again because it is so important: Ofcom must carry out its functions in relation to postal services in a way that it considers will secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service.

Your Lordships will know that in 2007 the Government set minimum access criteria for the post office network, the first time that any protection of this kind had been provided. These criteria are indeed more stringent than was previously thought necessary by the regulator for access to the universal service. The post office access criteria reflect the important social and economic role that these branches play in their communities and this Government’s commitment to maintaining a post office network with national coverage. As the Secretary of State has said, we have no intention of supporting a further programme of post office closures.

The criteria that must be met in respect of post offices include that 99 per cent of the UK population nationally must be within three miles, and 90 per cent of the population nationally be within one mile, of their nearest post office outlet. Furthermore, there is a criterion requiring that in each postcode district at least 95 per cent of the population should be within six miles of their nearest post office outlet. Currently 99.8 per cent of postcode districts comply with these criteria. I hope your Lordships will agree that these are very stringent criteria. Indeed, given that postcode districts vary in size, specifying, as we already do, that the vast majority of the population must be within a maximum distance from their nearest post office may actually be more stringent than merely having at least one in each postcode district, as the amendment seeks.

It is the Government’s view that it would not be proportionate for us to set further criteria on the number and distribution of post offices. The criteria that exist for the post office network already provide for a broad distribution of outlets providing reasonable access on a nationwide basis and specific protection for remote and sparsely populated areas across the country. It is much better for the issue of access to the universal postal service to be tackled, as it is within the Bill, by reference to the needs of users.

The Secretary of State made a statement about post office closures. He stated during earlier Committee stage debates that the Government have no intention of supporting any further programme of post office closures and in no way did he caveat that statement by time. The Government have established access criteria to ensure a truly national network of post offices. For the first time ever the criteria have a minimum carriage level and Post Office Ltd is required to exceed or meet them. Given the size of the post office network, with some 97 per cent of offices privately owned and operated, there will always be changes resulting from natural churn. The new code of practice jointly agreed by Post Office Ltd and Consumer Focus sets out detailed arrangements to inform and consult customers and local stakeholders on the reasons for any substantive changes in service and proposals for future provision.

The Secretary of State has separately recognised the value of wider use of the post office network and we are considering a people’s bank. We fully endorse the idea that the Post Office should do more on financial services. It already provides a wide range of financial services products, which are very popular, and there are a number of good suggestions which we and post offices will consider.

As to postcode districts and the Argyll problem, as I will call it, the present requirement on postal districts is that 95 per cent of people in each postcode district shall be within six miles of a post office. The current situation is that all but five of the 2,796 postcode districts comply with the access criteria. As at the end of February, there were four failing postcodes, but four out of these five will be compliant by 12 May. Whether or not the fifth is Argyll I am afraid I do not know; my notes do not tell me.

I hope I have addressed the points on access made by the noble Lord, Lord De Mauley. De facto, the Government set the requirements on the post offices by their legally binding contract with Post Office Ltd and we anticipate that arrangement continuing. No time limit has been put on the assurance and the criteria that I have referred to are set out in that agreement.

With those reassurances, I hope that my noble friend will not press the amendment.

Lord Clarke of HampsteadAmendment 85A is a little sweeping in the way it is drafted but there is some merit in considering the possibility of having an access point in most postcode districts. One of the by-products of this is what is known as the 739 service. When they get the grey envelope it tells the postal delivery officer not to 739 it. If it gets 739’d, it goes back to the office and people then have the problem of going to the office, which could be miles away. Even given the six mile criteria that the Minister mentioned, that can be difficult. I think there is a way around these things, given good will towards the new watchdog, or whatever you want to call it. I have been through this with the Post Office Users Council and then Postwatch, and now my noble friend Lord Whitty is going to take over some of those responsibilities. With some understanding between the parties, there could be a system that avoided the long treks to the delivery office that happen now. I am lucky; I can drive to the one in St Alban’s, although it is about six miles away and it is a nuisance.

We have to find a way for people to call a number and get through to a human being in the area they were talking about. Sometimes you will get an operator in Belfast who will tell you they do not know when the delivery can come out because they are nowhere near the place where your parcel or recorded delivery is. There is some merit in trying to find access points in and around a postcode district, so I would not dismiss the idea, although it needs some work. I am sure that the new regime under my noble friend and others along with Ofcom will look favourably on it, so long as they have in mind what the Minister has repeated—that is,

“take into account the needs of the user”—

although the Government would not accept that in the previous amendment, which is why we will have to come back to it.

I think I have answered the point made by the noble Lord, Lord De Mauley, about the sort of access point that we are talking about. There is a way that it could be done, but it would require some understanding of what we want at that point—do we want to post mail, collect it or use other services provided by the Post Office or Royal Mail?

It is tempting to talk for longer about the regulation by Ofcom, but it is very late. I wish Ofcom every joy in what it wants to do. As my noble friend Lord Whitty will be putting consumers’ interests into the melting pot, I hope we will get back to the idea that we are providing a public service. It is costly and difficult, but we should have it in our minds that we are here to serve, not to try to cut things. I am pleased that we have had a reassurance again about no closures of post offices.

I was delighted to hear the comment about the people’s bank. There is no need to spend too much time or money; all it requires is someone to go down to the archive and dig out the files on an organisation that started its life as National Girobank. It was a successful and simple banking operation that served so many people who had never even seen a chequebook in their lives, let alone owned one. To my sadness, there is still only one paper in this country that has printed the truth about that: the Scotsman . The bank was almost given away, even though some of us tried to form a consortium to buy it. I will not go too far, but I have said on previous occasions that it was a giveaway to the Alliance & Leicester, and we have had to pay the price. Do not spend too much time looking at the people’s bank that might be; go and get the Girobank files out, and then build on it so that it provides the financial services that a good people’s bank should. As I say, it is late, so I shall cut most of the end of my speech. I assume we are going to have a break soon—I hope so—and I beg leave to withdraw the amendment.

Amendment 81 withdrawn.

House resumed. Committee to begin again not before 8.44 pm.