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Royal Mail and the Post Office

Volume 475: debated on Wednesday 14 May 2008

It is a pleasure to serve under your chairmanship this afternoon, Mr. Weir, to discuss a subject that I know is dear to your heart. I applied for the debate after the panel that was set up to review the UK postal services sector published its initial report in response to the evidence submitted to it. I am grateful to Mr. Speaker for granting the debate.

I shall first talk about Royal Mail and later address the future of the Post Office. Royal Mail and its universal service obligation are part of the glue that holds the United Kingdom together. The delivery and collection of mail throughout the country at the same affordable price is very important. My constituency is sparsely populated and includes 26 inhabited islands, so it is definitely a beneficiary of the universal service. Small businesses in my constituency could not compete without it.

However, the interim report paints a picture of a bleak future for Royal Mail and the universal postal service if changes are not made. Paragraph 79 of the report, which is rightly highlighted in bold, states:

“We believe that there is a broad, emerging consensus among postal companies, business users, consumer organisations and the regulator that the status quo is not tenable: it will not achieve the vision we set out at the beginning of this paper. There is, therefore, a compelling case for action.”

That is a wake-up call to all of us. The report also concludes that householders and small companies have seen no benefit from the opening up of Royal Mail to competition, but that big companies have seen clear benefits. It warns that Royal Mail’s financial stability and thus the future of the universal service, with delivery to every home in the country at the same price, is under threat.

The report confirms what I and many other hon. Members have been warning for years: continuation of the present policies will inevitably mean the end of the universal service. In recent years, the service has worsened. The first delivery, by which mail used to be delivered by about half-past 9 in the morning, has ended. Delivery times for mail are now much later in the day—in some cases, as late as 7 o’clock in the evening. The price of posting mail has risen steadily. A second-class stamp went up in price by 12.5 per cent. last month, which is well above the rate of inflation.

An example from my constituency of a significant worsening of the service relates to deliveries to the island of Mull. For many years, the mail was delivered to the island on the first ferry of the day, at 8 am. Now it is delivered on the second ferry, at 10 am, which has a knock-on effect for the delivery time to people’s businesses and homes. Royal Mail’s excuse is a European transport directive that restricts its vans to 56 mph. However, that is only 4 mph below the speed limit on Argyll roads, and people familiar with the roads will know that their winding nature and the need to avoid all the potholes means that driving at 60 mph is impossible on most stretches anyway. I am not sure why that 4 mph difference means that mail cannot be on the first ferry.

As a result, the mail is not delivered to the shop in Fionnphort, at the end of the Ross of Mull, at the far south-west of the island, until almost 6 o’clock in the evening. Some houses outside the village do not get their mail until about 7 o’clock. Clearly, that is far too late for businesses to deal with the mail that they receive that day, but under Royal Mail’s performance statistics, it counts as mail delivered on that day. There is no incentive for the company to deliver the mail earlier in the day—if it is delivered before midnight, it counts as delivery on that day.

The Mull and Iona chamber of commerce discussed the problem with Royal Mail, which revealed that three quarters of the mail could reach the first ferry of the day. The chamber of commerce’s view was that it would rather receive three quarters of the mail during the working day than all of it after businesses had closed for the night. However, Royal Mail said that it could not entertain that suggestion, apparently because of performance targets. As I explained earlier, the targets set by Postcomm measure the day on which the mail is delivered, in theory even if it is only delivered at one minute to midnight.

That raises questions about the performance targets. Royal Mail seems to be driven by those targets rather than by the wishes of the customer. We need to make the organisation a bit more sensible, for example by having a target delivery time of perhaps 3 pm, rather than midnight as at present. We could even have a points system, with full marks for delivery before 3 pm and half marks for delivery between 3 pm and midnight.

I always stress to managers delivering any service that the islands need a degree of flexibility. Hard and fast rules that work okay on the mainland do not necessarily apply to islands. It is possible that some people on the island may have a different view from that of the chamber of commerce, so I want Postcomm to consider the proposal that Royal Mail should be allowed to deviate from the normal rules in any part of the country, following a public consultation and with the agreement of the local council. It should be allowed that flexibility as long as there is agreement, rather than slavishly having to follow national performance targets.

I am interested in my hon. Friend’s idea about greater flexibility. He is aware of the colossal post office closure programme that is affecting my constituency and others. Does he agree that it would be better to apply the same guidelines-based, rather than rules-based, approach in that case? People like me who are trying to save post offices such as Abermule, Berriew, Castle Caereinion and Garth Owen from closure could then appeal on the basis of a common-sense local decision, taking local criteria into consideration. It sounds to me as though that is what my hon. Friend wants to do in the case of the delivery service, but it makes sense to do it in the case of the closure programme as well.

I definitely agree with my hon. Friend, who makes an important point. As far as the closure programme is concerned, Royal Mail is constrained by the Government’s saying that it has to close 2,500 post offices.

Mull is just one example of a worsening service, and there are many others throughout the country. Royal Mail’s current strategy of constantly raising prices, combined with a worsening service, will inevitably lead to reductions in the volume of mail posted. That will get us into a vicious circle, triggering higher prices, leading to reduced volumes and so on, eventually making the entire business untenable and threatening the maintenance of the USO.

The hon. Gentleman has mentioned the increase in the cost of postage on two occasions—I arrived somewhat late, so it may have been on three occasions. Does he recognise that in comparison with other European countries, the cost is still one of the cheapest? For the service that it gives us, it is still good value for money.

I will take the hon. Gentleman’s word on the comparison with prices in other countries, because I have not made such a comparison. However, I am concerned that if there are such price rises every year, the vicious circle that I described will be triggered.

I congratulate the hon. Gentleman on securing the debate. Does he think that the problems he has identified—cost and lack of responsiveness to local needs—would be better or worse if Royal Mail were privatised? I understand that his party’s policy is to privatise Royal Mail and separate it from the post office network. Does he agree with that policy? If so, why does he think it would make things better?

Well, it would be inaccurate to describe my party’s policy as privatisation. I support the policy of the party, which is to bring more private sector investment into our mail services, and I will come to that later in my speech.

In the early stages of its existence, Postcomm argued that the universal service obligation was a help to Royal Mail and gave it a competitive advantage. I am pleased to read in the report that Postcomm has now woken up to reality and in its evidence to the review, it accepts that

“without extensive change, the Royal Mail’s business model will become unsustainable”.

It goes on to predict that, without policy changes, Royal Mail’s cash flow on its letters business could be in deficit by as much as £400 million a year in just four years’ time.

Given the threat to the universal service obligation, does the hon. Gentleman think that there is a case for the other mail operators that are emerging to make a contribution—as Royal Mail does—to the universal service obligation?

I am grateful to the hon. Gentleman for that intervention and I completely agree with him; I intended to mention that point later.

The hon. Gentleman’s intervention leads nicely on to the next part of my speech, which is to point out that Royal Mail is at a serious disadvantage compared with its competitors. It has to deliver mail to every home in the country. That obligation is often called “the last mile”, although in the case of my constituency “the last hundred miles” would be more accurate.

The private sector clearly picks the profitable side of the business. There will never be competition to deliver mail to rural areas, which is the expensive side of the business. Going back to the Fionnphort example that I gave earlier, we will never see two mail delivery vans rushing nose to tail down the single track road to Fionnphort. That scenario conjures up an image of the driver of the leading van ignoring all the signs urging him to be a courteous driver and to use the passing places to allow overtaking. However, that scenario will never arise; deliveries to Fionnphort will always be left to Royal Mail.

It is evident that Royal Mail requires more investment if it is to continue to deliver the USO without constant and large increases in the price of a stamp, so there are some issues that I would like the Government, the regulator and the review panel to consider. First, there is what is known as the “access headroom” rule. Royal Mail is required by its licence to maintain a minimum gap, known as the headroom, between the prices that it charges retail customers and the amount that it can charge its wholesale customers to use its network. The access headroom regime has paved the way for the fast growth of upstream competition—a rate of growth that is far ahead of all predictions.

I understand that no other postal market in the world has an access headroom regime that imposes such competitive constraints on the universal service provider; nor is there a market that makes new entry to the upstream market so easy by enabling competitors to rely on the existing infrastructure of the universal service provider to deliver “the last mile”. The UK’s access headroom regime is something that must be looked at. It certainly appears to be very unfair to Royal Mail.

Another way of paying Royal Mail for delivering the USO relates to a point I made earlier; we should take advantage of the clause in the European directive that allows a charge to be levied on mail companies that do not deliver a universal service, and use the proceeds to pay Royal Mail for doing so. If those private companies are cherry-picking the profitable parts of the business, they should compensate Royal Mail adequately for carrying out the unprofitable parts of the business. At the moment, it appears that Royal Mail is cross-subsidising the universal service obligation from other parts of its business, which makes it harder for it to compete. Royal Mail desperately needs more investment and the Government must either provide that investment themselves or ensure that private sector investment is secured for the company.

I turn to post offices. My constituency has already suffered from the latest post office closure programme; several post offices in my constituency have already been closed, so there is no point in my revisiting that ground. Instead, I want to look to the future.

The post office closure programme in Argyll and Bute reported in January. As well as closing several post offices, the report contained one piece of good news. Post Office Ltd said that it wanted to reopen one post office, in the village of Otter Ferry, which had closed several years ago. That seemed to be good news. However, yesterday—four months further on—the Post Office told me that it was still working to try to restore the service to that community, but it was not yet in a position to confirm anything. That certainly worries me; four months have passed and no one has been found to take over the post office in Otter Ferry.

To add to those worries, the post office in the village of St. Catherines closed suddenly in the middle of February. Again, the Post Office told me that the closure was only temporary and that it was planning to find somebody to take over the post office. However, three months later, the Post Office has again not managed to find anybody. I know that throughout the highlands and islands, there are post offices that are supposed to be temporarily closed, but they have been in that position for several years. It certainly worries me that, when a postmaster gives up a small village post office, it seems to be extremely difficult to find anybody to take over the business. That suggests that people looking at those businesses do not regard them as profitable, so I am worried that even after the closure programme we might continue to see a gradual decline of the post office network.

The key to keeping post offices open and profitable is clear—to ensure that the contract to pay pensions and benefits stays with the Post Office after 2010. We must not see a repeat of the TV licence fiasco, when the contract to renew TV licences was given to PayPoint, an organisation that lacks a rural network.

As the hon. Gentleman recognises, footfall is important. However, does he also recognise that the Post Office is having extreme difficulty in competing with the likes of PayPoint to win contracts? Let us take, for example, the fictitious “A Bank Ltd”, or a fictitious utility company, which might allow people to pay their accounts at a post office. However, the price has to be cut to such a level that the postmaster or postmistress receives a greatly reduced payment for providing that service, which in effect means that the business is no longer viable for them. I suspect that is why we end up with temporary closures that become almost permanent; no one is interested.

That is an important observation. However, the key thing is that, where there are Government contracts, they must be given to the Post Office. The reason is that the Post Office is the only organisation that has a rural network. PayPoint has an extensive network, but only in towns. Let us compare PayPoint with the Post Office in my constituency. PayPoint has no outlet in the whole of rural north Argyll, nor does it have an outlet on several of the inhabited islands in the constituency. By contrast, rural north Argyll has several post offices and the inhabited islands to which I referred also have post offices, so when the BBC gave the TV licence renewal contract to PayPoint, it meant that people on several of the islands in my constituency and in rural north Argyll were not able to renew their TV licence over the counter. I do not want that situation repeated with the Post Office card account.

The way for the Post Office to compete with PayPoint is through the rural post office network; the Government must recognise that in specifying the contract.

On the point about costs and internal costings, has my hon. Friend heard, as I have, from people in the Post Office that one or two of the privatised processors outside the Post Office now cost more, not less? In addition, there is the huge social cost in places such as Llanbrynmair, Carno and Trefeglwys, which are remote villages in my constituency. On top of everything else, people in those villages have to pay a lot of money in fuel bills to drive elsewhere for their postal service. Those additional hidden costs must be taken into account as well, because in many cases we are adding many pounds to the cost of simple transactions. That money could be saved if the Government made the political decision to protect things such as the Post Office card account. However, apparently for dogmatic reasons, they refuse to do so.

Yes, my hon. Friend is perfectly correct. There are social costs and extra costs that rural dwellers have to pay to travel to a post office in a town if their post office is closed.

I thank my hon. Friend for his excellent speech. I am meeting representatives of Royal Mail in about 10 minutes’ time so that they can tell me which post offices in my constituency they wish to close. On my hon. Friend’s point about more trade for post offices, Fife council recently decided to put more business the Post Office’s way by allowing customers to use post offices to pay council bills, but Royal Mail does not seem to have taken that into account. Does my hon. Friend not think that it would be wise for Royal Mail to wait until the full effects of that extra trade, which is significant, are felt so that it can make a full assessment before deciding which post offices it does or does not wish to close?

My hon. Friend makes an important point. I was certainly pleased with the initiative proposed by Essex county council for the council and post offices to share services. Unfortunately, in my area, the proposal was made far too late to allow the council or community groups to put together a proper business plan. In the case of my hon. Friend’s constituency, I hope that the Post Office will give Fife council time to put together a proper business plan. One way to secure the future of rural post offices is by sharing services with councils, community groups and other public bodies.

The key to securing the future of post offices is the card account. The Government must specify that whoever wins the tender must have a rural network, but we also need to develop the Post Office card account. Clearly, it has limited functionality at present, but it ought to be developed into a bank account with a full range of banking products. That is the road that France, Germany, Italy and other European countries have followed. It would allow small rural post offices to become profitable and to survive, and it would be of great benefit to people on low incomes who are often financially excluded. I urge the Government to develop the Post Office card account into a proper bank account with full banking facilities, and to ensure that the contract for paying benefits and pensions specifies a rural network.

I shall speak briefly about parcels. One of the complaints that I receive regularly from people in my constituency is that when they give their postcode when placing an order for something that has to be delivered as a parcel, they are directed to small print saying that an extra amount is charged for deliveries to the highlands and islands. That causes great consternation.

Clearly, the private parcel delivery companies are not keen on delivering to remote areas. Part of the problem is that they do not have depots in remote areas where parcels can be left if the people to whom they are being delivered are out. The Government and the review panel should consider allowing small sub-post offices to retain parcels that parcel delivery companies cannot deliver because someone is out.

At present, under the contract that small sub-post offices have with the Post Office, a parcel delivered by a private delivery company cannot be held anywhere in the shop. Even if the post office is in a corner of a shop, it is still against the contract to leave the parcel anywhere in the shop. Often, the post office-cum-shop is the only shop in the village, which means that if a parcel is being delivered to somebody in the village, there is often nowhere for it to be left if the person is out. I would like the Government, the regulator and the review panel to consider whether we could allow post offices to store parcels on behalf of private companies as well as Royal Mail.

Royal Mail and the Post Office are clearly in a critical condition, as the report demonstrates, but I still believe that with the right action they could be rescued. I conclude with three questions for the Minister. First, will he assure us that the universal service obligation will continue and will not be watered down in any way? Secondly, will he assure us that the present round of post office closures is the last, and that the remaining network has a secure future? Thirdly, the interim report says that the present set-up is unsustainable, so what action do the Government intend to take to ensure that Royal Mail services are sustainable in the long term?

I am delighted to take part in this important debate, particularly as it comes on the back of the issuing last week of the report, “The challenges and opportunities facing UK postal services”, by Richard Hooper, Dame Deirdre Hutton and Ian Smith. I shall refer to it, because it is an important report that shows the seriousness of the problems that we face.

Clearly, we know the background. It is good to see the Minister in his regular seat. He must have spent more time in this Chamber over the past few months than any other Minister, and I am sure that we will eventually give him the seat if he sits in it much longer.

We have been through the political pain and community anger caused by the closures, some of which are still to come in parts of the country. Now—dare I say it?— there is an increasing likelihood of legal challenges, as individual post offices and communities look at how the consultations were held and see them as having been unfair. However, we are looking at the big picture today, and that is what I mainly want to do.

I have some responsibility and interest: as I have said previously in this Chamber and in the House, I served on the Committee that considered the Bill that became the Postal Services Act 2000. It was largely a consensual operation all those years ago and was about trying to save the Post Office and Royal Mail. It is fair to say, as I will say again later, that the legislation has not been an unalloyed success. We are in a mess at the moment, even if the report that has just been published is taken as the benchmark.

The purpose of the legislation that we introduced five or so years ago was twofold. First, there was an idea that liberalisation would make the British Post Office more efficient and competitive. It would be able to see off its main competitors in the British market but also become strong enough to work in France, Germany, Italy and everywhere else in Europe. Its reputation and prowess would be such that it would succeed. Clearly, on those measures, we have a complete disaster. We have no imprint on Europe, and our competitors—the Dutch, Germans and French—in one guise or another, are rampant in our homeland.

Before my hon. Friend moves off that point, all that opening-up of the market has not come without a significant amount of pain and a significant number of job losses, as I am sure he well recognises. The problems cannot be rectified quickly, especially in rural areas such as Argyll and Bute and my own area. Some 30,000 jobs have been lost—and, I hate to add, there may be more losses to come.

I thank my hon. Friend for that intervention, with which I agree. To use a horrible analogy, it has been all pain and no gain. It is about time we considered whether something could be turned on its head, so that we could see some gain and a bit less pain.

The second purpose of the legislation was to try to restore—dare I say to refine?—the definition of the universal service obligation. We spent a lot of time trying to make it clear in the legislation that there was such a thing as a USO and that the Post Office was largely responsible for delivering it but would be protected in so doing. I contend that the USO is more under attack now than ever before—zonal pricing is an obvious example of that—and, more particularly, that we have not been able to protect the Post Office and Royal Mail. Foreign competitors and other major carriers came in below the radar and took away business that, fairly, should be with the Post Office. It is the lack of fairness and the lack of a level playing field that I wish mainly to mention.

On the USO, the Minister’s predecessor stated clearly that the Government were looking again to try to identify whether other major national carriers—international, because they come from abroad, but national in the sense that they have a significant share of the market in this country—should now contribute to the USO. That clear statement, which said that we as a Government were considering whether those other carriers could contribute to the USO, has been restated in answers to parliamentary questions. It would be good to hear the Minister say that progress is being made on that issue and that some announcement is, to use Government language, imminent. It is about time that we expected those who are, by every definition, a national carrier to have an obligation under the USO and that we stopped exploiting the British Post Office by making it deliver the last mile in return for negligible commitment and contribution. Ergo, why should they not pay towards the USO? I hope that we will hear something interesting from the Minister.

Just to show the depth of the problem that we face, I shall read from the introductory remarks in the report by Hooper, Hutton and Smith. Hon. Members should remember that this interim report is posing the challenge and is not coming up with any answers at the moment: it is long on analysis but contains few answers. On the next steps, page 7 says:

“There is now a substantial threat to Royal Mail’s financial stability and, therefore, the universal service. We have come to the conclusion, based on evidence submitted so far, that the status quo is not tenable. It will not deliver our shared vision for the postal sector.

There is a strong case for action. The policies needed to establish a sustainable future will be the focus of our report later this year.”

Three wise people are looking into this matter. I welcome Parliament’s being part of that process, because at the moment nothing matters more to our constituents than postal services, whether in respect of shutting post offices, the lateness of the mail, the deterioration in mail delivery or this most loved institution’s now being regarded more under attack than ever before.

It would be good to get some idea from the Minister about the time scale that the three wise people are working to and what authority they have to come up with solutions, which we welcome. All hon. Members could come up with the headings used in the review—profitability, pricing, efficiency, access to capital, pensions, labour relations, regulation, competition and financial outlook—but it is good that we have that analysis. I like the report, because it is short and readable, and we can dwell on what it is trying to say, even though it is just a framework.

More than anything, the three wise people are demanding a new vision. If someone were to ask me what is the vision for the Post Office and Royal Mail, I would not know, apart from its being one of closure and despair. That cannot be right. We have taken the most loved, most trusted and, until recently, the most used institution and turned it into a big question mark. I could blame my own Government for that, but the problem is deeper and has gone on through the generations. The British public have to accept their responsibility: every e-mail they send to a Member of Parliament is a letter not sent through the postal service. We are all responsible for all the changes.

Does my hon. Friend agree that the solution is not to follow the Liberal Democrat policy, which I understand is to privatise and break up Royal Mail? Surely, that would be the worst-case scenario and would ultimately lead to job losses, which we want to avoid.

From my political perspective, I want to do everything that I possibly can to reduce competition, because it is unfair competition, and I certainly have no truck with further privatisation. Liberalisation was a nice term, and we used to bandy it around as though it were the answer to everything. In essence, in this respect, it has been an unmitigated disaster.

I shall make five simple points, forming the kernel of the debate, to which the Minister may wish to respond, although he may not wish to respond to all of them now. First, we must revisit the Postal Services Act 2000. That Act, which we were all proud of, is not working. I cannot put my finger on exactly what part of the Act is wrong, but we have created an unfair situation, whereby competition is one-sided. Those who compete with the Post Office and Royal Mail are doing okay, but the Post Office and Royal Mail are doing badly. Those of us who believe that there is a need for a state communications service think that that must be looked into. I do not see why something that is so beloved should be completely undermined. The current situation should not be used as an excuse for further privatisation. The service should be owned by the state, given that much of the communications service is already in private hands.

Secondly, the universal service obligation, which I have already mentioned, is not working because it is entirely vested in the Post Office and Royal Mail, which cannot be fair, given that other national carriers should also be contributing.

Thirdly, as the hon. Member for Argyll and Bute (Mr. Reid), whom I congratulate on securing this important debate—I am sorry that I did not say that at the beginning—and other hon. Members have said, competition has arisen in the form of losing PayPoint, possibly losing the Post Office card account and losing the passport business, which is not often mentioned. Whatever one’s views on the identity card, it was a potential money-spinner, yet the Post Office effectively gave up the ghost, because the criteria were rigged to make it so difficult for it to win the business. That is a tragedy, because it could have worked.

While ancillary services are being explored, would it not make sense also to consider the future relationship of post offices presently scheduled for closure, but where the postmaster or the local community would like to have an ongoing relationship with the Post Office for as many postal services as possible through the outreach programme—I welcome the Post Office’s announcing its expansion—or some other means? Both Iffley village and Grandpont post offices in my constituency face closure and an ongoing relationship of that nature, which could retain postal services, would be welcome.

I agree entirely. My last point is about investment and innovation, so I shall come to my right hon. Friend’s question after making my penultimate point.

Although it is controversial to say so, there is a serious problem with the leadership of Royal Mail and the Post Office. The double act of Leighton and Crozier, which was regarded as a marriage made in heaven, has been an unmitigated disaster. They have taken Manchester United and turned it into Derby, to use a football analogy. I am afraid that, if the Government have not yet given them a vote of no confidence, it is about time that they did, because we have had both a dispute that was lamentably handled and the closures, in respect of which no one seems to know the strategy, other than that there must be 2,500 of them. They will blame the Government, but perhaps the Government ought to say, “It would help if you knew what you were doing in terms of the closures.” We have rehearsed that argument, and I will not go through it again.

I am apportioning the blame. At the end of the day, people are being paid millions of pounds to sort out this matter, and when that is not being done, we must look at the people at the top, and it is about time that we did so. Having said that, I will be for ever held up in the Communication Workers Union’s hall of fame. Nevertheless, having attended various demonstrations, it is difficult to be told, as a Government Member of Parliament, what the top people are earning to shut down all the facilities that we want to keep open.

I feel a certain amount of frustration because the closure programme will only save £45 million and some £4.5 million in bonuses was paid last year to the gentlemen that the hon. Gentleman mentioned and the board of Royal Mail.

I assume that the players at Derby are getting a bonus, but I am not sure whether it is totally deserved. I will pass on quickly.

My last point, to return to the issue raised by my right hon. Friend the Member for Oxford, East (Mr. Smith), relates to investment and innovation. We cannot pretend—this is why we cannot turn back the clock—that everything will come from the top down and that the £1.7 billion will be turned into £3.4 billion as a result of ever-increasing investment. It is good that the Government have invested in the Post Office—previous Governments did not and instead took money out of it—but we must understand that there are other sources of funding that we can make available.

Pleasingly, the Government announced today that they will introduce a community empowerment Bill, although some of us thought that we already had one in the Sustainable Communities Act 2007, but never mind—we will reinvent it. However, if there is great support for post offices out there in communities and if those communities want to keep their post offices open, why do we not challenge them? Why do we not tell them, “Find some financial means, find the volunteers and take on the responsibility.”? Let us see this as a partnership. It can work. Community shops in my area work in that way, so why can we not see such an approach as an absolute winner? At the moment, all we seem to do is shut down facilities and tell communities, “Sorry. We don’t want a presence in your part of the world.” We need to rethink the ideology and to turn what is happening into a community opportunity, not something that is about closures.

There are plenty of challenges. The Minister probably has the most difficult job in the Government; it used to be the Immigration Minister who had the most difficult job, but now it is probably whoever deals with the Post Office. The Minister therefore has plenty to do, but we are all here to support him. I hope that he will make some nice comments about what my little programme would do.

I will be brief because I know that others wish to participate in the debate. I will not rehearse what has been said, but I congratulate the hon. Member for Argyll and Bute (Mr. Reid) on securing the debate. At least 5,000 sub-post offices have disappeared since 1997. In the Welsh context, we have lost 30 in Cardiff and the south Wales valleys, 19 in Gwent and 13 in mid-Wales, and others will go under the current programme.

The Post Office card account concerns everyone in the Chamber. One hopes that its successor will be given to the Post Office. It is estimated that 10 per cent. of the income of sub-postmasters comes from the card account, and the figure rises to 12 per cent. in urban deprived areas. The card account not only gives sub-postmasters and mistresses a transaction fee, but draws people into post offices, thereby encouraging the sales of other products. Although the future of the card account is not clear from 2010, we urge the Government to give some positive signals. The National Federation of SubPostmasters tells us that if the successor to the card account is not given to the Post Office, a further 3,000 post offices will close, and nobody wants that.

As we all know, the post office provides an essential service in both urban and rural areas, and I will not repeat what has been said in the two excellent speeches so far. The post office is a focal point for communities. In many areas, 75 per cent. of post offices have a shop or other business attached to them, and they are often the only local place to take out cash. In my home village of Llanuwchllyn, we have one shop, which is also a post office. Without the post office, the shop will disappear. I have a car, as does my wife, and we might well be able to drive 5 miles to the next town, but that might be difficult for others. I am concerned about the future of that post office, which is well used.

If we look at the criteria being applied, the first thing that we see is that 99 per cent. of the UK population is to be within 3 miles of a post office. However, there is a sneaky reference at the end to 95 per cent. of the population being within 6 miles of the nearest post office branch. I am not sure which of those criteria will kick in in my home village. We are 5 miles from the nearest town, so if the sneaky criterion at the end applies, we are in trouble; if the one at the top, which everyone thought was the main criterion, applies, we will be fairly comfortable. I would like to know which it will be. I have written to the Post Office to ask, but it has refused so far to reply. What its representatives do not know, however, is that when they come to interview people and do their appraisal, I will be there telling them plainly what I think of them. I hope that the Minister will tell me when the sneaky criterion will apply and when we will apply the 3-mile zone.

Briefly, on the Royal Mail, yes, the word “liberalisation” was used, but it has been an absolute disaster. That is not because Royal Mail was not efficient; we have had a very good service under the universal service obligation, and we must maintain it at all costs. There have been several changes to working practices, such as the ending of Sunday services, the reduction to one daily delivery and changes to later deliveries. We can live with those things, however, provided that we do not go much further along that route.

Postwatch is concerned about the current situation with regard to the universal service obligation. I will not dwell on the issue, because it has been well highlighted by others, but it is the nub of the matter. The universal service obligation must stand; if it does not, there is no question but that it will be disastrous for rural areas.

I am sorry that I was not here at the beginning of the debate. Does the hon. Gentleman not agree that there is a degree of culpability on the part of Postwatch as far the unravelling of the universal service obligation is concerned? It was well warned six years ago that its attitude—that liberalisation could not come fast enough—would eventually be injurious. Now it is seeing the chickens come home to roost.

I will come in a minute to a court action that was launched yesterday, which the hon. Gentleman may know about. What he says may be true, but I do not know. Many of us felt that the word “liberalisation” did not mean what it said and that it would mean destruction or at least dismantling. It is vital that we have the universal service obligation. Even if other competitors come into the market, as has been said, they must contribute to the overall picture under the universal service obligation.

I hear what the hon. Gentleman says, and he might be interested to know that Postcomm has put its foot down at long last and said that we must protect the universal service obligation. Royal Mail has applied to the High Court to have the decision judicially reviewed and reversed. In that respect, I draw everyone’s attention to early-day motion 116, which was tabled by the hon. Member for Angus (Mr. Weir)—whoever he might be! I urge all hon. Members to consider signing it, because it encapsulates the whole matter.

I also congratulate Miss Judy Brown of Hastings, East Sussex, who yesterday secured permission to seek a judicial review of the decisions made by the Government and the Post Office to axe thousands of post offices. She secured permission based on the fact that she is disabled and that such decisions would be discriminatory. I therefore congratulate her and wish her well in her endeavours in the High Court.

Finally, the following quotation recently appeared on a website:

“Where there are large numbers of people who rely on the Post Office, or where transport to other offices is difficult, the Post Office need to think carefully about the impact of their plans.”

That was said by the Secretary of State for Wales.

I did not intend to make a contribution, so I shall keep what I am about to say as brief as possible.

I thank the hon. Member for Argyll and Bute (Mr. Reid) for securing the debate. As the Minister knows, this issue is just not going to go away, whether we are talking about the mail delivery service or our network of post offices. The current situation gives no one any pleasure. In that respect, I am looking to my hon. Friend the Member for Stroud (Mr. Drew), who sat in a room with me on more than one occasion as we tried to tell the first regulator that the liberalisation of the market would be a disaster. Everyone hates to say, “Well, we told you so.” What has happened in the past couple of years is what the regulator anticipated might happen over five or seven years, but sometimes people will not take a telling.

I must have a slight go at our Liberal Democrat colleagues—

No; perhaps I used the wrong terminology.

The Liberal Democrat policy of privatising certain sections to keep other parts alive would never work. At the weekend, we saw some of the figures on service delivery in terms of mail delivery, and the losses are beginning to pile up. The cost of postage still comes cheap in this country compared with elsewhere, but we have taken our eye off the ball.

It is perfectly fair for the hon. Gentleman to criticise our policy, and I would have agreed with him completely six or seven years ago, but the point at which the pass was sold was when we went down the liberalisation of the market route, which we did so ineptly, handing all responsibility to Postcomm. What would he do to preserve the universal service?

I was just about to come to the value of the universal service obligation, as someone who represents a rural area. Last Monday evening, I spoke to a local community group that wanted to talk about post office closures. By the end of the meeting, the group agreed with me that, in a rural area, the universal service obligation is every bit as important as their local post office, because no one else is coming forward to go 2 miles up a farm track, six days a week, to deliver a letter. That will not happen unless it is done by Royal Mail, which is why I fully agree that if there is anything we can do to get other carriers to make a significant contribution to that last mile, we should make every attempt to do it.

On the Post Office network change programme, I have still to go through what I suspect will be the pain of the closure programme in my constituency. I currently have 57 post offices, three of which are on outreach, and I am not taking any bets on how many might be lost. One of them is classed as being temporarily closed, and one is working in a partnership. We have to look more widely than what we have witnessed in communities over many years. The network change programme comes to my constituency in mid-August. Mrs. Brown, who is expecting to go on holiday in mid-August, will be disappointed, but she will know nothing about it because she does not read Hansard on a daily basis. There is no way that I will leave my constituency in mid-August when that news breaks.

The Post Office is unable to compete. PayPoint, which has been mentioned, has 17,000 outlets and 300 staff, so it is a mammoth task to compete for business. We always throw to the floor the change regarding TV licences, but that has saved the BBC £100 million.

PayPoint was able to undercut Royal Mail because it does not support the rural network that the Post Office has to support. If the contract specified that the rural network was involved, PayPoint would not be able to compete with the Post Office.

I agree, and I hope that that will be the saving grace in relation to the POCA.

We have not only lost TV licences; I was horrified to discover from the Post Office that 1 million people licensed their vehicles on the internet in November. I thought that figure horrendous. Not only did 1 million people do that in November, but 1 million people did it in December, in January and in February. Are we to say, “No, you cannot do that. You must go to your post office.”? I do not think that the general public will like us if we do that, as we all regularly conduct our business in that way.

The POCA is vital, because of the footfall it brings— 4 million customers. I do not know what other colleagues who are present have done, but I tell hon. Members on both sides of the House that I took a small delegation of my hon. Friends to meet my hon. Friend the Under-Secretary of State for Work and Pensions, the hon. Member for Warwick and Leamington (Mr. Plaskitt), who will consider and ultimately sign off the decision. So, he has already received a delegation making the case that this is about more than just providing a service—it is about the ability to provide a good-quality service on a daily basis.

We are all saying that the POCA might be a saving grace, but that will be in the short term, because the Post Office is not looking to sustain it much beyond the middle of the next decade. However, it would undoubtedly help if we secured that business. The Minister was asked whether he can guarantee that there will be no more closures, but I suspect that if we do not secure the POCA for the next round, there will be something much worse than the 2,500 post office closures that we are currently going through.

On the bright side, there are a few positive aspects. The Government continue to put significant sums of money into supporting the network. The Post Office is at the top of the premier league, as my hon. Friend the Member for Stroud put it, for bureaux de change and new drivers who are seeking car insurance for the first time. It is expanding financial services, but, regrettably, as it is rolling them out, the pressure on financial services and the credit crunch are impinging on its business in a different way.

Last week, I, too, attended the report-back by Richard Hooper and his team. There is much for us all to do, and it is not just up to that team to come forward with ideas. There is a duty on us all to come forward with our own thoughts. The delivery of a Post Office network in our communities needs to be done through innovative methods such as outreach and partnership working. We cannot continue to deliver a post office network in 2008 and beyond in the same way that we delivered it 30 or 40 years ago. It has to change if it is to survive.

At the height of the furore surrounding post office closures on the Isle of Wight, many of my constituents wrote to me voicing their concerns. For them, their local post office served not only as a place to collect pensions and to send letters, but as a vital source of social interaction. In many areas, the local post office is the nucleus of the community. Since the closures, I have received many complaints about people’s difficulties in getting to their nearest post office and about the increased cost of doing so.

Initially, when the closures were proposed, I wrote to the Post Office to ask why some, seemingly profitable, branches were destined for closure, but I failed to get any sort of sensible reply. When branches were eventually closed, I wrote again, asking it to provide me with documentary evidence to show that my concerns and my constituents’ concerns had been taken into account when decisions to close branches were made, but no such evidence was available. I had made joint representations with the island’s chamber of commerce and rural community council, but our concerns appear to have been completely ignored.

When Lowtherville post office closed, my constituents were forced to go to the branch in Ventnor town centre. The road into the town has one of the steepest inclines in the country, so it is virtually impossible for elderly and disabled people to walk down the hill, let alone up it again, and they are unable to use the kneeling bus because the kerbs prevent it from working properly. The Post Office, however, knew nothing about the buses, and said that it was not responsible for public transport.

In Meadow road, East Cowes, the Post Office could not prove that it had taken into account the fact that 500 houses were being built next to a closing branch. In Newport, Hunnyhill was a handy alternative to the central, very busy branch, so the central branch grew even busier when Hunnyhill closed. Surely it would have been better to resolve the difficulties faced by the Newport branch before closing Hunnyhill, but, again, there was no attempt to explain that.

The proposed alternative to Calbourne post office was Brighstone. That is complete nonsense. To use a bus, as proposed by the Post Office, means a round journey of 20 miles. If it had investigated the matter, it would have found that a nearer post office is at Carisbrooke or Newport. Hence, with no direct bus route, my constituents find it difficult, time-consuming and costly to travel.

In conclusion, the Post Office’s scheme was ill-planned and insensitive to the needs of my constituents. The post office service is in an unusual position because it faces no competition and receives a great deal of public money as subsidy. My constituents deserve better.

I congratulate my hon. Friend the Member for Argyll and Bute (Mr. Reid) on securing the debate, which is timely. He spoke clearly about the impact of the universal service obligation on his constituency and the importance of post offices as a social hub. I represent a very different constituency—an inner-London constituency. It was interesting for me to hear just how important is it for a rural area to have a universal service obligation and the impact losing it would have on people’s lives.

Although I represent an inner-London constituency, where picking up mail might appear to be easier, my constituents also feel strongly about this matter. They certainly share the same anger that has been spoken about today by many hon. Members, including the hon. Members for Isle of Wight (Mr. Turner) and for Meirionnydd Nant Conwy (Mr. Llwyd), whose constituency I hope I have pronounced properly—I have been practising it under my breath for five minutes. Both spoke about the impact of closures on their constituencies. There is a similar level of anger in Brent, where we have had a further six post office closures in the latest round, which is a 40 per cent. reduction since 1997. As my hon. Friend mentioned, the death of a post office often represents the death of a shop too. In an urban area, it can also represent the death of the local parade of shops because the post office ensures footfall and keeps local businesses alive.

A number of people have studied the impact that post office closures have on the local economy. In a study looking at Manchester, which is obviously an urban area, the New Economics Foundation suggested that closing a post office would result in the local economy losing about £270,000. In a rural area, it suggested that for every £1 of subsidy, between £2 and £4 is generated for the rural economy. It seems to be a false saving to make the closures. As I mentioned in an intervention on the hon. Member for Stroud (Mr. Drew), the closure programme generates just £45 million of savings.

My anxiety and that of a number of other hon. Members who have spoken, particularly in interventions, is that there does not appear to be a sustainable plan to keep the remaining post offices alive. I worry when I hear that just 7,500 post offices are required to meet the access criteria. If the post office network is losing money, what good reason do the Government have for keeping those post offices alive? I hope that the Government will commit to a sustainable plan and recognise the social value of the post office network. We cannot afford to lose another 3,000 post offices because we will undermine the whole of the network. There is no evidence to suggest that the 2,500 closures that are currently being forced through will generate the increase in footfall that the Government say is needed to maintain the financial viability of the network in the remaining post offices.

A number of hon. Members mentioned the consultation process, including the hon. Member for Isle of Wight. The hon. Member for Stroud talked about whether communities could be involved in bringing forward finances to safeguard post offices that are threatened with closure. However, it is difficult to do that when we are given only six weeks’ notification. We need a sustainable plan and a rapid injection of funds—both into the post office network and Royal Mail—not just to allow it to survive, which frankly it has just about been doing for the past few years, but to modernise, innovate and compete. That point was made well by my hon. Friend.

Royal Mail has been starved of investment by successive Governments and unfortunately it was inevitable that it would struggle with the liberalisation process if there was no immediate injection of funds. It will be difficult for Royal Mail to modernise to allow it to compete. It continues to have a large pension deficit, as the hon. Member for Stroud pointed out, which goes up or down according to the state of the market. The deficit appears to be £3 billion or £4 billion and was caused by a decision made by the previous Government to take a holiday from payments when the equities market appeared to be performing well. There is a desperate need to invest in the infrastructure of the Royal Mail. At a time when the public purse is tight, particularly after a pre-by-election bailout, what are the chances that the Government will invest the dramatic amount of money required to ensure that Royal Mail can cope?

Furthermore, successive Governments have been unwilling to give Royal Mail permission to go to the markets and borrow for investment. Part privatisation would give Royal Mail that permission because it would allow for a change in the nature of the business. Our policy is that there should be a separation of Royal Mail from the post office network, as other hon. Members have mentioned. I will say why that is necessary in a moment. Part privatisation of Royal Mail would enable the sale of 49 per cent. of the shares and the proceeds of that sale could be invested into the post office network to give it the kick-start that is needed. That will not solve all the problems of the post office network, but it will at least allow a kick-start in investment and enable the network to be modernised as required. The remaining 51 per cent. of shares could be divided between Government and a John Lewis-style trust for the benefit of employees. The shares could be held in a trust for the current employees of the business to ensure that they have a stake in the future of the organisation and can share in its success and profits. Employees would have a share in improving the performance of the business.

I appreciate that some hon. Members disagree with that policy, but the truth is that the Government do not have another solution. I suspect that the postal services review was probably paving the way for recommending something similar, but so far the Government have refused to come forward with a policy that will lead to the sustainability of Royal Mail or the post office network. Separating the Royal Mail from the post office network is key to the survival of the network. My hon. Friend mentioned post offices acting as a depot for parcels, which would be particularly important in rural areas. Actually, that is important everywhere. How often have we had the frustration of having something delivered by a private company and finding that we have to go a long way to pick it up or have the persistent hassle of renegotiating times when it can be delivered? It would be so much easier and more convenient if a parcel could be delivered to a local post office and wait there for us to pick it up. That would provide a source of revenue for the post office and would be better for those of us who are trying to pick up things sent to us.

The lump sum created by the sale would also allow investment in modernising the network, as I said. There is currently a particular problem with Crown post offices. They are not hospitable places to be and considerable investment needs to be made in training, in the appearance of the branch and in the infrastructure. That would allow the post office to function more efficiently and would be welcome.

A number of hon. Members spoke about the need for new sources of income. The hon. Member for Dumfries and Galloway (Mr. Brown) spoke about the Post Office card account. The Post Office should be central to a new universal service obligation: that of providing basic bank accounts. I am relatively open minded about whether the Post Office itself should be the provider of that bank account or whether it should work in partnership with others. I would be interested to hear the Minister’s views on that. There is a serious problem with financial inclusion and access to basic bank accounts. The policies the Government have so far pursued in trying to encourage other banks to provide such accounts does not seem to have been particularly successful. My proposal would marry together two different issues, provide a source of income for the Post Office, and recognise the value of the post office network as a public service.

My hon. Friend the Member for Argyll and Bute made a number of good points about Government services being given to PayPoint and the need to think about criteria for awarding contracts. That is key. When we think about the use of the post office, we need to understand it as a public service and ensure that things such as the rural economy are written in.

Several hon. Members spoke about the idea of a levy to pay for the universal service obligation for postal services. We deliberately left that open in our policy because of what we foresaw might happen if there was a failure to invest in Royal Mail. Judging by the interim report from the Postal Services Commission, it seems that such a measure will be necessary. I hope that the Government will think seriously about it because the universal service obligation must be protected. A levy may be a sensible way forward.

It is a pleasure to serve under your chairmanship, Mr. Weir, although you must have found this a deeply frustrating afternoon, as at times you would probably have preferred to be participating in our discussions rather than being in charge of them.

I congratulate the hon. Member for Argyll and Bute (Mr. Reid) on securing this timely and important debate, and on the thorough and thoughtful way in which he introduced it. He took us through some of the areas where we have seen a general decline in the post office service. He talked about the ending of the second delivery and the increasing cost of postage, although the hon. Member for Dumfries and Galloway (Mr. Brown) was right to point out that in most other European countries, the postal rate is two to three times what it is in the UK. The hon. Member for Argyll and Bute talked about the confusing approach that is used to show that the post has been delivered on the next day. We need to take more account of that. He could have added the end of the daily collections, the often confusing pricing system, which means that people do not understand the correct postage for their letters, and the decimation of the postbus service, which has been withdrawn in many parts of the country. The hon. Gentleman was treading on dangerous ground when he criticised the BBC for seeking to save £100 million of licence payers’ money. If people had to go through post offices, another £3 or £4 would be added to everyone’s licence fee to pay the extra £100 million that would be required. It is right that there should be open competition.

The Post Office is in a serious situation, but it is a mess of the Government’s making. After all, the Government set the framework for the closure of post offices. The financial rules and level of subsidy were set by the Government. The access criteria, which were about geographical location rather than economic viability, were set by the Government. The fact that the consultation period is only half the time recommended by the Cabinet Office was determined by the Government. It is intriguing that post office closures had to be suspended in the run-up to the local elections because of Cabinet Office rules, yet the same rules do not prevent the Government from announcing £2.7 billion of public funding for tax cuts this week, just before a by-election.

Furthermore, the rules on the closure of post offices must have been cleared by the Government. Post offices that are closing have been told that they may not offer a lottery service and they may not offer a PayPoint service, because the Post Office wants to encourage migration. It is one thing for the Post Office to determine where people may buy their stamps, but it should not be determining where people can buy bread and milk as well. As was said by other hon. Members, particularly the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), when we lose a post office, we often lose a shop and services beyond that as well, which does tremendous damage to local communities.

The sadness is that the Government ignored a formula that could have saved post offices. In addition to the subsidy, which is so important and which we support, they should have been finding ways to bring new business into the post office network before they tried to find out how many post offices they could get away with closing. There has been discussion this afternoon about how we could bring in business by allowing the Post Office to work with other carriers. It is environmentally crazy to have vans driving forwards and backwards past the local post office every day unable to deliver packages to local houses because people happen to be out. It would make much more sense to use the post office as a hub where people can access a range of local carrier services.

Other financial services could be considered. Sub-postmasters themselves are calling for that. We never meet a sub-postmaster who says, “I want more subsidy; I want to depend on subsidy.” They always tell us that they want to depend on business. We should be opening up opportunities for them to depend on business, and ensuring that post offices become a hub where people can access local and central Government services. Much more business could be done through the post office network, which would enable more post offices to survive on business, rather than having to rely on subsidy and seeing their numbers cut as they have been.

Investment should have been made to enable post offices to compete on a level playing field. The hon. Member for Dumfries and Galloway talked about the number of people who renew their car tax online, but if we go online, we just type in our registration and it is immediately known whether our car is insured and has an MOT certificate if it requires one. If we renew through the post office, it does not have access to that information through its computer, so we have to take with us the insurance certificate, the MOT certificate and all the bits and pieces that make the process less convenient. Even when we want to do things to support the local post office, we find that the system is skewed against us.

More generally, it is clear that the challenge facing Royal Mail is formidable. Some of the most lucrative parts of the business have been gradually chipped away. The issue is not whether it was right to liberalise, but that liberalisation works only if everyone liberalises at once. The problem we face is that we have done it ahead of most other countries in Europe. If it had happened in other countries at the same time, Royal Mail would have been able to explore opportunities elsewhere.

The Hooper report has been cited. It states:

“There is now a substantial threat to Royal Mail’s financial stability and, therefore, the universal service. We have come to the conclusion, based on evidence submitted so far, that the status quo is not tenable. It will not deliver our shared vision for the postal sector.”

From what Mr. Leighton and Mr. Crozier say, it is clear, too, that more money will be needed. It is wrong to blame them for what has gone wrong. They are trying to run a business with their arms tied behind their backs by the Government. Adam Crozier said:

“Clearly, the business needs more cash to invest.”

Allan Leighton said:

“We have got to know what cash we will have coming in.”

We need to know from the Minister what discussions he is having with them, how much money he proposes to put into the Post Office and Royal Mail and how he plans to do that. What will they offer in return? Just a year ago, a £3.7 billion rescue package was put together for the Post Office, but now we know that it was not adequate to secure the survival of Royal Mail and the all-important universal service obligation.

The hon. Gentleman just said that the money that the Government had put in was inadequate. Can he please tell us how much he proposes to put in, in addition to what we have pledged?

I am saying that the money has not been able to produce the restructuring that the Government said it would achieve, so we need to consider different formulas. We certainly need to consider whether we should divide the role of the Post Office from that of Royal Mail to put much greater clarity into their financial arrangements than is currently the case. We know that the Post Office and Royal Mail are coming back for more funding so we need to know how the Minister plans to respond.

Will the Minister also clarify the confusion that is emerging about the future of the Saturday delivery? That issue has been covered in the press in the past few days. Last week, The Daily Telegraph reported that the Saturday delivery was under threat. Postcomm immediately responded that the story had “no substance whatsoever”. However, Postcomm’s chief executive, Sarah Chambers, said:

“There are other ways to deliver a service to customers in far-flung areas than insisting on a six-day-a-week service.”

What precisely was she referring to? What is being considered? It appears to us that there is a real attempt to chip away at the universal service obligation. The Government must have an understanding of what Postcomm is considering and what Royal Mail wants in that regard.

In the course of a television interview, the Minister said, “We are absolutely committed to the universal service obligation.” However, he would not talk further about the threat to the Saturday service. We need to know what is happening. We all know that Royal Mail faces what may be the biggest threat in its history. The delivery service—the service our constituents rightly expect—is under threat, but at the heart of the situation is the Government. They cannot just say, “These are other organisations and we do not know what’s going on.” We expect some answers and we expect them from the Minister this afternoon.

It is a pleasure, Mr. Weir, to serve under your chairmanship. It is also a pleasure to be here in Westminster Hall, in my usual place, discussing the Post Office. Members who are really keen can see me in action again in half an hour, in a debate on post office services in Stafford. However, it is always a pleasure to debate the wider issues, which is just as well, as we do so with some frequency.

Today’s debate is not quite like the usual post office debates, which are normally about the closures taking place in various parts of the country. Although some hon. Members took the opportunity this afternoon to mention the various local communities in their constituencies to be affected by closures, our debate has ranged more widely. It focused particularly on the Hooper review, which was set in train by the Government just before Christmas.

The Hooper review arose from a manifesto commitment to undertake a review of the liberalised market during this Parliament. The timing is right, because something significant is happening in the mail market, but I do not think that it was referred to during the debate. Many Members spoke about the inequities of competition—about creaming off the more profitable parts of the mails market and about the evil nature of various companies that have come into the market. I have to tell them that those companies will be employing people in their constituencies, so I urge caution. However, that was the tone of the debate.

No one mentioned the wider changes in the mails market. It would be complacent to say that the problems and challenges facing Royal Mail are due only to competition from other mail providers. There is competition, but it is hugely and significantly additional competition. It comes not from TNT or UK Mail, or the other operators at the access pricing end of the market, but from Google. That is not only my verdict; it is the verdict also of the chief executive of Royal Mail. The competition is the internet. As my hon. Friend the Member for Dumfries and Galloway (Mr. Brown) said, it is about the capacity to put services online. It is popular and is used by 1 million people a month.

I shall give way in a moment. The debate is not only about transactional services online but about how we communicate with one another. When I said that something significant is happening in the mails market, I meant that the volume of mail once tracked economic growth—they were like two peas in a pod; they would go up together and come down together. Over the last couple of years, however, the total volume of mail has declined by about 3 million items a day. It would be complacent of us to place that at the door of the liberalised mails market.

The Minister is right about the changes in the mails market as a whole. The changes were taking place six or seven years ago, when the Government first spoke of liberalising the postal market. From our experience of parcel post, we know what unregulated competition in such a market can achieve. With hindsight, does the Minister not think that pushing liberalisation of the market as far and as fast as the Government chose to do, and allowing Postcomm to set the access price as low as it did, was a mistake?

There are two points. First, Postcomm did not set the access price; it was negotiated by Royal Mail. Secondly, whether we were correct to liberalise at a particular time—a point mentioned also by the hon. Member for Wealden (Charles Hendry)—is becoming a moot point. The European directive has been agreed. The rest of Europe is committed to liberalisation over the next few years, with the largest countries doing so by the end of 2010. Liberalisation is coming in other countries.

Many hon. Members quoted the Hooper review, saying that it stated that

“the status quo is not tenable…There is, therefore, a compelling case for action.”

No one quoted Hooper’s statement:

“Returning to the days of statutory postal monopolies is not a policy option in the European Union”.

It is important to remember both statements when considering the challenges facing the mails market.

What has been the effect of competition? The report is clear about the benefits to large users of mail services. It is also critical of benefits to small business and domestic users. Of course we care about domestic users, because they are our constituents. Even though only 13 per cent. of mail is what we would describe as social mail—the stamped mail with which we are all familiar—it is important that our communities receive a top-quality service from Royal Mail. The large bulk mailers—they account for 87 per cent. of mail—have done well from competition.

In the few minutes that remain to me—it is always a feature of these debates that I am asked to respond to more points than is possible in the time—I turn to some of the specific points raised in the debate.

Although postal prices for the UK were increased recently, they are comparatively low internationally. Our service to the user is not expensive compared to services in Europe.

Many hon. Members asked about the future of the card account and stressed its importance to the future of the post office network. I spoke to the National Federation of SubPostmasters earlier this week, and it is keen for the Post Office to win the contract for the new card account. Hon. Members will know from their attendance at previous debates that the process is out to tender. The hon. Member for Argyll and Bute said that the Post Office must get the work. That may be a statement of intent on his part, but it is not one that the Government can legally make. Tendering rules have to be pursued, and the decision will be taken in the proper way by my colleagues at the Department for Work and Pensions.

If the Government were to specify the contract so that the provider had to have a rural network, including branches on the small islands in my constituency, the only company that could win the contract would be the Post Office.

The contract specifies that whoever wins it has to have 10,000 outlets throughout the country. Some of the Post Office’s competitor networks may take issue with the hon. Gentleman’s description, but the contract stipulates 10,000 outlets. That decision will be taken later this year.

My hon. Friend the Member for Stroud (Mr. Drew) spoke of his guilt at serving on the Committee that considered the Postal Services Act 2000, which initiated the present regime. I was interested to hear him say that, because the Act enshrines the universal service obligation in legislation. The Government are committed to the continuation of the USO and to a one-price-anywhere service throughout the UK. I know that is important to our constituents.

I have not gone into all the ins and outs of post office closures today; I have concentrated on the mails market. I end by saying that the third stage of the Hooper review will be to report later this year on how to maintain the USO in the changed mails market.