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House of Commons Hansard
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20 October 2009
Volume 497

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With permission, Mr. Speaker, I wish to repeat a statement made by my noble Friend the Secretary of State for Business, Innovation and Skills about the decision of the Communication Workers Union to take national industrial action later this week.

No one is in doubt about the damage that such industrial action will cause, but those who advocate strike action have not been clear about why it is threatened. The dispute at the Royal Mail is about modernisation, which has been the subject of localised strikes, particularly in London, for many months. We know from the Hooper review on postal services about the company’s need to change and reform in the face of a postal market that is being transformed as people switch to text, e-mail and direct debit, and as the growing area of mail, which is parcels, offers a variety of alternative operators from which to choose.

Royal Mail has to respond to the fact that 10 million fewer letters are posted each day than were posted three years ago, and that total mail volumes have fallen by a further 8 per cent. in the first half of this year. In other words, if it stands still, the company faces terminal decline. Following a national strike two years ago, the union—the CWU—and management reached a national agreement on pay and modernisation. The agreement set a framework of four phases for bringing essential change to Royal Mail. The first three have been introduced throughout the country but are being resisted in some places, which I will come to shortly. The changes have involved the introduction of more walk-sorting machines and new working practices including expecting employees to do the full number of hours that they are paid to work.

Phase four, the next phase of modernisation, is yet to be agreed in substance rather than outline and will be about a new framework for improving industrial relations. That will include introducing walk-sequencing machines to sort the postal delivery round and developing new business opportunities along with a new system for rewarding employees.

In the majority of Royal Mail’s workplaces, phases one to three of the national agreement have been implemented without any local industrial action being mounted. Outdated working practices have been replaced and efficiency is being improved, but in other parts of the country—most notably in London—there has been repeated non-co-operation and industrial action to frustrate the agreement’s implementation. It is claimed by union representatives that in London the management are unilaterally imposing change that goes beyond the 2007 agreement’s first three phases. Management contest that, pointing out that all that London is being asked to accept is what everyone else in the country is delivering under the first three phases. It is those local disputes that have now escalated into the threatened national strike.

I very much regret what is happening and, to put it candidly, we think that it is totally self-defeating for our postal services and for those who work in them. Taking industrial action will not resolve the dispute; it will serve only to drive more customers away from Royal Mail. In the delivery of parcels—where there would otherwise be a prospect of growth—Royal Mail’s reputation for reliability could be irrevocably damaged and in the delivery of letters such action will lead to a further twist in the downward spiral of mail volumes. Business will be quick to recognise that, while one can picket a delivery office to stop the service or refuse to deliver letters, one cannot picket the ever present internet.

Royal Mail’s small business customers will look on with anger and exasperation. Just as there are signs of the economy recovering and the prospects for their businesses improving, strikes now will set them back and put their businesses in jeopardy. Royal Mail’s finances will be plunged into the red. Last year, out of a £6.7 billion mail business turnover, the company made less than 1 per cent profit. One thing that the company cannot afford is strikes and industrial action.

Change in a big organisation is never easy, but for the Royal Mail it is unavoidable. Let me make it clear that, contrary to what some may say, the dispute is not about pensions. The trustees are engaged in their periodic assessment of the pensions deficit and, lest there be any doubt, let me make it clear that the Government’s policy on the pensions deficit will not be dictated by strike action. The Government were prepared to take on the pensions deficit as part of a package of modernising measures set out in the Postal Services Bill. Sadly, however, the CWU did not support those proposals.

When it comes to financing, the Government and the taxpayer have not held back. We have made available £1.2 billion to finance a modernisation and investment programme, and that remains on the table.

We are, of course, in frequent contact with both management and the union. They have continued talking today, and we strongly welcome that. Our message to them has been clear: put your customers first; strikes are not the way to resolve differences or safeguard the future of our postal services.

The Royal Mail needs management and unions to have a relentless focus on turning it into an efficient, modern postal company, protecting as many jobs as possible and providing customers with the services that they need. Both sides should put behind them, once and for all, the endless cycle of disputes. We will, of course, continue to encourage a settlement, but we cannot impose good industrial relations on the company, or disinvent the internet. An independent third party may well be needed to help the two sides resolve their differences. ACAS is engaged, but we have to be realistic: it will be far easier for ACAS to play an effective role if the threat of a national strike is lifted.

The Government are ensuring that vital services to the public, especially those who are most vulnerable, are maintained. If necessary, the Department for Work and Pensions will implement plans to ensure that the small minority of pensioners and others on benefits who still receive their cheques in the post will be able to pick them up from their nearest post office. If the disruption is prolonged, the Department of Health and NHS trusts will make alternative arrangements to transport appointment notifications, blood samples and test results.

We urge both sides to make every effort to avoid damaging industrial action and to resolve this dispute. That is what is in the interests of the Royal Mail, its employees and its customers. I commend this statement to the House.

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First, I join the Minister in hoping that management and trade unions find some way of resolving the dispute and avoiding a totally suicidal strike. They should return to the previously agreed programme of modernisation as quickly as possible, in the interests of both the customers and staff of Royal Mail.

Does the Minister agree that we should welcome the management’s announcement that, if necessary, they will recruit temporary staff to maintain the service to customers? Many small businesses would be threatened by a continued dispute, and of course the possibility of disruption to the Christmas mail looms before us. I hope that he will welcome the management’s decision in that regard.

The Minister’s statement was factually accurate, but surely he does not think that he can wave away the Government’s involvement in this matter. Is it not plain that it was the Government’s weakness in conceding on their policy of part-privatising Royal Mail that almost immediately encouraged the Communication Workers Union to believe that it could move to reopen the two-year-old deal on modernisation and contemplate strike action? There seems to be a clear relationship between the two.

I welcome the continued commitment to the recommendations of the Hooper report, which we share, and the three key proposals which have to go together if they are to proceed at all. I hope the Minister can reassure me that that resolution to the existing policy will be maintained in the face of the undoubted pressures that he will come under if a strike goes on. After the cave-in on the Bill, can he reassure me that his weak Prime Minister will not next induce him to start taking apart the Hooper recommendations and making concessions to those who are challenging the modernisation programme?

As the Minister said in his statement—this is a stark remark—if the company stands still, it faces terminal decline. Is it acceptable in the face of such a dramatic remark for the Minister to admit that the Government have no policy, are proceeding with no Bill, and are capable of doing nothing as the service looks likely to face a risk of terminal decline? Does he agree that if things continue in this way—I do not blame him personally; I am sure it is the Prime Minister and the majority of the Cabinet who are responsible for this frozen impasse—he will leave to the next Government after the election in May whatever wreckage remains of an extremely important public service and the mail system of this country? He seemed powerless to do anything about it.

Finally, would it be fair to regard the issue, as I regard it, as a symbol of the Government’s continuing inability to modernise and reform our great public services? Do not the facts as set out in the Minister’s statement show that on that front this dying Government are weak, impotent, powerless and, like most members of the public, a horrified spectator of events as they unfold in the Royal Mail, over which they no longer have any control and for which they can no longer take any responsibility?

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There is, of course, nothing new about the Royal Mail hiring temporary staff at this time of year. It does that every year. This year it is hiring more because of the situation that it faces.

The right hon. and learned Gentleman asked me about Government involvement. The Government have put up £1.2 billion to finance the modernisation that is at the heart of the dispute. Far from that being delayed or held back by the dispute, we want to see it proceed because that is in the interests of the Royal Mail and its workers. What we cannot do is impose on the company the productive industrial relations that are needed for that to happen. In the end, ACAS involvement or not, that must be down to management and unions working through the issues that are needed to take modernisation forward.

The right hon. and learned Gentleman spoke about the Postal Services Bill. I note his party’s position, as set out in the Financial Times this morning. We said that we would not proceed with the Bill at this time owing to market conditions, and that is precisely what his party set out as its position in the Financial Times this morning. It too would want to test the market before proceeding with the Bill. I note his position on that, as set out this morning.

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I am grateful to the Minister for the courtesy of an advance copy of his statement.

As the Minister made clear, Royal Mail is no longer the essential business tool that it once was. The combination of electronic communications, growth in parcel delivery services and competition for business mail means that Royal Mail has a future only if it becomes competitive in that new environment. The present dispute will not assist that goal. It may, indeed, hasten the demise of Royal Mail by precipitating a flight to other suppliers.

Does the Minister agree that many larger businesses have already announced plans to place contracts with alternative suppliers, but that others which are less able to do so are particularly vulnerable, and that this dispute will have a disproportionate effect on them? I refer, in particular, to small businesses, some of our most vulnerable citizens and people in rural areas, all of whom have the least alternative choice. Does the Minister agree that a prolonged dispute poses a clear and present danger to the universal service obligation? What steps will the Government take to ensure its survival?

The Minister has assured us that benefits payments by the Department for Work and Pensions will, for those in receipt, be available at post offices. Will he give similar assurances regarding winter fuel payments, which are coming up shortly? What about the volume of mail that Her Majesty’s Revenue and Customs sends out on tax credits, and its other correspondence? Will the Minister confirm that the Government plan to seek alternative suppliers in the private sector for their own postal business? What assessment has been made of the impact of that decision on Royal Mail’s future?

Part of the reason why we are in this situation is the stalled legislation. The Minister well knows that I would not have begun it, but he must now accept that having started and then stopped is worse than not having started in the first place.

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I shall try to go through the issues that the hon. Gentleman raises. He is absolutely right that the world has changed and people have communications alternatives. That stark fact should concentrate everyone’s minds as they stand on the threshold of the dispute. It is why, indeed, a strike would be so tragic for our postal service and those who work in it.

The hon. Gentleman referred to the switch from mail, and, as I said in my statement, there is already a highly developed market in parcels. High street retail chains already, sadly, carry adverts saying, “Fed up with postal strikes? We don’t use the Royal Mail”, and I fear that we will simply see more of that if the strike goes ahead.

Some 50 companies account for some 40 per cent. of the mail that is posted by letter every day. If a major shift is made by those companies, away from mail to paperless billing and greater incentives for direct debit payment, it could do permanent damage to Royal Mail’s prospects. Again, my fear is that industrial action would only make such a shift more likely.

The hon. Gentleman asked about the delivery of pensions and benefits. Those sent through the post are now a fairly small minority; most are paid either directly into bank accounts or through the Post Office card account. As I said, for the minority who still receive benefits through the post, the Department for Work and Pensions will make arrangements to try to ensure that people do not lose out on the money to which they are entitled.

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As a former postal services Minister, I must say that we have been 12 years in coming to this point, and it is really important that a Sir George Bain-type figure is appointed to negotiate a settlement—negotiate, negotiate, negotiate. Why? Because front-line staff and customers in every one of our constituencies deserve better. If people give up the skill, knowledge and commitment to negotiate, they will be as much use as a chocolate fireguard at defending their members’ interests or the company’s long-term interests. I ask my right hon. Friend to make sure that the management and the union get around the table to resolve the issue to ensure that the company and its front-line staff have a future, and that its customers can get on with their business.

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My right hon. Friend makes his point very effectively. On third party involvement, ACAS is engaged, but I believe that it would be far better able to carry out the very effective role that it often can carry out if the threat of industrial action were lifted. ACAS stands ready to give assistance in the dispute, and, if the management and union believe that that would be effective, the service is available.

My right hon. Friend is absolutely right: in the end, whatever the involvement of a third party, it will be down to the management and the union to work out for Royal Mail a future that gets away from the pattern, seen not just once but consistently, of localised disputes, time and time again, over changes that would be normal practice in other parts of industry.

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rose

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Order. About 20 Members are seeking to catch my eye. There is important business to follow in the form of the Second Reading debate, so once again I am looking for single, short supplementary questions and brief replies.

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Does not the Minister see that the uncertain note that the Government have sounded about the future of the Postal Services Bill must have contributed to the decision of the Communication Workers Union to threaten industrial action? Can he therefore clarify the future of that Bill, which is still languishing under remaining orders on the Order Paper? That would also have the benefit of clarifying the limbo into which Postcomm and Ofcom have been thrown by the delay to the Bill.

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During discussions on the Hooper package we were told time and again that there was no need for some of the reforms suggested in it because everyone was up for change. Yet since the Government said that we would not proceed with the Bill at this stage, we have seen not change but a return to the destructive pattern of industrial disputes over change and modernisation in the postal service. There was an opportunity for those who disagreed with the Hooper package to show that change could be delivered, but that opportunity has not been taken up; in fact, the very opposite has happened.

On regulation, we will encourage a closer working together of Postcomm and Ofcom, because the postal service must be seen in the light of the wider communications market. To go back to the point made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), there are alternatives, and we are all using them every day.

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If Royal Mail’s case is so strong, why is it not prepared to go to arbitration? Why is it saying that it will consider it only if the union calls off the strike? That is silly playground posturing. It should get to arbitration, and arbitration should be binding on both sides. This is causing misery for businesses and people up and down the country, and the Government are washing their hands of it. Get in and sort this out!

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It is absolutely not the case that the Government are washing their hands of this dispute. We remain in regular contact with the union and the management. Ministers have met union representatives twice in recent weeks, and we are also in regular contact with the management. As I said, ACAS is engaged and stands ready to help, but of course it is easier for it to play a constructive role if the threat of industrial action is lifted.

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Does the Minister have any idea how many postal workers, particularly in London, have second jobs? It is the threat that they might have to work a full shift for which they are paid that is adding to the militancy. [Interruption.]

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It is certainly true that one of the changes agreed in the 2007 agreement is that, instead of the previous practice, which was known as job and finish and sometimes meant people going home a couple of hours before the end of the hours for which they were paid, postal workers would work the hours for which they were paid, which might also mean being more flexible about how they went about their job during that period.

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The Minister, in his disappointingly one-sided statement, talked about the need for productive industrial relations. How can there possibly be productive industrial relations with a management who sabotaged the fourth phase of the agreement and who he knows, in his heart of hearts, have no commitment to keeping the service in the public sector and want to privatise it so that they can put money in their own pockets?

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Discussions about phase four of the agreement are continuing. That is absolutely essential, because in many ways phase four is more important than phases one to three. Phase four is about the large-scale introduction of walk-sequencing machines that will sort the round by post and, if that change is introduced successfully, place Royal Mail on a par with some of the more modernised postal services elsewhere in Europe.

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Even without yet having had the impact of strike action we have had the alarming news in Scotland that one of the major public sector contracts—the Procurement Scotland contract, which deals with mail to the NHS, colleges and most councils in Scotland—is going to be given to a private sector operator. What can the Minister do to ensure that the haemorrhaging of business from private businesses, to which he referred, does not spread to the public sector?

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Competition exists in the postal service, and it will not go away and cannot be wished away. I want a Royal Mail that is fit to win in that market, rather than one that simply wishes competition to go away. The most fundamental challenge to Royal Mail is not competition from other mail companies but competition from other communications technologies. That must lie at the heart of the response to the threatened dispute.

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Everyone listening to the statement will have greeted it with dismay and anger. As long as the Royal Mail is in public ownership, what is done is done in the Government’s name. We are talking not about the Premiership but about a precious public institution, so will the Minister instruct Adam Crozier to go to ACAS and get a negotiated solution?

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The dismay and anger will be on the part of the public, who cannot understand why a strike should proceed. I have seen a number of interviews about the dispute with spokespeople in recent days, and although various grievances have been outlined, no clear reason has been given why the country, the economy and the public should be facing a national postal strike this week. ACAS is ready to play a role, but it will be far better able to do so if the threat of industrial action is lifted.

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Concern is growing that the Secretary of State is deliberately antagonising the union to commit suicide, to pave the way for full privatisation on the basis that privatising a third of the business is almost impossible to achieve. Will the Minister explain why that concern is not justified?

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We have been clear throughout that we will keep Royal Mail in the public sector, and there is no hidden agenda to privatise it. We made that clear throughout the debates on the Hooper report.

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Further to that point, I am glad to note what the Minister says about the Government’s intentions, but is he aware that there is an underlying fear among postal workers that the long-term objective of management is to privatise and casualise the industry? Can he say anything to allay the fears of the work force on that point?

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The best way to allay the fears of the work force is to have a secure agreement about the modernisation of Royal Mail that is implemented. Whether or not third parties are involved, that is what must come out of this. The tragedy is that we could achieve that without a national dispute and the damage that it causes.

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The Minister is, I know, aware that the closure of the Crewe mail centre would result in significant job losses that could equate in the current climate to an increase in local jobseeker’s allowance claimants of 25 per cent. Does he agree that, for the sake of local employment in a recession, it is important that we separate the original review of the mail centre network from the current dispute?

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I am afraid that I cannot agree with the hon. Gentleman that we should put the issue of mail centres on ice. We have pretty much the same number of centres around the country as we had before the internet was invented. I do not know whether he heard what I said in my statement about the fall in mail volumes, but of course that will mean changes to mail centres. I appreciate the effect that that can have in an area if it loses its mail centre, but I have to disagree with him because it would be wrong for the Government to instruct Royal Mail that it had to keep the same number of mail centres for ever and a day when it is trying to introduce change throughout the rest of the company.

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I declare an interest: as somebody who was a CWU member for 21 years, I am perhaps not as unbiased as some.

The Post Office and Royal Mail management have been known for years as not being able to get on with their work force, yet we have done nothing about it. We saw on television last Sunday a document come into the public domain that was intended to inflame the situation. Now they are talking about increasing the number of part-time workers, inflaming it even more. Does my right hon. Friend not agree that it is time that they sat down, took away such inflammatory ideas and reached a proper negotiated settlement? If ACAS has to be part of that, let us help ACAS rather than use the strike as an excuse.

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My hon. Friend is absolutely right to say that there has been a history of poor industrial relations in Royal Mail. Not only did we have a national strike two years ago and various local disputes in between, leading up to the current situation, but poor industrial relations have been a constant feature of the attempt to introduce change in the company.

My hon. Friend referred to a story that was in the media over the weekend. Let me read out Royal Mail’s statement on the story:

“The contents of the e-mail sent to us by Newsnight do not reflect Royal Mail’s policy, strategy or position in relation to the current dispute with the CWU…No member of the board or the senior management team at Royal Mail has seen, or is aware of any such presentation…For the avoidance of any doubt Royal Mail has never had any strategy to derecognise the CWU and nor would we seek to do so.”

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Will the Minister give an undertaking that any mail that moves to the private sector during the dispute will return 100 per cent. and immediately to Royal Mail at the end of the dispute? Will the Government get off their butt and actually get in touch with Adam Crozier and the management?

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Order. May I just gently say to the hon. Gentleman, who is an experienced Member, that one question means one question?

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There is no question of our not being in touch with those involved in the dispute. As I said, we have been in regular touch with people on both sides of it. On the question of lost business, the fear for Royal Mail is that people have alternatives. If the company’s service is constantly threatened by strike action, the likelihood is that people will use alternatives. I believe that that is tragic for Royal Mail, for our postal service and for the good men and women who work in it.

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I am sure that the Minister will agree that everyone should do what they can to cool this down. If that is the case, why does he think that the management of Royal Mail have told workers today that if they attend the picket line on their day off, they will be deducted a day’s pay? Is that the way to promote good industrial relations?

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I am not aware of the announcement to which my hon. Friend refers. I agree that cool heads are probably required in this situation, because if the strike goes ahead, it will not be in the interests of Royal Mail or those who work in it.

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Will the right hon. Gentleman take every opportunity to impress upon trade union leaders that in view of the changes in technology and information communication their only future lies in accepting fundamental and continuing change, and that being so, they do not enjoy public support?

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The frustration of the situation is that everyone says that they are up for change in the face of the technological revolution to which the right hon. and learned Gentleman refers, but when it comes down to it, attempts to implement change are constantly frustrated by disputes. It is absolutely true that Royal Mail and its workers must get beyond that pattern if we are to have a prosperous postal service in future and to maintain the universal service that, as a social glue, is so important to the whole country.

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Is the Minister aware that it takes two sides to cause a dispute? Is he aware that the ballot result was 70 per cent. in favour? That is democracy, and it is set against employers who have inflamed the situation by deciding to recruit 30,000 agency workers. I know which side I am on. I am on the side of those who deliver the mail.

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My understanding is that the 30,000 people recruited are not agency workers, but that they are directly hired, as Royal Mail hires every year. My hon. Friend is absolutely right—I have huge respect for him—that it will take two sides to negotiate a proper solution.

Talks are taking place today—I said this in my statement—and we welcome that. We hope even at this late stage that a settlement is possible without the damaging industrial action that has been threatened. My message to both sides is this: keep talking, keep focusing on the public, keep focusing on the small businesses that depend on Royal Mail and try to avoid the strike action threatened for later this week.

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I was disappointed by how little the Minister had to say about the protection of the everyday consumer. With that in mind, does he rule out this Government removing the last vestiges of the monopoly that Royal Mail has enjoyed, to the detriment of so many of the consumers who have relied on that service?

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Royal Mail does not have a monopoly, and that is the point that I am making. It operates in a competitive environment, and if a strike goes ahead, those who can use alternatives will be more likely to do so. That will be damaging for Royal Mail and it will also damage those who work for it. That is why a strike would be self-defeating, and we should do all that we can to avoid it.

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Is the Minister aware that in Islington an agreement was reached under which there would be cuts in staff numbers and changes in working practices to pave the way for more machinery—but that the difficulty was that national management walked in and tore that agreement up? That is why the workers there are on strike.

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The allegation in London by the union is that management have gone beyond the agreement reached in 2007. Management contests that and says that all that London is being expected to implement are the changes that have already been accepted and implemented throughout the country. It is precisely that point about which the two sides are meeting as we speak, to talk it through and try to avoid industrial action later this week.

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Earlier, the Minister skilfully dodged one of the questions asked by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). Will he make it clear whether he thinks that the 30,000 temporary staff being hired by Royal Mail are a good thing or a bad thing?

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That is what it does every year.

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The Minister must know that parts of the statement that he has made today, and the one that has been made in the House of Lords, will be contested by the union. How does he think that that is helpful in this situation, and can Ministers not move beyond providing questionable commentary in the House and get the union and the company into the same room at the same time, with the Government?

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As I said, we have remained in constant touch with both sides and we have urged them to focus on the public—the people who depend on Royal Mail—and avoid strike action. Of course we stand ready to help in any way we can, but we cannot impose good industrial relations on a company that has a history of going on strike whenever an attempt is made to implement change.

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Morale among postal workers is at a very low ebb; that is why there was such a strong vote in favour of strike action by people who know that a strike would be disastrous. In that context, is it not right and proper for us to insist on mediation that brings union and management into the same room, to work and work until there are some common grounds for agreement? They will not do that on their own, because there is no trust between the management and the union.

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There has been a history of third party involvement in Royal Mail. Some years ago, Lord Sawyer carried out an inquiry into industrial relations in the Royal Mail, and George Bain and others have also examined the company in the past. There has been no shortage of third party involvement. ACAS stands ready to play a role if both parties think that that would be helpful. I am sure that ACAS would be able to play a productive role, but that would have a far better chance of working if the threat of industrial action were lifted.

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Is it not fair to say that businesses are being put at risk if the strike continues? Families of postal workers are also losing income in this desperate situation. Has not the time come for the Minister, who is the custodian of the shares in Royal Mail, to use his influence and shareholder power to ensure that the two parties sit round the table with ACAS and do not come out until this has been resolved amicably?

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They are round the table. There has been nothing lacking in the volume of meetings between Royal Mail management and the unions. I have heard talk of 70 to 80 meetings. ACAS is ready to assist and, as I have said on more than one occasion today, it would be easier for ACAS to play a productive role if the threat of industrial action were lifted.

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It is not clear to me, from what the Minister has said, whether Royal Mail is prepared to go to ACAS. We know that the trade unions are prepared to do so. The situation is pretty serious. I have been involved in a few disputes in my time, and it is not easy for anybody to go on strike as a result of intransigent management. Small businesses and the families of those involved are suffering because of what is happening. There have been a lot of uncertainties—for 12 years, somebody said—and the Minister should now intervene directly.

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I believe that Royal Mail is prepared to involve ACAS in the dispute, but obviously it feels that that would have more chance of success if the threat of industrial action was lifted.