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Royal Mail

Volume 718: debated on Wednesday 7 April 2010


Asked By

To ask Her Majesty’s Government what is their assessment of the level of Royal Mail’s pension liability.

My Lords, the Royal Mail pension liability is a matter for the company and the trustees of the pension plan. I understand the parties are currently working together to complete the ongoing March 2009 triennial plan valuation, which is scheduled to be finished by June of this year. The previous valuation in 2006 showed a deficit of £3.4 billion.

I thank the Minister for that Answer. The Government have failed to provide the legislative framework for the Hooper review, which would have provided reassurance for thousands of Royal Mail workers worried about their pensions, before a general election. How could the Government have been in power for 13 years and left such a mess and such insecurity for Royal Mail workers?

My Lords, I am struggling to come to terms with this new-found compassion for Royal Mail, which has not always been expressed in that manner by the Opposition. In relation to what the Government have tried to do, we have a good track record of investing heavily in Royal Mail. We have committed ourselves to universal mail provision. We have not held back in our support for Royal Mail. For example, in 2007 we provided some £850 million towards a £1 billion escrow account to support the pension plan, and we made available a further £1.2 billion for the company to fund modernisation.

My Lords, I fear the Minister is being somewhat obfuscatory in his answer. Only last week or the week before, many of us received a letter from Adam Crozier, the chief executive of the Royal Mail, indicating that the pension liability was £10 billion, not the £3 billion to which the Minister referred. I am sure he is aware of that. I am sure he is also aware that when the Postal Services Bill was going through your Lordships’ House, the noble Lord, Lord Mandelson, indicated that the Government were not prepared to do anything about the liability for the pension fund unless the necessary reforms to Post Office working were put in place. Is the Minister satisfied that Adam Crozier’s letter set out appropriate measures to put those reforms in place? If so, do the Government stand behind the liability?

My Lords, I was not being obfuscatory, I was factually reporting the position as it is. However, it is true that in the recent interim accounts published in December 2009, Royal Mail expected the deficit to be in the order of £10 billion.

That has not yet been fully validated because this matter is going through the proper valuation process with the trustees. We believe that the pension scheme is a matter for the company and the trustees to work out between them. We made clear our view that if we were going to take on that liability, it would have to be as a part of the Hooper review recommendations. They are threefold, as I am sure the noble Lord remembers, including external investment and the modernisation programme. The good news is that, as we speak, an agreement has been reached between the CWU and Royal Mail and a ballot will take place this week on the modernisation agreement, so there has been progress in the right direction.

May I ask the noble Lord—this question has not been answered—whether the Government stand behind this liability? Could he answer that question?

My Lords, I believe that I have answered that question. It is not a question of saying whether the Government stand behind it. We believe that this is a matter for Royal Mail and the trustees. They are working to find a way forward. They have until June of this year and can apply to the Pensions Regulator to extend that deadline if necessary. We have proved that we support Royal Mail through the generous funding that we have given to the pension scheme and the modernisation programme. Nevertheless, we believe that at this point the obligation is on the company and the trustees to find a solution to this problem.

Does the Minister agree that among the wreckage that this Government are leaving behind, one of the great missed opportunities has been the failure to reintroduce the Postal Services Bill? He has already been asked a question about it that he has not answered. According to the First Secretary of State, that Bill was much improved and strengthened in this House and was the best chance of securing the universal postal service while protecting Royal Mail pensions. Why has he not reintroduced that Bill?

The First Secretary of State made it quite clear why we felt that we could not proceed at the time. We did not believe that the investment scenario was the right one to attract the necessary investor in the scheme and we do not believe that that situation has changed. We refute the political hyperbole of the noble Lord’s use of the term “wreckage”. Royal Mail has very recently concluded a modernisation agreement with the Communication Workers Union. We believe that to be a fundamental step forward in ensuring a modernised Royal Mail which will provide a successful universal postal service.

My Lords, does my noble friend agree with me that the steps the Government have taken in relation to the recession have probably restored the value of the pension fund by around 20 per cent, owing to the recovery that has taken place in the stock market?

The Minister said that the deficit figure given by the Liberal Democrat Front Bench was based on an expectation of some time ago. Can he say on what the figure he gave the House a moment ago is based, and whether that is a firm figure or an expectation?

I have already answered that question but I will do so again. In the recent interim accounts published in December 2009, Royal Mail expected the deficit to be in the order of £10 billion.

My Lords, is the Minister aware that his replies will have given great comfort to a number of shyster employers and owners of companies with huge pension deficits who could follow the Government’s example and simply walk away if the employees do not do what they would like them to do?

That is a very florid interpretation by the noble Lord, Lord Tebbit. No, I would not agree with that. We have provided some £850 million towards a £1 billion escrow account to support the pension scheme and a further £1.2 billion for the company to fund modernisation. If you can find other companies that are doing that and walking away at the same time, I would be interested to hear of them.

Does my noble friend agree that it is rather unfair of the noble Lord, Lord Tebbit, to be talking about shyster employers, unless he is talking about those who keep coming out of the woodwork to support the Conservatives in the most partisan way during this election campaign?

If the noble Lord has difficulty in answering that question, can I again ask him to answer my question about his statement?

I think that the noble Lord, Lord Elton, is getting overenthusiastic this afternoon, which is unlike him. I do not think that I can add any more to my noble friend’s analysis.