PARLIAMENTARY DEBATE
Royal Mail Takeover - 16 December 2024 (Commons/Commons Chamber)

With permission, Madam Deputy Speaker, I will make a statement on the ongoing takeover of Royal Mail Group’s parent company, International Distribution Services plc.

Royal Mail is an iconic national institution, and this Government are committed to ensuring that it remains one. Since taking office in July, the Secretary of State for Business and Trade and I have been clear that the Government will robustly scrutinise the proposed takeover of Royal Mail and ensure that there are safeguards for its future. While a takeover bid is still ongoing and subject to the relevant regulatory processes, the purpose of this statement is to update the House on the legally binding undertakings that have now been given to the Department for Business and Trade by the bidder, EP Group. I wish to be clear that this does not mark the conclusion of the takeover, and these undertakings will become effective only if the takeover goes through. Should the takeover complete, I am pleased to announce that the Department for Business and Trade has secured significant commitments to promote a long-term and financially sustainable future for Royal Mail in the United Kingdom.

It will be helpful if at the outset I set out where Royal Mail was at the time the takeover bid was announced. Before the bid, Royal Mail’s financial position was challenging. In its financial year 2023-24, Royal Mail recorded a loss of £348 million. That loss was in part due to a long-term decline in letters, and the significant fixed costs of the universal service delivery network. At the same time, Royal Mail has not met its quality of service targets set by the independent regulator, Ofcom. Royal Mail’s performance for the 2023-24 financial year resulted in Ofcom fining it £10.5 million. While the previous Government were happy to accept decline, this Government have worked closely with the buyer to secure significant commitments to deliver the transformation of Royal Mail into a sustainable service, and hard-wired in stronger protections for Royal Mail’s identity.

When the discussions with EP Group began, my Department’s objectives were: first, to strengthen the financial sustainability of this iconic and important British institution; and secondly, to protect the customers, workers and brand of Royal Mail. Today I can confirm that we have agreed a deed that customers and the workforce alike can welcome, with significant new commitments from the buyer to the Government. This deed is a clear example of the Government’s commitment to working hand-in-hand with business to generate reform and investment in public service. It is also yet another example of this Government fixing the foundations where the previous Government did not.

I am proud to announce to the House that we have agreed that the Government will have a golden share in Royal Mail. This golden share will ensure that the Department for Business and Trade now has an ability to prevent Royal Mail from moving its headquarters abroad or moving its tax residency without Government permission. I should make it clear that that is an entirely new measure that was not in place at the time of Royal Mail’s privatisation. Except in very limited circumstances, that measure will remain in place in perpetuity, including when there is a subsequent change in ownership of Royal Mail. I want to be clear that the agreement will not give the Government any role in the day-to-day running of the business—Royal Mail remains a private entity.

Not only have we agreed a golden share, but the EP Group has made a number of other commitments in addition, which I will set out at a high level. Those commitments include a commitment to prevent value extraction unless two tests are satisfied: first, a financial test that takes into account the debts of Royal Mail, so that value cannot be extracted if the company is heavily indebted; and secondly—this recognises a key concern of the public—a quality test to ensure that value is not extracted unless specific performance targets are met.

All businesses need to adapt and improve in order to respond to change, and Royal Mail is no different. Recognising that there is a need for Royal Mail to modernise, there is a commitment from EP Group to ensure that Royal Mail has the financial means to fund the transformation of its business in the three-year period following completion of the acquisition. In addition, EP Group has agreed to take an immediate step to strengthen Royal Mail’s balance sheet by removing a significant intra-group debt, which is currently due to the remainder of the International Distribution Services group. The agreed undertakings also include a commitment to ensure that Royal Mail retains ownership or access on fair terms to those assets necessary to meet the universal service obligation.

Next, EP Group has agreed to meet all the regulatory requirements that Royal Mail Group is subject to, including ensuring that it remains the universal service provider for as long as EP Group is in control. We all know—not just in this House, but across the UK—that Royal Mail is an iconic British brand, and that is why there is a commitment to the existing brand protections in place for Royal Mail. Royal Mail is a respected and revered operator, and not just in the UK—it has various international responsibilities at international fora and with the overseas territories. Those will be respected and continued, maintaining the UK’s prestigious international position.

EP has stated its long-term commitment to Royal Mail, and the discussions have demonstrated the wide range of areas of public interest in the work of the company, so I am also pleased to confirm that EP has committed to taking steps to facilitate discussions between any future owner of the business and the Government, be that in 10 or 20 years’ time. These commitments have been offered by EP Group to the Department on a voluntary basis; nothing has been offered in exchange.

I take this opportunity to thank EP Group. I am confident that we share the same objective of a reliable and financially sustainable universal service provider, while workers and consumers are placed at the heart of a sustainable Royal Mail. I am also pleased that, as well as reaching an agreement with the Department, EP Group has today announced that it has in-principle negotiated agreements with both unions representing the Royal Mail workforce. The Government welcome those agreements, and I am confident that the constructive and collegiate approach between the unions and the buyer can represent a restart for industrial relations in the Royal Mail Group.

I have set out some of the key commitments, but there are further commitments from EP Group that I do not have time to set out in full today. I am therefore placing copies of the deed in the Libraries of both Houses. I will keep the House informed as much as I can as the takeover progresses. I commend this statement to the House.

I call the shadow Minister.

May I start by thanking the Minister for advance sight of his statement? Before I get into my questions, can we take a moment to thank every postman and postwoman up and down this country for their hard work, particularly at this time of year? In all the challenging weather, they are out there putting letters through every letterbox in the land and collecting thousands of letters from the red pillar boxes in every corner of our country. I take the opportunity, especially in this Christmas season, to say thank you on behalf of all of us.

Every colleague here will recognise the importance of Royal Mail, both as an institution and as a provider of a vital nationwide service. It has been in existence for more than 500 years, and it has seen a lot of change over those years, but the one consistent thing is that it is still a service on which we all depend every day. It is not the only way we communicate any more, but it is a vital one, and it will continue to be needed, including by Government. What a shame it is that one of the biggest postal deliveries done by Royal Mail this year was from the Government. It was a letter to many pensioners—often on low incomes—cancelling their winter fuel payments.

The dwindling number of letters sent has eroded the base on which the success of Royal Mail was built. The inevitable consequence is that Royal Mail has been facing serious financial challenges, and amid those challenges the service received by people across Britain has become worse, whether that is deliveries missing their deadlines, letters going missing or occasionally, in some areas, people going weeks at a time without post. The example of that failure was shown last week by the fines that Royal Mail received. The cost of this poor service cannot be overstated, whether it is for those who subscribe for services by mail, those who rely on business deliveries or those who miss appointments with their general practitioner, impacting their health and costing the Government. That poor service cannot be allowed to continue.

The inward investment into the service announced today will be scrutinised by shareholders, but given that they are the golden shareholder, I have questions for the Government. What guarantees has the Minister received about the service provision? What commitments has he received about the level of jobs across Royal Mail? How much of Royal Mail do the employees themselves now own? In some places it has been reported that the commitment to the tax residency guarantee is for five years, but I heard the Minister say at the Dispatch Box that it was perpetual. Can he clarify that?

What ongoing role will the Government have in making sure that Ofcom ensures that Royal Mail delivers the service expected by customers? The fines do not seem to be doing it. An important part of the service offered by Royal Mail is the universal service obligation, which now requires post to be delivered six days a week and parcels to be delivered five days a week. When the Royal Mail is working well, the universal service obligation provides an outstanding service. However, Royal Mail wishes for it to be reformed. Does the Minister believe that the obligation must be maintained in its current form? Can he confirm what discussions he has held with EP Group about the obligation? Will he confirm whether there is a sunset on the obligation? He mentioned that there potentially was with a transfer of ownership.

The value of Royal Mail goes far beyond the universal service obligation. Can the Minister outline whether he expects any of the other services provided by Royal Mail to be impacted? For example, can my rural constituents continue to count on their letters being collected from every post box? What risks has he identified with the takeover itself? Although the Post Office and Royal Mail are separate entities, they are closely tied. Just over a month ago, the Government announced that more than 100 post office branches were at risk of closure, with hundreds of jobs lost. Can the Minister explain what assessment he has made of the risks facing the Post Office and how they will be impacted by the sale of Royal Mail?

Royal Mail faces the same headwinds, often created by this Government, as other businesses. Whether it is Labour’s employment regulations or the national insurance jobs tax, businesses have warned that they may be forced to put up prices and cut jobs, because of the very actions of this Government. Finally, can the Minister confirm whether Royal Mail has expressed concerns over the Budget or the Employment Rights Bill?

I thank the shadow Minister for her comments, and I start by joining her in thanking all those postal workers who throughout the year—not just at this time of year, when it is particular busy, but 12 months a year—come rain or shine, sleet or snow, deliver those much-needed communications from friends, family and loved ones. I was pleased to be able to go to my own depot in Ellesmere Port last Friday. I will go to another one in my constituency, in New Ferry, this Friday. All hon. Members should be encouraged to make those visits, because they really show how much we appreciate the work that our postmen and women do.

The hon. Lady is right that the Royal Mail is a service that we all depend on. I agree that performance has not been good enough in recent years. That is why we have had a number of discussions with the company and with Ofcom about how we will get things back on track. That is why the agreement is so important, because the deal will get in the investment needed to try to drive up that performance.

I turn to some of the hon. Lady’s specific questions. On guarantees of service provision, the legislative framework is already there for the universal service obligation, and I see the takeover having no impact on that. It has not been part of the discussions—it is an entirely separate issue—but Parliament will have its say on that if needed. Next year, Ofcom will have a consultation on the universal service obligation. I think it is recognised that an awful lot of work is needed to bring standards up to the level that we would like, and one of the protections in the agreement will hopefully deliver on that.

On jobs guarantees, the hon. Lady will be aware that the general secretary of the Communication Workers Union has spoken positively about the agreement reached. He believes that sufficient assurances have been given on jobs. On employee engagement, she asked whether the employees will own the company. That is not the case, but they will have a say in governance in future as a result of an agreement between the Communication Workers Union and EP Group. That is to be ratified by the Communication Workers Union executive, but that will be a groundbreaking arrangement that we did not have previously. She also asked about tax residency in perpetuity, which is what the golden share does indeed intend to deliver.

I call the Chair of the Business and Trade Committee.

I welcome the statement made by this hard-working Minister. I take it from the announcement that Mr Křetínský has cleared the investment screening tests that the Cabinet Office is responsible for. It would be useful to have that confirmed.

Let me press my hon. Friend about the universal service obligation. Is it his intention that beyond the initial five years he will seek six-day delivery and a universal service obligation in place for Royal Mail for as long as His Majesty’s Government retain the golden share?

I thank the Chair of the Select Committee for his comments. The golden share is to deal with tax residency and headquarters being domiciled in the UK. Obviously, there will be discussions about the universal service obligation. We know that this is a fast-moving market, and that will be for determination by Ofcom some time next year.

I call the Liberal Democrat spokesperson.

Order. I am sorry, but the Liberal Democrats get two minutes for their response and we are quite a while after that.

I assure the hon. Lady that the universal service obligation is not contingent on this deal—that is an entirely separate matter for Ofcom to be considering—but a number of commitments that we have secured in this agreement will hopefully improve standards, which in any event have clearly not been as we would all want.

I welcome the Minister and the Government’s work to secure the long-term future of the Royal Mail. The statement shows that we have got a good deal for UK customers and workers. Will the Minister assure me, Royal Mail customers and workers in the Livingston constituency that when the deal goes through, the new owners will be held rigorously to their obligations on an ongoing basis? We have had too many instances over the last 14 years of privatised industries going off track because the regulatory environment has not ensured that they meet their obligations.

My hon. Friend will not be surprised to hear that some of my early discussions in this role have been with Ofcom, and indeed with Royal Mail about its performance. There is a shared determination between not just the regulator and the Government but the trade union, the workers and the new owners to drive up that performance, because we can all clearly see that it is not good enough at the moment.

Thirty-one years ago, when I had the Minister’s job, I was trying to privatise the Post Office, but I was stopped by rebellious Tory Back Benchers—nothing new there. I was sacked a week later. So I warn him that this is quite a difficult issue.

What people were worried about was the universal service obligation—it costs so much more to deliver in rural Lincolnshire than in central London—so I think that what we are all worried about is that, as the Royal Mail moves ever further away from public ownership, this new private company will try to chip away at the universal service obligation, particularly in rural areas. Can the Minister reassure us that he is really on the case?

I thank the right hon. Member for his question. Is he now the rebellious Back Bencher, I wonder? We all share those concerns about the universal service obligation. This deal is not contingent on the universal service obligation. We have had discussions on how we improve the current state of affairs, because it is clearly not good enough. I hope that his constituents will see an improvement in service as a result of this deal.

Barely a week goes by without a constituent reaching out to me to express frustration at the quality of service they receive from our local Royal Mail delivery services. What will the announcement mean for them and for the quality of service that they receive?

We hope that the deal will lead to an improvement in service. Specific investment commitments are being made as part of the deal, which we hope will be used to drive up standards. I think that everyone is committed to seeing an improvement on where we are at the moment.

I have eight Royal Mail delivery offices in my constituency, staffed by a team of hard-working posties who cover a vast rural area around the Scottish Borders. Will the Minister tell them, and me, what commitment the new owner has given to maintaining those offices and staff levels?

The hon. Member must be busy at Christmas time if he has eight offices to visit. He makes an important point about the Royal Mail’s vital role in rural constituencies. We have got commitments to improve standards, and hopefully the deal will deliver on that through the increased investment that has been agreed.

Postmen and postwomen in my constituency were shaken to the core a couple of months ago when one of our postmen was brutally attacked and hospitalised while doing his rounds. I am sure the Minister will join me in sending my sympathies to him and his family for that terrible incident. When I visited the depot in my constituency—fortunately, I only have one—the postmen were concerned about the long-term future of Royal Mail. What assurances can he give me and postmen in Harlow that he has done all he can to protect Royal Mail and ensure that any future takeover does not lead to a running down of services?

First, I extend my sympathies to my hon. Friend’s constituent who was attacked. We all feel abhorrence when public servants are attacked doing their job.

My hon. Friend can be assured that services will be protected. This is an opportunity to get investment. We have commitments that were not in place previously post privatisation, so we are in a better place than before.

On Friday I will be visiting the delivery office in my constituency. Like other Members, I am concerned to reassure those who work there about what this privatisation will mean for them. We have talked a lot about services and universal obligations, but what reassurances can the Minister give that jobs will not be lost down the line?

It is not a privatisation—that began under the hon. Lady’s party’s time in office. This is an important step forward, getting commitments that were not previously in place to protect the Royal Mail brand and delivering the investment that we all clearly see is needed.

Our posties go above and beyond 12 months of the year, but especially at this time of the year. I welcome my hon. Friend’s statement, but I particularly welcome the support that it has garnered from the workforce. Can he say a little more about his conversations with the trade unions during the negotiations about the industrial relations reset that has been discussed by the general secretary of the Communication Workers Union? What steps have been taken to ensure that any future owner of Royal Mail does not run it into the ground?

The Secretary of State and I have regularly met the Communication Workers Union. As my hon. Friend rightly points out, there has been considerable industrial unrest in recent years, so it is extremely good news that the Communication Workers Union has talked positively about the groundbreaking deal that it has signed with EP Group. I agree with the union that it is time for a fresh start and a complete reset of employee and industrial relations. We want good industrial relations across the whole economy, so we welcome the constructive way that EP Group has engaged with the trade unions. We hope that that spirit carries forward into the future.

As many have mentioned, many rural communities will be concerned to know how this could affect them. I spoke to postal workers in Blandford Forum in my constituency on Friday; they can be the best advocates, so can the Minister ensure that they are well primed to explain to their customers—who they are very proud to serve—what this means for the universal service obligation?

Likewise, the Royal Mail has such a crucial job in delivering elections, particularly but not exclusively with postal votes. There is growing concern about the resilience of Royal Mail to meet the growing demand. I appreciate that it is outside the Minister’s brief and he may need to write to me, but can he provide some assurance to the House that the contract that the Government give to Royal Mail will be honoured in full by the new owners to ensure that our democracy can still function?

The hon. Member may have noticed that I was sitting next to the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Bethnal Green and Stepney (Rushanara Ali), before the statement and we had a brief conversation about that, because we all agree on the importance of Royal Mail delivering our democracy. I assure him and his constituents that it is our intention to see that the universal service obligation is complied with and improved on in future.

I start by thanking postal workers across the country for the magnificent job that they do all year round. I remind Liberal Democrat Members seeking assurances that it was under the coalition Government that the Royal Mail was privatised in the first place, with none of the assurances that we have currently have.

I refer Members to my entry in the register, and I declare that I started my working life on a Royal Mail apprenticeship. It is a proud part of my life—28 years of service, and I am proud of all of it. The Royal Mail has been run into the ground and is currently broken. Through the golden share, the Minister has been able to get this Government back in the room, because we have been locked out ever since privatisation. That represents a breakthrough, and ensures that Royal Mail does not carry on as it has. The current board is responsible for the biggest failure in quality of service, the biggest attack on its workforce and the creation of a two-tier workforce. Can the Government give us some assurances that those responsible will not walk away filling their wallets, but will turn around and apologise for what they have done?

I thank my hon. Friend for his questions and his service in the Royal Mail. Clearly, arrangements for those currently in the Royal Mail are a matter for the new owners once the deal goes through, and I am sure that that point will be discussed. He is right that the performance has not been good enough, and we are very pleased to have secured a number of commitments in the deal that were not previously in place.

I welcome many parts of the statement, not least the part on quality assurance. I would like to know a little more about that because one issue in Dundee, which has the largest teaching hospital in Europe, is that appointments letters often arrive too late, which of course has an impact on the NHS.

I want to focus specifically on the question not yet answered, which is about jobs. In Scotland, 11,000 people are employed by the Royal Mail, and they will be listening today to find out what cast-iron assurances there will be for their jobs. Mr Křetínský recently completed a takeover of a French supermarket, promising in 2023, in the run-up to that deal, that there would be no job losses, but one year later there were plans to cut 3,000 jobs. Can the Minister be very specific today and tell us what cast-iron guarantees he has for the 11,000 people employed in Scotland and those who are employed elsewhere across the UK?

I have no doubt that the Communication Workers Union and the Unite Communication Managers Association would not have spoken positively about the deals that they had struck had they not received sufficient guarantees about the workforce. As I said, the general secretary of the Communication Workers Union has been on the air today, speaking very positively about the commitments that he has received about not just job security but governance arrangements, and about workers having a “meaningful stake” in the success of the business moving forward. This is a really positive deal, and if the CWU is speaking positively about it, I think the hon. Member should be reassured.

On Friday morning, I visited the West Brom Royal Mail sorting office and saw the fantastic work that the staff there do. Many of the posties have worked there for decades, and one for as long as 40 years. How will this deal protect Royal Mail and, critically, the postmen and postwomen who are so important to our communities?

My hon. Friend is absolutely right. One of the biggest assets in the Royal Mail is the workforce itself. That is widely understood not just on the Labour Benches but by the EP Group. As I said, commitments have been made between the trade unions and the EP Group on job security. I hope that goes some way to dealing with her concerns.

When I visited the two depots in my constituency last week—I join Members in thanking our posties—I noticed how run down and aged the van fleets are. Will there be an upgrade of Royal Mail fleets as part of this deal? Given the Minister has said that the Government’s golden share does not extend, maybe understandably, to operational matters, is the takeaway today that there can be no assurance for my rural constituents that their service will be maintained at the level that they expect?

I can assure the hon. and learned Member that there is nothing in the deal that affects the universal service obligation, and it is our understanding and commitment to continue to ensure that there is a universal service obligation moving forward. There are commitments in the agreement to deliver more investment. On the van network, I know that Royal Mail has purchased a number of vans in recent times, conveniently from the Stellantis plant in my constituency. Hopefully, that will be replicated throughout the country, because it is an ageing fleet. As the company has ambitious targets to meet net zero, I think it wants to improve the make-up of the stock.

I thank John Kay, my local CWU rep, for showing me around the Fotherby Street depot on Friday morning. It was very good to see my current postie, Nev, there as well. They pointed out that some of the performance issues, including missed deliveries, come down to a lack of staff, which comes down to the two-tier workforce. It is less desirable now to work for Royal Mail. Has the Minister had conversations with Royal Mail, EP and the CWU about moves to end the two-tier workforce?

When I visited my depot on Friday, we discussed the two-tier workforce and the variation in terms and conditions. I think it is generally recognised that it is not a helpful thing; I do not think it has helped Royal Mail with retention. My understanding is that there are agreements to be made between the Communication Workers Union and the EP Group on moving away from that. The detail has yet to be ratified by the union’s executive, but I hope that will mean there is a common basis to try to deal with the issue.

I am the proud son of a postie, as the Minister knows, and I refer to my entry in the Register of Members’ Financial Interests as a proud member of the CWU. When I met my local posties at the depot on Friday, they told me that they have seen the demise of Royal Mail since privatisation. My constituents are asking for reassurances—what can the Minister tell them about how we can finally get Royal Mail operating to a decent standard again, ensuring they get their letters on time?

I pay tribute to the work my hon. Friend father does, and to his work as an official of the Communication Workers Union. What the union has said about the reset in industrial relations is really important to improving standards; of course, the other part of the agreement—on investment in the company—is much needed. When everyone works together, everyone shares the common goal of the business expanding and improving its performance. I think we have got everyone aligned on that at last, and I hope that we will all see improvements off the back of that.

Our posties are friendly, familiar faces who go above and beyond all year round, but never more so than at Christmas. It was a pleasure to visit Bournemouth Royal Mail depot recently, on a tour with Martin and Sonia. Will the Minister outline how the Government will prevent any future owner of Royal Mail from driving the company into the ground? What assurances can he give the people of Bournemouth that Royal Mail will finally deliver?

There are a number of safeguards in the deed of understanding that relate to value extraction, so the EP Group will not be able to take profits out of the company unless there is an improvement in performance; there are also safeguards in respect of debt leverage. I hope that gives my hon. Friend the assurances he is looking for.

I join Members in paying tribute to and thanking our postal workers. In particular, I thank those at my depot in Portsmouth North, which I will be visiting for the second time next week; that was one of my first visits when I was elected. Like me, the posties and people of Portsmouth North were concerned when the previous Government began to negotiate a takeover deal. We therefore welcome the steps that this Minister and his team have taken, particularly around the involvement of the workforce and the trade unions. Can he give us further information on those negotiation talks?

A number of commitments have been made that were not previously in place, and there is no doubt that we are in a much better position than we were post privatisation. As I say, this groundbreaking deal between the unions and the company includes rights in terms of governance, a profit-sharing incentive and guarantees on job security. I am sure that Members will be pleased to hear that we really have made fantastic progress.

For the final question from the Back Benches, I call Dave Robertson.

My hon. Friend the Member for Bracknell (Peter Swallow) is right to raise the issue of complaints, which I am sure all Members from across the House receive from constituents let down by failures to meet the universal service obligation. From speaking to posties, as I did today, it is clear that posties right across the country, just like my hon. Friend the Member for Corby and East Northamptonshire (Lee Barron), are proud of what they do. They are proud of the job that they do, proud of being part of the community, and proud of the identity that working for that iconic brand gives them. It is clear that they are not the ones who are letting the public down; that is down to the current board of the company, which is running the organisation into the ground. Today I spoke to a proud postie, who said that he feels the company is a national disgrace—that shows how far it has fallen under the current ownership. Can the Minister assure me that the new ownership will not be allowed to sink to the depths that the current ownership did under the guidance of the previous Conservative Government?

I agree with my hon. Friend that when the Royal Mail fails to deliver, it is not the fault of the postmen and postwomen; it is about institutional failure in the company that has been allowed to fester for too long. He will be pleased to hear that we have secured a number of commitments to get the investment and security that we need to ensure that the poor performance does not carry on.