Pat McFadden
MP for Wolverhampton South East · Labour · United Kingdom
“In his review Alan Milburn considered that issue and said that, “the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years.” As I said earlier, 400,000 more people are in work this year than last year, and the number of young people in employment is up since the election.”
“Since our last DWP questions, both Alan Milburn and the Pensions Commission have published their respective interim reports on young people and on the current state of saving for retirement. I look forward to receiving their final reports later in the year.”
“As Alan Milburn pointed out in his recent report, the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years. There are 400,000 more people in work than last year. The number of young people in employment is up by 74,000 since the election.”
“I thank the right hon. Gentleman and send him commiserations for whatever has left him reliant on his crutches today. I am happy to congratulate the businesses he mentioned in his constituency. He raises a serious point: it is important not only to come up with the right policy, but to make it simple for businesses to use.”
“My hon. Friend is right, and I thank Cardiff football club for being a partner. We are supporting nearly 1 million young people and creating up to half a million opportunities for jobs and training.”
“We are making strong progress on expanding youth hubs, with around 130 already in operation across Great Britain. In March, I announced the locations that we want to open in this year, and I have just announced a further 180 locations for the following two years.”
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“Although that can be difficult, it is not something that we will turn our backs on.”
“The right hon. and learned Member for Rushcliffe (Mr. Clarke) clearly knew what was coming and thought that he had better get out before hearing that statement. If the time ever came when the Opposition were to get into power, I would be interested to see whether the right hon. and learned Gentleman would be able to support the policy that the right hon. Member for Wells (Mr. Heathcoat-Amory) just outlined. The right hon. Gentleman knows that the policy that he outlined—to resile from the European legal settlement that goes with membership—would end in a clash and that, ultimately, it would lead to withdrawal from the European Union. If that is his policy, he can defend it. I have set out a policy today of positive membership of the EU and positive trade throughout the EU that brings wealth and employment to our country.”
“All the countries are signed up to the European posted workers directive. It is legal under the directive for a company to bid for work and to use its permanent employees as part of the fulfilment of that contract. That is not just a British right; it is part of the directive.”
“As the Chancellor said at the time, it is important that Her Majesty’s Revenue and Customs shows some flexibility towards hard-pressed small businesses, and those figures show that that is happening and that there is some understanding of their difficulties. I turn to the package that my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform announced last week.”
“That is the action that we took in October. We announced further measures in the pre-Budget report. I shall not go through them again here, but colleagues will know what they are: introducing empty property relief for properties with rateable values up to £15,000; and allowing businesses to apply for flexibility when paying tax bills. So far, more than 20,000 businesses that contacted the business payment support line have been given agreements to delay payment of tax, amounting to more than £350 million of tax. I thank the hon. Member for Croydon, Central (Mr. Pelling) for reflecting the positive impact that that has had on some businesses.”
“We should not give the public the impression that the huge sums announced represent normal Government expenditure that is spent once and never returned either to the Government or to the taxpayer. Secondly, the recapitalisation was about intervening to save the banks not just for banks’ sake, but for the whole economy’s sake, because banks serve as the foundation of an efficient market economy and as the oil that allows the wheels to move. Without a stable banking system, I dread to think what the consequences would be for the small businesses about which the hon. Gentleman is quite rightly concerned. The Ernst and Young ITEM Club’s chief economist noted recently: “It is easy to criticise…the Government’s policies… However, we must not lose sight of the fact that they have prevented the collapse of the monetary system as we know it”.”
“The global economy has not experienced such shocks in modern times, and they are unprecedented in their scope, scale and confluence, which is why Governments throughout the world are having to act to support banking systems, credit and their economies. I turn to some of the measures that we have taken. In October 2008, we recapitalised the banks. There is an important point to make, because the hon. Member for Kettering talked about the large sums involved. It can be confusing to our constituents to hear sums that involve tens or hundreds of billions of pounds. First, however, it is not all direct Government expenditure but money that has been injected into the system in return for assets, charged at commercial rates, or taken the form of temporary loans.”
“All I can say is that many more small businesses exist now than when the Opposition were in power and that those businesses employ more people and contribute a huge amount to our national income. Some 13.5 million people—up by 1.3 million—are employed in small businesses, and they contribute about one half of our national output. We heard in the debate that small businesses face significant problems due to the global credit crunch. First, we must remind ourselves of its extent and scope: the international banking system has been shaken to its very foundations in the past year; 1 million jobs have been lost in the United States in the past two months; Chinese exports are down; and the International Monetary Fund predicts that world output will fall this year—for the first time since the end of the second world war.”
“I shall try, in the limited time available to me, to set out the Government’s approach and to answer some of those points. I must pick up on the onslaught about the number of Members in this debate. There have been, at different points in the debate, four Members on the Government Benches, and I can count four Conservative Members, two Liberal Democrat Members and one Member who sits as an independent. Small businesses are worried not so much about how many Members are sitting in the Chamber, but about their own fate. The hon. Member for Hertford and Stortford (Mr. Prisk) said that the Opposition understood small businesses. Well, that is a claim about which people will make their own judgment.”
“Thank you for your chairmanship this afternoon, Mr. Hancock. I, too, thank the hon. Member for Kettering (Mr. Hollobone) for successfully applying for this debate. He is absolutely correct to say that this is an issue of huge importance to our constituents and, indeed, to the whole country. He went through a number of examples of problems that individual small firms in his constituency face. If I gaze into my crystal ball, I can see some copies of Hansard being posted to various constituents and small businesses in the Kettering area, and, as Minister with responsibility for postal services, I look forward to that small increase in revenue for a very important national business. I also thank all parliamentary colleagues who have spoken today, raised various issues on behalf of constituents or small businesses and made suggestions.”
“I have been able to respond only to some points, as is always the case with these debates, but, suffice it to say that we understand the importance of small businesses; we have taken action to support and to help them; and we will continue to do so in these difficult economic times.”
“Members, I am quite happy to discuss with my colleague, Baroness Vadera—a Minister in the Department that covers small businesses— the suggestion that the hon. Member for Banbury (Tony Baldry) made. I agree that Members should be able to approach the Department, and I hope that it is clear that I am always available to Members of whatever political stripe if they wish to approach me about a constituency issue. That has always been the case, and we will do what we can on that front. Businesses should go to Business Link to check for information on the schemes. There is a website, businesslink.gov.uk, and a helpline, 0845 600 9006.”
“It is not a scheme to which individual companies apply, but it allows banks to put together portfolios of lending in which the Government can share the risk, freeing up lending to companies with turnovers of up to £500 million. Secondly, there is the enterprise finance guarantee, which will support up to £1.3 billion worth of bank loans to companies with a turnover of up to £25 million. That is a scheme to which companies can apply directly. Through all that, we are trying to free up lending to small businesses without replacing the proper banking function of judging who is entitled to a loan and who is not. We introduced those measures precisely because we understand the difficulties that small businesses face. Turning to the issue of information and help for ordinary businesses and for hon.”
“I am always interested when the hon. Gentleman raises the issue of small business rate relief. I gently remind the House that the Opposition voted against the introduction of that relief, and that, when the vote took place, the hon. Gentleman was present in the Lobby trying to stop its introduction. I am interested in his conversion, which is always welcome, and, of course, we will consider representations on all those matters. I am sure that my colleagues at the Treasury and at the Department for Communities and Local Government will consider representations on the issue, but now, I shall return to the package that we announced last week. We announced three measures, but I shall mention just two. First, there is the working capital scheme, which is about sharing risk between the Government and banks to free up lending.”
“It will protect the universal service for consumers and give Royal Mail new opportunities to modernise and develop; it offers Royal Mail’s staff a future in a modern, efficient postal operator, with more secure pension arrangements; and it offers the whole country a Royal Mail that we can be proud of. I commend this statement to the House.”
“We will now build on that decision, to ensure a stable and sustainable network for the future. We are determined to have a post office network offering a broad range of services throughout the country, supporting both social and financial inclusion. I am delighted that the Select Committee on Business and Enterprise has agreed to undertake an inquiry into what further services the Post Office could offer. I believe that Royal Mail and the postal market can thrive in the future, provided that decisive action is taken now. Without far-reaching change, the opportunities brought about by technology will become overwhelming threats. That need not be the case. I believe that there are benefits for everybody in the package of measures that we intend to take forward.”
“My Department will pursue that in the coming weeks. Finally, I should comment on the Post Office, which was not part of the review’s terms of reference. The network of local post offices combines a unique set of commercial, public and social roles. In recognition of that, a partnership would not include the post office network. However, a healthier Royal Mail letters business will be good for the Post Office, and today’s announcement will help underpin our existing commitment to the post office network. We are providing £1.7 billion until 2011 to support a network of around 11,500 branches. We will continue to support the non-commercial network beyond that time. The House will recall the recent announcement that the Post Office card account will stay with the Post Office.”
“We will fulfil our manifesto commitment to “a publicly owned Royal Mail fully restored to good health, providing customers with an excellent service and its employees with rewarding employment”. Bringing in a partner through a minority stake in Royal Mail’s postal business will help us to deliver that goal. It will bring Royal Mail fresh investment and new opportunities to grow in Europe, and enable it to offer new services. It will provide a fresh new impetus to modernising the Royal Mail and to securing the universal service. We and the Royal Mail have already received one expression of interest from the Dutch postal company, TNT, to build such a partnership. I very much welcome that approach from an experienced postal company, just as I will welcome other expressions of interest from credible partners should they come forward.”
“My Department will study the report in detail and we intend to respond with a full statement of policy in the early part of next year. With backing from the Government, Royal Mail has been improving performance in recent years, but progress has been too slow, and Hooper makes it clear that, in the face of the challenges confronting the company, transformation must be faster and more far reaching. The Government agree with Hooper’s analysis and recommendations. As he does, we reject cutting back the universal service; indeed, we share his ambition for a strong universal service and a strong Royal Mail. We intend to take forward the recommendations as a coherent package of measures.”
“Secondly—and closely related to that—to improve its performance, Royal Mail should forge a strategic minority partnership with a postal operator with a proven record in transforming its business, working closely with the work force. Hooper believes that that would give Royal Mail the confidence, the experience and the capital to make the changes needed to improve performance and to face the future—in other words, save the Royal Mail by investing in its future. Finally, on regulation, Hooper proposes that Ofcom should take over responsibility from Postcomm for regulating the postal market. Its primary responsibility would be to maintain the universal service in the wider context of other changes taking place in the communication markets.”
“Overall, Hooper’s conclusions are crystal clear: the status quo is untenable, the universal service is under threat, and we face the choice of either downgrading the universal service as we manage decline, or acting now to turn things around and secure Royal Mail’s future. At the heart of the Hooper report are three linked recommendations. First, Hooper recognises that the pension fund deficit represents a significant challenge for the company. The report recommends that as part of a package of changes, the Government should take over responsibility for substantially reducing the pension deficit. I stress that Hooper says that that would be justified only as part of a coherent package to secure Royal Mail’s long-term viability.”
“Each year, on top of its regular £500 million contribution to the pension fund, the company is having to find an extra top-up of £280 million to plug the deficit. These payments look set to rise substantially when the fund is re-valued next year. Fourthly, Hooper says that labour relations in the company need to improve. We know that levels of trust and co-operation are low and that industrial action takes place too often, and a fresh start in industrial relations is badly needed. Fifthly, there is regulation. Hooper reports a lack of trust in the relationship between the company and the regulator. There are disagreements about even basic information and those tensions divert energy from the chief challenge of modernising the business.”
“As Hooper makes clear, that will be the case for the foreseeable future, so a healthy Royal Mail is vital to sustaining the universal service. The second challenge that Hooper describes is that of efficiency. Hooper reports that Royal Mail is less automated and less efficient than its western European counterparts. In modern European postal companies, 85 per cent. of mail is put in walk order by machine for delivery to the individual home or business. By contrast, in British local delivery offices, that is still done entirely by hand. The Royal Mail urgently needs to catch up and modernise. The third challenge is the pension fund. Hooper warns that Royal Mail has a large, growing and volatile pension fund deficit. That is near impossible for the business to manage, and it is a huge demand on its revenues.”
“In this country, 60 billion text messages were sent last year, and we now send 5 million fewer letters per day than two years ago. Hooper is absolutely clear that the main challenge to the Royal Mail comes from the impact of changes in technology and consumer choices. His estimate is that last year the shift from mail to those new technologies cost the company £500 million in lost profits—that is five times the impact of business lost to other postal companies in our liberalised market. The message is therefore clear: making those other companies go away is not the answer to make the Royal Mail succeed. Royal Mail’s success matters because it is the only company capable of delivering mail to every address in the UK, six days a week.”
“Its purpose was to look ahead to the future and recommend the steps needed to sustain the universal service in a world where technology, consumer behaviour and the communications market are all rapidly changing. The review did not cover the post office network. We have now received Richard Hooper’s final report. It is a serious, wide-ranging study and makes sober reading. We are publishing it this afternoon, and I am grateful to Richard Hooper, Dame Deidre Hutton and Ian Smith for their work on it. Let me set out Hooper’s analysis of the challenges facing the Royal Mail. First, there has been a revolution in communications technology in the past decade as consumers have turned to e-mail, the internet and text messages.”
“I wish to repeat a statement made a little earlier by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform about the Royal Mail. The Government are firmly committed to a universal postal service—that is, the ability of the 28 million homes and businesses across the country to receive mail six days a week with the promise that one price goes everywhere. The universal service helps to bind us together as a country. As well as having social importance, it is the means by which many companies build and operate their businesses. However, it does not come free. Last December, my right hon. Friend the Member for Barrow and Furness (Mr. Hutton), the then Secretary of State for Business, Enterprise and Regulatory Reform, invited Richard Hooper to lead a full independent review of the postal services market.”
“We will try to reach an agreement that is in the best interests of Royal Mail and the British public. The hon. Gentleman mentioned state aid. Of course we are aware that other companies in Europe have undergone similar transformations. We are certainly aware of the critical importance to post office branches of Royal Mail’s business. Having made the announcement on the Post Office card account just a month ago, we are looking forward to a more secure and sustainable future for those branches. There is nothing in the statement that I have announced today that will pose a threat to that.”
“I did not follow the hon. Gentleman’s logic in that regard. The pension fund does have assets, but it also has liabilities. The problem is that the liabilities are greater than the assets, and that represents a significant burden for the company when it comes to meeting the costs. The hon. Gentleman asked about figures. As I said in my statement, last year the company had to find an extra £280 million—on top of the normal £500 million contribution to the pension fund—because of the pension fund deficit. To help the company to deal with the deficit, we released funds that could be spent on modernisation and meeting the challenges. We have received one approach from a potential partner, and we invite other approaches from interested potential partners.”
“As ever, the hyperbole of the hon. Member for Rutland and Melton (Alan Duncan) disguises the lack of any credible policy in his party. The hon. Gentleman implied that nothing had been done about Royal Mail for the last 10 years. I remind the House that, in 2007, the Government made available £850 million in reserves on the balance sheet to support the pension fund, that they made available loan finance to help Royal Mail to modernise, and that, back in 2001, they made available £500 million in loans to purchase the companies comprising GLS, which is Royal Mail’s European logistics and parcels arm. Action has been taken and change has happened, but, as Hooper reports, that change has been too slow to meet the challenges confronted by the company in the face of changes in consumer habits and the burden presented by the pension fund deficit.”
“I have the greatest respect for my hon. Friend, and I can assure him that this company will remain publicly owned in line with the manifesto on which we fought and won the last general election. Bringing in a partner on a minority basis will give three advantages. It will give the advantage of the experience of having gone through change in a major postal company, which Royal Mail has not yet gone through; it will bring the confidence to carry through the decisions necessary for such change; and it will bring access to the capital needed to fund the modernisation. That is why it is an important part of the package that we have proposed today.”
“Gentleman the same as I said to my hon. Friend the Member for Bolsover (Mr. Skinner)—that the company will remain publicly owned in line with our manifesto commitments. Our objective will be to get the best deal for the company and for the public in respect of those three key factors that a partner can bring: experience, confidence and capital. On the issue of competitors, Hooper considered and rejected the idea of a levy on them in order to fund the USO. He was also clear—this is important—that of the challenges facing the company, the shift from mail to other forms of technology is much more significant than other challenges and will have a much greater impact than in respect of other postal companies operating in the market.”
“I thank the hon. Gentleman for his broad welcome of our proposed changes. He mentioned the maintenance of the universal service obligation and it remains at the heart of the statement I made today and at the heart of our policy intention. We legislated to enshrine the USO in law and we are pleased to see that Hooper rejected the downgrading of the USO as an answer to the company’s problems. I also welcome the hon. Gentleman’s broad support for our pension changes. He is right, of course, that there is more detail to be worked through and more to be announced on this matter, but the principle is clear—that, as part of a wider package involving partnership and a change in regulation, we seek to lift the enormous burden that funding the current pension deficit poses to the company. On the issue of the partner, I say to the hon.”
“Hooper concludes precisely the opposite and quantifies the effect of those two things on the company’s balance sheet. He concludes that the impact of technological change is five times greater than that of any competition with other postal companies. I am afraid that the main challenge is not other postal companies; it is the change in lifestyle that the technological revolution has brought about.”
“My right hon. Friend is correct to say that legislation would be needed to take these changes forward, but he is not correct to say that that opens the door to privatisation of the company, because as I have said our manifesto commitment is clear and the company will remain publicly owned under the proposals I have outlined today. My right hon. Friend talks of pension changes. Hooper is quite clear that those could be justified only in the context of wider reform of the company and wider change in it. That is why this should be viewed as a coherent package, not as a menu of items to be picked one by one. I am afraid that I have to disagree with my right hon. Friend when he says that the main issue is other postal companies, not technology.”
“On regulation and other details, as I said, we will make a fuller statement in the new year, but Hooper’s essential recommendation on this is clear: it is time for a change from the regulatory regime governed by Postcomm to a wider regulatory framework placing the Post Office in the context of the wider communications market and also ensuring that Ofcom’s primary responsibility in this field will be the maintenance of the universal service.”
“The hon. Gentleman asks two questions. The first relates to Post Office Ltd. As I said, we are acutely aware of the importance of the relationship between Post Office Ltd and Royal Mail, and acutely aware that those arrangements enable the delivery of the universal service. It is our priority to keep the universal service, not to downgrade it. Therefore, we will be mindful of the importance of that to Post Office Ltd going forward.”
“I know that my hon. Friend is a passionate campaigner for post offices and Royal Mail, but I have to point her to Hooper’s conclusion on the very point that she raises, which is that the principal challenge facing the company is not that from other postal companies, but the far greater challenge and the far greater impact on the company’s balance sheet caused by the shift from mail to other forms of technology. Making the other postal companies go away is not an answer to the challenges facing Royal Mail. On the pension fund, regardless of what has happened in the past, we recognise that that is a major problem for the company. Therefore, as part of a package of wider changes, we are prepared to address the pension fund deficit.”
“Universal service means a one-price-goes-everywhere delivery, six days a week. That is enshrined in law, we are committed to it and it is at the heart of the reforms we have proposed today.”
“As I have said to other right hon. and hon. Members in response to questions on the pension fund, our concern is to reduce the liability posed for the company, but only in the context of the wider change that Hooper set out in his report. The company that my hon. Friend mentions has made an approach to the Government. There may be other approaches in the coming weeks and months, but our intention will be to find a partner who can provide the three key qualities that Hooper mentioned in his report: the experience of having gone through major change in a postal network, the confidence to carry through such change and access to the capital necessary to finance it.”
“Legislation to carry these proposals forward would be in an additional Bill. I cannot say exactly when it would be introduced, but we will be working out detailed proposals on these matters in the weeks and months ahead.”
“I am grateful to my right hon. Friend for acknowledging the urgency of change. He asks whether we will speak to the work force about the changes. Of course we will speak to them. As I said in my statement, it is time for a fresh start in industrial relations in the Royal Mail, and that fresh start is essential in the carrying forward of proper reform.”
“I repeat that the company will remain publicly owned in line with the Government’s manifesto. The hon. Lady is right to say that access headroom has been controversial, and that people have raised a number of issues about it. It is a matter for the regulator, and in the context of the regulation change proposed by Hooper, it would be a matter for Ofcom in the future. It is important to remind the House that Hooper concludes firmly that the key challenge facing the company is not from other postal companies, but from other technologies. That is what lies behind a drop in the volume of mail of some 5 million items a day, and that drop is not just taking place in the UK, but in many other countries for precisely the same reason.”
“My hon. Friend is correct to point to a growth in packet volumes as a result of people ordering over the internet, but that is not enough to counteract the falling volumes of mail. Overall, mail has fallen by 5 million items a day. My hon. Friend takes us back to the issue that the hon. Member for Solihull (Lorely Burt) and other Members raised by contending that the principal problem facing the company is competition from other postal companies and the terms by which that competition is conducted. Hooper concludes that that is not the case, and that the impact of that is just one fifth of the impact of the shift from mail to other technologies. Therefore, changing the regime for upstream access or headroom pricing will not deal with the Royal Mail’s problems. That demands wider change and wider reform.”
“The valuation takes place every three years. I think I am right in saying that the last valuation was in 2006, so we expect the next triennial valuation to take place early next year. We expect it to have grown substantially from the valuation in 2006 of a £3.4 billion deficit. That starkly shows the size of the burden imposed on the company, which is why, in the context of a package of wider reform, it makes absolute sense to relieve the company of that burden, so it can concentrate on the investment that is required to finance the transformation that the Royal Mail sorely needs.”
“My hon. Friend asks how we can convince the public. The public want a strong USO, secure for the future. We do not have that at present, because the challenges I have outlined today—the transfer to different technologies, the pension deficit, the lack of efficiency in changing the company—mean the USO is now loss-making. We want to address that, put the company on a stronger footing, and make sure the USO is secure for the future. On the slippery slope issue, I again remind my hon. Friend of our manifesto commitment for a publicly owned Royal Mail. We will have a publicly owned Royal Mail, and any partnership would be only on a minority basis.”
“The company is already going through a process of reducing the number of mail centres. Automation will mean fewer mail centres in future, as, I believe, both the company and the work force are aware. It is not for me to say exactly how many jobs would be involved, but automation will mean fewer mail centres. Many other western European postal organisations have gone through precisely that process.”
“I acknowledge the work force’s contribution. This package offers them a more secure future for their pensions than would otherwise be the case. The Government established the Hooper review to examine how the Royal Mail can succeed in a world in which electronic and other forms of communication provide increasingly attractive alternatives to the mail and in which there is more competition in postal markets. That is precisely what Hooper has done in his report, which has been published today. Its recommendations are a consequence of our fulfilling a manifesto commitment to carry out this review.”
“The intention in the Hooper report is for Royal Mail to partner another postal firm that has experience of going through this kind of change. It is not a share floatation that might be talked about in another context; this is a partnership with another postal firm. Of course, we will be mindful of the state aid rules in any reform package that we take forward.”
“I cannot accept that the Government have weakened the Royal Mail. We have lent the company money to make new acquisitions, and put up money to support the pension fund and to finance modernisation. But that process has not proceeded quickly enough in the face of the challenges that the company is facing. Today’s report concludes that new entrants are not the primary problem for the Royal Mail—new technology is.”
“As I have made clear a number of times, we will maintain the Royal Mail as a publicly owned company, in line with our manifesto commitment to have a publicly owned Royal Mail.”