Performance of Royal Mail
I thank my hon. Friends the Members for Redditch (Chris Bloore) and for Lichfield (Dave Robertson) and others for securing this important debate. It is a pleasure to speak in it, but I am disappointed we are having to discuss this topic yet again, because we have been here before: the owners of Royal Mail prioritising profits over the public service requirements of the business they bought; the regulator seemingly unable to do anything at all about it; and postal workers once again being treated so badly when they are the ones who go out on the frontline day in, day out. The question we therefore need to answer is: why? During my time as Chair of the Business and Trade Committee in the previous Parliament, I spent days and days of parliamentary time cross-examining Royal Mail bosses, the then Government and the regulator. I sought to give a voice to postal workers who, more often than not, felt voiceless in the workplace, and I was proud to support the efforts of the Communication Workers Union to give its members more strength in the power games that were being played between management and the workforce, but quite frankly, what good did that do? The then chief executive was asked to move on, albeit with a handsome exit payment, a new owner has taken over the business, and the regulator conducted its reviews, issued its fines and changed the universal service obligation, yet we find ourselves here in Parliament discussing the issue once again. The only conclusion I can draw is that the business model is not fit for purpose. We should not be shy in coming forward to say that the privatisation of the Royal Mail and its separation from the Post Office was a mistake. The coalition Government got that wrong, and I hope that this Labour Government will put that right. As far as I can see, there are only two real options. The first is to facilitate the end of the public service provided by the Royal Mail, and to let the current owners turn it into a truly profitable business. We should not be surprised that the new owners of Royal Mail want to make the business profitable, and to focus on its profit-making services—that is the business they are in. However, the problem with privatisation of a public service is that profit making comes first. So it falls to us, as the guardians of public services in this country, to decide whether we will protect the public service functions of the Royal Mail or not. Some might say the issue is not that binary. No doubt regulation of the parcels market to ensure fairer competition would go a long way to help, and the Government should ask the Competition and Markets Authority to conduct a market investigation into parcel deliveries irrespective of what happens next to the Royal Mail. However, the House should be clear-eyed about what it will mean if we continue with the privatised model. It will, in the end, be the end of the universal service obligation as we know it. That is important because, as we have already heard, the universal service obligation is not just about delivering letters: it is about having a human connection with the people of this country, at every doorstep of every house, in every community, across the width and breadth of the nation. The covid pandemic showed why the network of postal workers matters so much, and I believe that will become more, not less, important in the future. To those making an economic case about the drop in letter deliveries being the end of the universal service obligation, let me say this: think carefully about the end of this public service, because once it is gone, it will not come back. That takes me to the second option. If Ministers agree with me that privatisation of the Royal Mail was a failure, the only other real option is to renationalise it. The House may be surprised to hear me, of all people, say that—I am not a natural fan of the Government borrowing yet more money to nationalise businesses that can be effectively run by the private sector. However, it has been proven that the Royal Mail is an example of a business that cannot be run effectively by the private sector, and an example of a business that I believe the Government can renationalise fairly easily within its fiscal rules. When the former Chancellor of the Exchequer, my right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves), updated the fiscal rules in 2024, the debt definition became public sector net financial liabilities, or “persnuffle” among friends. That allowed the Government to borrow money to invest in assets while maintaining the debt rule target that Government debt should fall in the long term as a share of GDP. In practice, that allows the Government to use so-called financial transactions to pay for equity or debt financing of publicly owned assets. That could be done with the Royal Mail, and it would fall outside the fiscal rules. That merely leaves the question of how to raise the money to do so. I am very conscious that our national debt has risen to above £3 trillion, and that the cost of that debt is expensive to the taxpayer, costing over £100 billion a year in interest payments alone, but I think there is a way through that Ministers should consider. When the current owners of Royal Mail, International Distribution Services, bought the Royal Mail in 2025, the deal was valued at £3.6 billion. We should therefore use that number for the purposes of today’s debate. In the spending review that I conducted in 2025, we allocated £23.8 billion for financial transactions alone between 2025-26 and 2029-30, and we are told to expect the Chancellor to increase that budget further this week. However, financial transactions can only be used by Departments to finance deals where there is a suitable public financial institution—or “puFins”—and where the Office for National Statistics agrees that it is a genuine financial transaction, not an attempt to redesign normal Government spending so that it falls outside the fiscal rules. We have several well-established puFins, from the National Wealth Fund to the British Business Bank, which I am sure will spend their budgets well. The Government have also committed to establishing several new ones, some of which have yet to be fully established. In short, it is quite hard to spend the financial transactions capital budget and I therefore assume, with some confidence, that there will be underspends that could be reprioritised. Finally, if that is not convincing enough, I am certain that there will be public interest in a more mutual form of ownership of the Royal Mail and, I would hope, its reintegration with the Post Office. A public share offering and a special scheme for Royal Mail employees could be a nice way to do that, with the Government merely underwriting the risk, while funds are raised by the public in the years it would take to undertake the action. Having looked at this issue for so many years, I believe that this is the only solution to protecting the Royal Mail and its future.