Government
legislation to safeguard the future of Royal Mail and keep the
Post Office in public ownership has today been agreed by both
Houses of Parliament.
Business Secretary Vince Cable said:
“Today marks a significant milestone for Royal Mail. Legislation
has now been agreed that will help tackle the huge challenges
facing the company.
“Royal Mail and the Post Office are important and cherished parts
of our society. It was vital we took swift action to put them both
on a sustainable footing.
“Passing the legislation, reforming regulation, getting state aid
approval, tackling the pension deficit - these are all vital steps
that will provide momentum towards a sale of Royal Mail. They will
also give the company the security and certainty it needs to press
ahead with its essential modernisation programme.”
During the final debate in the House of Commons today the
Minister for Postal Affairs Edward Davey set out the next two
crucial steps that need to be taken to secure the future of Royal
Mail: obtaining state aid approval from the European Commission
and changing the regulatory regime.
The Minister confirmed that the Government intends
to take on Royal Mail’s historic pension deficit with effect from
March 2012 as part of the preparations for a sale of the company.
It also intends to restructure the company’s balance sheet in due
course. Royal Mail currently has around £1.7billion of debt
facilities with the Government. Ministers believe that for Royal
Mail to be on a sustainable commercial footing going forward this
will need to be restructured and Royal Mail’s level of debt will
need to be reduced substantially.
The Government needs approval from the European Commission to
provide this financial support and informal discussions have now
begun with the Commission. The Government will submit a formal
state aid notification in the next few days. It hopes that the
process will be completed by March 2012.
At the same time, work to establish a new regulatory framework
for postal services is already underway. The Bill provides for the
transfer of regulatory responsibility from Postcomm to Ofcom
alongside significant reform of the existing regime, ensuring that
regulation is proportionate to the needs of the market. Ofcom will
launch a consultation in the autumn with a view to establishing
the new regulatory framework in spring 2012.
Minister for Postal Affairs, Edward Davey, said:
“Today is unquestionably a major step forward in protecting our
universal postal service and our Post Office network.
“We have worked extremely hard to ensure the best possible
outcomes for the taxpayer and the dedicated employees of Royal
Mail and the Post Office up and down the country.
“At least 10 per cent of the shares in Royal Mail will go to its
employees as part of the sale process. Royal Mail’s staff will get
secure pensions. And the proposed support will ensure that the
company is on a sound commercial footing and can operate on a
level playing field.”
The Postal Services Bill is expected to receive formal Royal
Assent shortly.
Notes to editors
1. The Postal Services Bill stipulates that:
Royal Mail
The current minimum requirements of the universal postal service
– including collection and delivery of letters six days a week at
uniform, affordable prices – are written into the Bill. The
Government has no intention of downgrading them.Royal Mail will be
able to benefit from an injection of private capital - ending the
dependence on funding from the taxpayer and bringing new
commercial disciplines into the business.Alongside private sector
investment: At least 10 per cent of the shares in Royal Mail will
go to its employees in the future as part of the sale process.
This will be the largest employee share scheme of any major
privatisation, larger than British Telecom, British Gas or British
Airways.Royal Mail will be relieved of its historic pension
deficit by the Government.As part of a general reform of the
regulatory regime for mail, the existing regulator, Postcomm, will
be replaced by Ofcom, the communications regulator, with the Bill
providing for the transfer of Postcomm's regulatory
responsibility to Ofcom.
Post Office
The network of at least 11,500 Post Office branches is not for
sale and there will be no programme of closures. Instead there is
£1.34 billion of new funding, subject to state aid clearance, to
modernise the network and safeguard its future, making it a
stronger partner for Royal Mail.Government has confirmed that it
will ensure that the longest legally permissible contract between
RM and Post Office Ltd will be in place before separation of the
two companies. Under the proposals contained in the Bill, the Post
Office could be converted into a mutual structure as part of
innovative new plans to hand over its ownership and running to
employees, sub postmasters and local communities. Co-operatives UK
recently published their report to government containing proposals
for how a mutual POL might work. The report can be found here:
http://www.uk.coop/postofficeThe Government’s strategy on the
future of the post office network, published in November, can be
found here
http://www.bis.gov.uk/assets/biscore/business-sectors/docs/s/10-1260-securing-the-post-office-network.pdf
2. The Postal Services Bill and an accompanying policy statement
which explains the Government’s approach can be accessed here: http://www.bis.gov.uk/policies/business-sectors/postal-services/postal-services-bill-2010.
3. The Postal Services Bill has been informed by the
recommendations of Richard Hooper CBE in his independent updated
report on the future of the universal postal service.
"Saving the Royal Mail's universal postal
service in the digital age" was published on 10 September
2010. This report can be accessed here:
http://www.bis.gov.uk/hooper-report .
4. BIS's online newsroom contains the latest press
notices, speeches, as well as video and images for download. It
also features an up to date list of BIS press office contacts. See
http://www.bis.gov.uk/newsroom for more information.
Contacts:
BIS Press Office
NDS.BIS@coi.gsi.gov.uk
Joe Upton
Phone: 020 7215 5959
Joe.Upton@bis.gsi.gov.uk